Submission to the Ministry of Finance, Democratic Republic of Timor-Leste
From La’o Hamutuk
Regarding the Proposed Revision of the Petroleum Fund Law
5 November 2010
Timor-Leste is the most petroleum-export-revenue-dependent nation in the world, spending its non-renewable oil and gas wealth to pay for around 95% of state expenditures. But Timor-Leste’s petroleum reserves are very limited. Although Bayu-Undan provides more than a billion dollars every year today, it will be used up in less than 15 years.
Fortunately, Timor-Leste established our Petroleum Fund in 2005 to “contribute to a wise management of the petroleum resources for the benefit of both current and future generations.” Experience shows that many oil-rich nations become poorer because they spend all the money as it comes in, and their resource wealth becomes only a story to tell their grandchildren. Often the money is spent on short-term desires rather than invested for long-term benefit; used without good planning; diverted by politicians, companies, criminals or special interests; or diverts attention from developing the non-oil economy. A well-managed, secure Petroleum Fund can help Timor-Leste avoid this “resource curse,” together with other forward-looking policies.
The 2005 Petroleum Fund Law says that the range of qualifying instruments for investments shall be reviewed after five years, considering institutional capacity, and that any changes require Parliamentary approval. This is the fifth year of the Petroleum Fund, but this does not mean that the law has to be changed. Laws should define policies which endure from one government to the next, providing policy continuity and guiding frameworks to help decision-makers act for the long-term national interest.
A summary of this submission is available at http://laohamutuk.blogspot.com/2010/11/lh-submission-on-petroleum-fund.html .
The full text, with links, is at http://www.laohamutuk.org/Oil/PetFund/revision/10LHSubMFRevFPEn.htm. This email version has been abridged slightly.