ETIMOR: Dramatic tax reduction targets foreign investors
Updated
East Timor's struggle to achieve economic stability has been marred by years of unrest, political turmoil and a lack of foreign investment. The United Nations ranks East Timor as the poorest nation in the Asia Pacific region. But the country's government now hopes to change that. It has devised a plan to lure foreign investors, with a series of incentives that include a dramatic reduction in company tax.
Presenter: Steve Holland
Speakers: Joao Gonsalves, East Timor's Minister for Economy and Development; Glen Robinson, Executive Director of the ASEAN Focus Group
HOLLAND: While East Timor has made strides in building an institutional framework to support economic development and promote macroeconomic stability, it still has a long way to go. About 44 per cent of the country's population lives on less than one dollar a day. And as the country's government notes, East Timor's economic performance since independence has been fragile.
GONSALVES: Our first thing of course was to establish our priorities and what we should do to get the economy moving.
HOLLAND: Joao Gonsalves is East Timor's Minister for Economy and Development.
GONSALVES: Amongst the reforms that we are conducting at the moment, one is the review of the tax law. We have a new proposal which we discussed last with a couple of ministers and it's now being finalised.
HOLLAND: That proposal will see the level of tax imposed on companies drop from 30 per cent to 10 per cent. Mr Gonsalves says it's one of numerous measures aimed at attracting foreign investors.
GONSALVES: Another review that I have in my hands is actually the investment laws. We are trying to review it to make it more efficient and more attractive. Previously under the previous government we had two investment laws, one was a foreign investment law and one was a domestic investment law. So we are going to have only one law.
HOLLAND: He says by combining the two departments procedures involved in securing foreign investors will be quicker and more efficient. The Minister's department is also preparing a national development plan that will map out the country's economic prospects for the next five years. A development plan for East Timor was drawn up in 2001, but it never took off. Minister Gonsalves expects his plan to be in action this year.
GONSALVES: We hope that we'll also have investment nets in the areas of tourism and areas of agriculture and natural resources, and hopefully with this we'll be able to at least better foreign investment into the country.
HOLLAND: Reducing import duties, tax on salaries and complexities governing the registration of businesses are also amongst measures aimed at luring foreign investment and boosting East Timor's economy. Agriculture dominates the East Timorese economy, accounting for more than 30 per cent of GDP and about 70 per cent of employment. Tourism has been listed as a potential market... but it's the oil and gas reserves that East Timor is pinning its hopes to. Glen Robinson is the Executive Director of the ASEAN Focus Group which, for 20 years, has been providing advise to companies looking to invest in Asia.
ROBINSON: East Timor coming into the scene it's trying to attract investment. It's got a number of difficulties as I see them, there are several, one of them is the small size of the country, less than a million people. The lack of infrastructure which I know has to be addressed and everybody sees it as being one of the major things to address. The disruption, political and social disruption that's occurred over the last three years, they really need to convince the investing organisations that that is now behind.
HOLLAND: Mr Robinson says East Timor's location could also prove an obstacle.
ROBINSON: Countries in Southeast Asia are all competing with each other to gain that foreign investment, you know you've got Thailand, Indonesia, Malaysia, traditional investment targets for many countries. They're doing reasonably well, Philippines is yet to come good, but the big ones that are going right now are Vietnam and Indonesia who are coming back onto the investment scene.
HOLLAND: But he says East Timor has a lot going for it. He says he would recommend it as a country to invest in. And he believes East Timor has its advantages over its regional competition.
ROBINSON: They all miss out on something which East Timor has and they don't, and that is a great well of goodwill in Australia. There are many organisations here in Australia who will invest in East Timor even though it may not be commercially attractive.
