Insights and Analysis

Timor-Leste’s Non-Oil Economy Must Look to Tourism

June 22, 2016

By Susan Marx

“From its ruggedly beautiful landscapes to its centuries-old traditions, Timor-Leste offers one of the world’s last great off-the-beaten-track adventures,” begins Lonely Planet’s description of Asia’s youngest country, which fought to gain independence from Indonesia 14 years ago. The description is indisputable, but so too are the Southeast Asian country’s ambitions, having achieved average economic growth rates of around 10 percent over the last eight years.

Tourism in Timor

Despite its obvious allure, when it comes to tourism and hospitality, Timor-Leste remains isolated, untested, and expensive compared to its ASEAN and Pacific neighbors.

Despite Timor-Leste’s obvious allure and ongoing economic improvements, it remains a heavily oil-dependent country – the second highest in the world behind South Sudan – with oil revenues providing 90 percent of the government’s revenue. Experts warn that unless Timor diversifies its economy, the country’s fiscal stability is in danger of quickly deteriorating.

Oil Tanker in Timor

An oil tanker looms behind a local fisherman off of Dili’s shore. Timor-Leste is the second-highest oil-dependent nation in the world. Photo/Conor Ashleigh

Timor-Leste’s new engine of economic growth

Coffee is Timor’s second-largest export, after oil. In this sector, Timor-Leste has had some success in establishing its image as a high-end, shade-grown producer, with exports mainly to markets in the United States and Europe. Notably, Seattle-based coffee giant Starbucks recently announced it would add a “Mount Ramelau” single origin coffee to its lineup. That being said, coffee exports presently account for only $15.8 million – or approximately 1 percent – of the country’s annual budget, and are unlikely to grow to a significant portion of the GDP due to vulnerability to climate shocks which can affect yield consistency.

This conundrum brings us back to rugged landscapes and rich traditions: according to a 2014 Asia Foundation survey of travelers to Timor-Leste, the tourism sector is currently worth $14.6 million per year, and while still a small percentage of overall GDP, it ranks closely behind coffee as the third largest sector. Importantly, though, the survey also indicates high satisfaction among travelers, with 83 percent saying that their experience met their expectations and almost equal proportions saying they would recommend Timor-Leste to their friends and family.

While these figures represent enormous potential, Timor-Leste’s tourism sector is dwarfed by that of its geographic neighbors. The Northern Territory in Australia reports an annual visitor economic value add of close to $1.5 billion, and neighboring Indonesia reports a total economic value add of $9.12 billion annually. According to our survey, fewer than 13,000 travelers came to Timor’s shores for purely tourism purposes, and only 8 percent saw any form of marketing material relating to Timor-Leste prior to their visit.

However, Timor’s government, led by Prime Minister Rui Maria de Araujo, the former health minister who took office last year, is taking action to shift this, regularly highlighting tourism alongside agriculture and fisheries as the focus areas in the non-oil economy. The administration is currently drafting a new tourism policy that acknowledges the tourism sector as one of the country’s best bets to generate jobs and investment (currently over 60 percent of youth under 25 are unemployed).

The government has allocated $7.4 million to developing the tourism sector (a still low figure considering the sector poses the second-largest non-oil opportunity). As part of this, the Ministry of Tourism is working on a professional branding and marketing strategy to raise Timor’s attractiveness among potential tourists. It is evident that while nascent, the tourism industry will be critical to Timor-Leste’s future economic stability. What remains less clear, however, is how.

If you build it, will they come?

Unlike coffee, accurate information about tourism and what drives travelers to visit (or not) was practically non-existent before The Asia Foundation’s survey, which provided the first-ever in-depth analysis of visitor experiences upon which the Ministry of Tourism can develop future policies that address the needs of travelers to Timor-Leste.

Our research indicates that unmet traveler needs include poor levels of infrastructure, high costs of rental transport, and limited availability of readily consumable information relating to travel within Timor-Leste. Additionally, while travelers express a desire to visit cultural and historic sites, access to and information about these sites is extremely limited.

When it comes to tourism and hospitality, Timor-Leste remains isolated, untested, and expensive compared to its ASEAN and Pacific neighbors. Coupled with this, its tumultuous past and lagging infrastructure still holds more appeal to the adventurous, backpacker-style traveler than those in search of a family holiday. However, it may just be that its off-the-beaten-track, “unexplored” character is in fact its greatest appeal.

It is true that most infrastructure in the country is in need of an upgrade, and the availability of quality services rapidly diminishes as one travels farther from the capital, even by the standards of the most adventurous of tourists. This reality is captured perfectly by one of the most common phrases heard by tourists in restaurants and hotels: la iha (we don’t have that). But, in all fairness, today, 14 years after independence, Timor-Leste is a far cry from the warring images that captured the world’s attention on the front pages of many international news outlets in the 1990s. Now, Timor-Leste is by all measures a thriving, democratic, and vibrant young country in which tourists (at least in Dili) can readily enjoy many creature comforts, and power is nearly always available.

Timor-Leste is at an important juncture for its future as a nation, and as a tourist destination, and determining the most appropriate approach can be daunting. One popular option is the “build it and they will come” approach favored by a few well-positioned investors, versus the demand-focused route favored by risk-averse, capital-poor operators heavily reliant on government infrastructure and most tourism experts. The nature of interdependency between these operators and government for investments like major infrastructure, relevant access to capital, national brand management, and other inputs does point to the importance of a joint government-private sector approach.

Whatever the type of tourism the government ultimately settles on, the decisions made today will not only impact the country’s economic viability, but also its social fabric, international relations, and future livelihood of its people – 75 percent of whom live in rural areas and 50 percent of whom live below the poverty line. For these reasons, it is crucial for government agencies and ministries involved to come together around a holistic and coordinated tourism policy that is based on hard evidence, not just anecdotes and aspirations.

A successful policy process should bring together stakeholders from within government, development partners, civil society, communities, and the private sector to identify opportunities in the short, medium, and long term, harnessing and bolstering the emerging tourism industry while at the same time taking care not to displace and upend important gains that have been made to date. Such a policy should take a strong pro-Timorese and pro-poor approach by considering inclusiveness and the impact on local markets and industries, both negative and positive, in addition to national-level economic impacts.

By setting the stage for an authentic experience to a diverse and vibrant country with a compelling story, Timor-Leste has an opportunity to become a new niche destination for resort-wary, high-income Australian and Asian markets in search of the “next new thing.” Also, learning from similar experiences in countries such as Vietnam and Korea, both former war-torn nations with booming tourism industries today, rather than focusing on an aspirational model of mass-tourism, Timor-Leste can find its voice, and its place in the booming tourism market in the region and the world.

The Asia Foundation is currently working with the Ministry of Tourism, NGOs, and the private sector to support the development of its tourism strategy and national branding campaign, which will include a website with accurate, easily accessible, and up-to-date information on destinations across the country. Download the full 2014 Survey of Travelers to Timor-Leste

Susan Marx is The Asia Foundation’s country representative in Timor-Leste. She tweets at @TAFRepTimor. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation or its funders.

Related locations: Timor-Leste
Related programs: Good Governance, Inclusive Economic Growth
Related topics: Tourism


  1. I enjoyed the article.

    • Thanks useful informations for us

  2. Congratulations Susan Marx for putting down on paper what I’ve been saying for the last 12 years. The biggest problem in Timor – Leste is that no one wants to hear what you might have to offer in fear that you might know more than they do. It is a beautiful country and we all know that, it has beautiful people and beaches, mountains, lakes, water falls, snorkelling, again we all know that and we see these promotions on our gadgets. One of the problems is that they feel as though the job is done and the gates are open and the tourist will come forgetting that their neighbouring country(s) also have the same or better with roads, signs, toilets, BBQ, table and chairs, maps, etc, etc, etc. The other problem is that they have a lot of other tourism sites readily available for the tourists but they are on the back burner. I do have immense love for MY Country and its people and and would like to be part of the future development of the tourism industry, but I have no one to talk to about my ideas.

  3. Good article, great leadership from TAF.

  4. Still a long way but It’s getting better. Infrastructures are being build, such as roads from Manatuto to Nartabora and roads to Liquiça and Maubara etc… Human resources are also improving many young people are able to speak English and are learning tourism and hospitality and tour guides courses. Private individuals are also investing in building small hotels and guest houses. We certainly need more marketing for tourists to start to come and encourage the current private investors. Carlos from Lauhata Beach Escape in Liquiça.

  5. Expenses of the place and headaches owing to confusion and unavailability of the basics need to be brought down. With this level of high unemployment, it feels like it must be doable.

  6. I love the article as it remains me of my university assignment related to tourism development.

    East Timor as one of the low income countries where the socio-economic characteristics epitomizes it. Thus, economic leakage to be one of the critical points might need to ponder in tourism strategic planning. Decision makers should put in a critical deliberation, particularly, to look at the direct and indirect impacts of tourism industries in which at the end of the day will benefit the grassroots cohort in regional and urban areas, investors and the gate keepers. To some extents, eco-tourism development, sight seing, bush walking etc, believed will escalate the competitive advantage and attract more travelers. This will sustain the industry and at the same time infrastructures, basic services and amenities can be built and developed in order to meet the demand when more travelers visiting the country.

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