So the setting-up of a small business can be especially difficult.
But new initiatives from the World Bank and support from Australia, are hoped to help the sector get the boost it needs to create more jobs.
Correspondent: Karon Snowdon
Speakers: Kathleen Goncalvese, Vice President of East Timor's Chamber of Commerce; Sergio Pimenta, the IFC's Director for East Asia and the Pacific /i>
SNOWDON: It used to take up to 65 days to register a small business in East Timor.
Four or five government ministries had to approve the process.
Now it takes perhaps 19 days and eventually it will take just one.
For business owner Kathleen Goncalves that day can't come soon enough.
GONCALVES: Absolutely. The cutting down of this heavy beaurocrcay and the uncertainty of this mecahnism that makes the way to corruption. This will be reduced.
SNOWDON: The previous government had installed a simpler system with the one stop shop approach to business registration.
It was helped by the World Bank's International Finance Corporation which focusses exclusively on the private sector.
Sergio Pimenta, the IFC's Director for East Asia and the Pacific is in Dili and says the new system will curb the potential for corruption.
PIMENTA: We've always promoted business in a transparent way complying with the highest standards and fighting against corruption is part of the things we want to be part of. And as you said having a more transparent business registration and business licencing mechanism will be a big benefit for the country.
SNOWDON: Access to finance is another hurdle. There are five banks in East Timor but they're reluctant to approve loans for local enterprises.
Kathleen Goncalves, sank all her savings into a business.
She's also Vice President of the Chamber of Commerce in East Timor and says the banks are reluctant to extend loans because they say regulation remains weak and the country lacks a bankruptcy law.
GONCALVES: This is our long lasting problem, access to finance. One bank is doing that but because the risk is very high then also the interest is very high, extremely high. If for the local people there is no access to finance there is no way Jose they can be involved in a business.
SNOWDON: But it seems much easier for foreigners to open a business in say Dili?
GONCALVES: Absolutely. Without money of course we cannot do business.
SNOWDON: The mico finance area where very small loans often to women in rural areas help develop a micro business and skills often lead to bigger things.
Its been successful in East Timor and is one of the projects supported by the IFC.
Sergio Pimenta says the next step up -- the small to medium sector is much more difficult.
PIMENTA: Across the world and Timor is unfortunatley not an exception here it is not a sector that gets as easy access to finance as much larger companies which are more used to working with banks and providing collateral and having the right structures. So this is an area that we would really like to focus going forward and see what we can do to help.
SNOWDON: On a bigger scale the IFC is advising the government on the public private partnerships needed to refurbish the airport in Dili and build a new shipping port.
PIMENTA: We have an agreement with the governmentwhere the IFC is porviding advice on how to structure this transaction so that we can attract private sector involvement and working with the government so that the airport can increase its capacity and become more modern and then the port can contribute to access to the country in terms of having a very important infrastructure.
SNOWDON: The IFC's partners in East Timor come from the private sectors as well as the governments of Australia, New Zealand and Japan.
Its extending its support for another year to the Chamber of Commerce which now has 100 members.
Kathleen Goncalvese, Chamber Vice President and food importer says her business is doing well.
GONCALVESE: Its pretty busy, people have to eat every day.