THAILAND international currency speculators, who are willing

to wager that the central bank is not fully

The Thai government had guaranteed that the
committed to its exchange-rate goal.
exchange rate between the Thai baht and the U.S.
dollar would be fixed at a rate of 25 baht per When the Thai government in July 1997 was forced
dollar. Capital was attracted to Thailand because to abandon its fixed exchange rate of 25 baht per
the country’s interest rates were higher than those dollar, the baht’s value fell to about 30 baht per
in the United States. The government’s pledge of a dollar in a matter of days. Seeing the crisis in
stable currency value encouraged Thai finance Thailand, investors “sold Asia,” pulling their
companies to borrow U.S. dollars on global investment funds out of other countries in the
markets, convert them to Thai baht at the fixed region. The Asian currency crisis continued through
exchange rate, and then lend them out at a higher the summer and into the fall. When the dust
interest rate in Thailand. Banks and borrowers used settled, the Thai currency’s new exchange rate was
the funds to expand businesses, purchase property, about 50 baht per dollar, with similar collapses in
and even speculate in Thai stocks. Consequently, other Asian countries. This had a number of serious
business bubbles began to inflate in Thailand and effects. For Thai citizens, the most direct effect was
other countries in the region. that foreign goods were suddenly more expensive.
A $10 bottle of a U.S.-made prescription drug that
Problems developed when Thai banks were found
used to cost 250 baht was now priced at about 500
to have many bad loans on their books—loans that
baht. But U.S. citizens benefited, for example, when
were unlikely to be repaid on time and perhaps
a 100-baht sack of Thai jasmine rice, which used to
could never be repaid at all. Some of these bad
cost $4, was now just $2. Of course, this also put
loans were blamed on crony capitalism— a system
pressure on U.S. rice farmers to match the lower
in which the government gave some Thai banks
Thai prices.
favorable treatment in return for bribes or loans
from the banks. In other words, public officials and However, the biggest effects were in the financial
business elites scratched each other’s backs. When sectors where even Thai businessmen who had
the bad loans were revealed, international made good business decisions or lent money
investors became concerned about the health of efficiently could not possibly repay their U.S.-dollar
the Thai economy and began to pull their funds out loans because it required twice as much baht as
of Thailand. This meant that for every 25 baht expected. Many went bankrupt. Many people in
withdrawn, the Thai government had to give Southeast Asia had acted rationally and worked
$1 U.S. in return. As the flow of funds out of hard but found themselves deep in debt, their life
Thailand increased, the Thai government’s supply savings wiped out, and with few prospects for
of dollar reserves was drawn down. Conjecture short-term recovery. The losses in Thailand were
began that the government would not be able to enough to lower the average per-capita income of
keep its promise of a fixed exchange rate—what the entire country by about 25 percent in one year.
would it do when it ran out of dollars? For many, the economic collapse was similar to the
Great Depression.
This speculation soon turned into a kind of self-
fulfilling prophecy. When everyone tried to pull out
quickly and unexpectedly, it was impossible for the
The economic liberal perspective on development
Thai government to pay everyone their dollars.
requires that LDCs become inte grated into the
These conditions were perfect for a speculative
global market economy, especially through trade.
attack, which is essentially a confrontation between
By emphasizing their comparative trading
a central bank, which pledges to maintain its
advantages, LDCs are able to capitalize on the
country’s exchange rate at a certain level, and
benefits of international trade and build a robust The World Bank released a study titled The East
economy. Trade enables poorer econo mies to Asian Miracle which sought to assess the lessons
export their natural resources and (mainly) learned from import-substituting industrialization
agricultural commodities, while affording access to versus export-oriented growth.24 It noted that the
manufactured goods from abroad. As these “East Asian Miracle”—high growth without great
economies grow from export earnings, gradually inequality—was due to two basic factors. First, the
they will be able to acquire more foreign technol East Asian coun tries were successful at “getting the
ogy and knowledge to promote new investments in fundamentals right.” This is development jar gon
manufacturing. According to this perspective, as for avoiding the tremendous economic distortions
“latecomers,” LDCs can use the market to develop that the Latin American countries were forced to
and indus trialize, while learning from the policy introduce as they sought inward development. By
mistakes of the now developed nations. Such con trast, the East Asian countries avoided
hindsight translates into less waste of resources inefficient wage, price, and exchange-rate
and more efficiency, while accelerating the distortions. They promoted high rates of saving (so
development process. that investment was possible without large foreign
debts), high levels of education and training, and
Economic liberal ideas have received considerable
stable mac roeconomic policies. Second, some of
attention, related in part to the economic growth
the state policies were effective in increas ing
achieved by many states, including Japan, the Asian
growth, especially “export-push” policies.
Tigers (Taiwan, South Korea, and Hong Kong),
According to the World Bank, the contest between
China, Malaysia, Thailand, and Indonesia—all of
state-led import-substituting industrialization and
whom adopted some variant of export-oriented
state-led export-oriented growth showed that the
policies. Yet, as we discussed above, there is some
key to success was not so much what the
disagreement whether these countries adopted an
government did but what it avoided doing. If the
approach squarely consistent with the economic
state avoids making a number of critical mistakes,
liberal model. Furthermore, both the
development has a pretty good chance.
antiglobalization campaign and the global financial
crisis have generated doubts about whether the
model is appropriate for most poor developing
Antiquities are also big business for smugglers.
nations.
Countries as widespread as Greece, Italy, Bolivia,
and Thailand have laws that severely restrict the
export or sale of antiquities, which are considered
What were the lessons learned from the debate
part of the national patrimony. Nevertheless, the
between import-substituting indus trialization and
huge demand for art and antiquities in wealthy
export-oriented growth? The answer to this
countries sup ports a thriving transnational trade in
question depends on whom you ask and when. By
stolen cultural property. Simon Mackenzie points
the early 1990s, the evidence seemed to favor an
out that art dealers and collectors have a strong
export-oriented strategy based on the dynamic
sense of entitlement to enjoy and preserve cultural
growth experience of the East Asian Tigers and the
items, and they take insufficient steps to verify the
Southeast Asian “Tiger Cubs” (Thailand, Indonesia,
legal provenance of objects they purchase.29
the Philippines, and Malaysia). In Looking at the
Sun, James Fallows argues that the East Asian As countries like Indonesia and Thailand have been
system of state-led, export-oriented economic stripped of valuable forest cover, illegal logging has
growth proved superior to both the ISI strategy and shifted to new areas like the Greater Congo Basin,
liberal laissez-faire policies. Burma, and Papua New Guinea. This illicit market
causes many follow-on problems that the global
community must grapple with, including loss of follow ing month; for 2011 as a whole, tourists
biodiversity and increased global carbon emissions. arrivals dropped 28 percent compared to the
Moreover, governments lose billions of dollars of previous year.
tax revenue. Unfortunately, international efforts to
suppress illegal deforestation have had limited
effects. Thailand is the second-largest economy in
Southeast Asia after Indonesia, and with an upper-
middle income status, serves as an economic
As many as 150,000 non-Japanese work in Japan’s anchor for its developing neighbour countries. The
sex industry. Organized crime groups play an country's economy appears resilient and, according
important role in the sex business. They include the to the IMF, growth was estimated at 2.7% in 2023,
Russian Mafia, the Chinese Triads, and the slightly higher than 2.6% one year earlier, as the
Japanese Yakuza. The former Soviet Union has been contraction in investment and goods exports
an important source of trafficked women since the caused by the slowdown in external demand
collapse of communism sent economies in Russia, partially offset the robust private consumption
Ukraine, Moldova, and Belarus into a tailspin. growth following the tourism recovery. The growth
Burma, Nepal, India, and Thailand are also projection for 2024 stands at 3.2%, buoyed by
important suppliers to the world’s brothels. The enhancements in external demand and sustained
trade is usually from poor countries to wealthier robust growth in private consumption, followed by
countries. 3.1% in 2022 (IMF).
Concerning public finances, the IMF anticipates
that the general government deficit will rise to 1%
Natural disasters make popular headlines in
of GDP in 2024, up from an estimated 0.3% in 2023.
newspapers and television news reports. As a
This increase is attributed to heightened
result, despite how geographically limited the
expenditure, accommodating initiatives like the
impact of a natural disaster may be, the average
digital cash handout scheme and other measures
person with a limited knowledge of the affected
endorsed by coalition parties during the election
coun try naturally forms a negative mental
campaign. These expenditures are expected to
association with that country and becomes much
outstrip steady revenue collection as growth
less inclined to travel there. The damage unleashed
strengthens. In 2025, the IMF projects a modest
by the natural disaster is then compounded by the
increase in the fiscal deficit to 1.2%, mainly driven
loss of income created by a drop in tourist demand.
by sustained social and capital spending. The debt-
For example, the Indian Ocean tsunami in
to-GDP ratio increased to 61.4% last year, from
December 2004 that killed over 200,000 people
60.5% in 2022, and is expected to follow an upward
resulted in extensive damage to the infrastructure
trend in 2024 (62.9%). Thailand's robust external
of several tourist-dependent economies, including
position continues to be a fundamental strength,
the Maldives, Sri Lanka, southern Thailand, and
offering a substantial buffer against tightened
India’s Andaman and Nicobar Islands. The
global financial conditions and geopolitical risks. In
immediate drop in tourism to these regions only
2023, headline inflation reached 1.5%, benefiting
made things worse, as tourism revenues rendered
from ongoing efforts to maintain low energy prices
even more necessary by the tsunami dried up
and enhancements in global supply chains. As
overnight. More recently, the Fukushima Daiichi
growth strengthens in 2024, headline inflation is
nuclear disaster, caused by a massive earthquake
anticipated to experience a slight uptick to 1.6%.
and tsunami off the coast of Japan in March 2011,
led to a 60 percent plunge in tourist arrivals the
The unemployment rate remained very low in 2023 industries and technological innovation. Thailand's
(1.2%) and is projected to stay around 1% over the industrial output declined 5.1% in 2023 due to a
forecast horizon (IMF). Thailand's official significant drop in computer and peripherals,
unemployment rate is among the lowest in the electronic parts, and furniture production (official
world due to the low birth rate, lack of social data).
insurance and informal sector employing the bulk
of the workforce (street vendors, motorbike taxis The tertiary sector contributes to 56.2% of the GDP
and self-employed). The country’s average GDP per and employs 46% of the active population (World
capita (PPP) was estimated at USD 20,672 in 2023 Bank). Key sectors include tourism, finance,
by the World Bank. Thailand has made the most healthcare, education, and telecommunications.
progress in ASEAN on eradicating poverty in recent Thailand's tourism industry is a major driver of the
years, with the poverty ratio standing at 6.3% of tertiary sector, attracting millions of visitors
the population (Asian Development Bank, latest annually: according to official governmental figures,
data available). the country welcomed over 28 million international
visitors in 2023 , generating an impressive income
of more than THB 1.2 trillion. The finance sector,
Thailand has a labour force of 40.2 million people, centred in Bangkok, serves as a regional financial
out of its 71.6 million population. Its economy is hub, offering a wide range of banking, insurance,
heavily based on agriculture, which contributes and investment services. Healthcare and education
8.8% of the GDP and employs 32% of the active are also prominent sectors, with Thailand being a
population (World Bank, latest data available). The destination for medical tourism and home to
country is the largest producer of natural rubber in reputable universities and international schools.
the world and one of the leading producers and Emerging areas within the tertiary sector include
exporters of rice; it also possesses sugar, corn, jute, digital services, e-commerce, and fintech.
cotton and tobacco among its major crops. Fishing
constitutes an important activity as Thailand is a
major exporter of farmed shrimp. Traditional Thailand is an emerging economy and active
farming methods are prevalent, but there's a member of ASEAN; it is very open to international
growing emphasis on modernizing agriculture trade, which represents around 134% of its GDP
through technology adoption, such as precision (World Bank, latest data available). According to
farming and irrigation systems. figures from the Ministry of Commerce, in 2022,
the country’s main exports were motor cars, parts
The manufacturing sector accounts for 35% of the and accessories (10%), automatic data processing
GDP and is well diversified, employing 23% of the machines and parts (7.2%), precious stones and
active population (World Bank). The country has jewellery (5.2%), rubber products (4.8%), and
established itself as a manufacturing hub in refined fuels (3.5%); whereas imports mostly
Southeast Asia, attracting foreign investment due comprised crude oil (11.9%), chemicals (7%),
to its strategic location, skilled workforce, and machinery and parts (6.9%), electrical machinery
robust infrastructure. The Thai industrial sector is and parts (6.7%), electronic integrated circuits
diverse and dynamic, encompassing manufacturing, (63%), iron, steel and products (5.1%).
electronics, automotive, and petrochemicals among
its key sectors. Emerging sectors within the In 2022, the country's main export partners were
industrial landscape include renewable energy, the U.S. (16.6%), China (12%), Japan (8.6%),
biotechnology, and aerospace, reflecting Thailand's Vietnam (4.6%), and Malaysia (4.4%); conversely,
efforts to move towards high-value-added imports came chiefly from China (23.5%), Japan
(11.4%), the U.S. (5.9%), the UAE (5.7%), and term interests. He argues that state capitalism can
Malaysia (4.8% - data Ministry of Commerce). On foster entrepreneurship and innovation. He points
the 15th of November 2020, Thailand signed out that thirty years ago, the Brazilian government
the Regional Comprehensive Economic gave the small aircraft maker Embraer subsidies,
Partnership (RCEP) with 14 other Indo-Pacific loans, and contracts when private investors would
countries. This free trade agreement is the largest not extend capital to it. Now Embraer is the world’s
trade deal in history, covering 30 percent of the largest manufacturer of regional jets. The Singapore
global economy. It includes the Association of government has played the same role, providing
Southeast Asian Nations (ASEAN: Brunei, “angel investments” to small startups and
Cambodia, Indonesia, Laos, Malaysia, Myanmar, incentivizing them to invest in emerging
Philippines, Singapore, Thailand, and Vietnam) and technologies.
ASEAN’s free trade agreement partners (Australia,
China, India, Japan, New Zealand and the Republic
of Korea). The RCEP covers goods, services, Singapore is a global financial and economic hub
investment, economic and technical cooperation. It that sits astride the meeting point of the
also creates new rules for electronic commerce, strategically vital Malacca Strait and the South
intellectual property, government procurement, China Sea. Despite its small size, the island city-
competition, and small and medium-sized state of 6.2 million people is a heavyweight in
enterprises. regional and international affairs.
A close strategic partner of the United States in
According to WTO data, Thailand exported USD 287
Southeast Asia, Singapore also maintains a close
billion worth of goods in 2022 (+5.5% year-on-
relationship with China. In recent years, it has
year), compared with USD 303.1 billion in imports
pursued a balanced foreign policy, seeking to avoid
(+13.6%). Concerning services, exports stood at
getting caught up in the geopolitical competition
USD 40.5 billion against USD 62.7 billion in imports
between the two countries. But the U.S.-China
(+59.5% and +8.3%, respectively). The country had
trade war bruised Singapore’s economic prospects
a structurally positive trade balance; however, the
in 2019, and the 2020 coronavirus pandemic has
trend reversed in 2022, when the World Bank
posed a challenge to the country’s health-care
estimated the trade balance to be in deficit by 2.3%
system and economy.
of GDP for the first time since 2001. According to
preliminary figures by the Ministry of Commerce,
throughout 2023, the kingdom's exports declined
Today, Singapore’s per capita gross domestic
by 1% compared to the previous year, amounting to
product (GDP) is among the highest in the world.
USD 284.56 billion, while imports decreased by
The PAP, which Lee founded, continues to rule
3.8% to USD 289.75 billion, resulting in a trade
Singapore today, having never lost an election.
deficit of USD 5.19 billion.
Lee’s son, Lee Hsien Loong, is the country’s third
SINGAPORE and current prime minister.
Similarly, Joshua Kurlantzick characterizes these Lee Kuan Yew was famous for his political
policies as constituting a form of state capitalism— philosophy, which viewed the national government
an economic system in which the state owns many as a paternalistic and technocratic manager of all
enterprises or at least “plays a major role in aspects of social and economic life. He saw
supporting or directing them.”27 The state is not individual liberties as secondary to communal
trying to weaken capitalism; rather, it is trying to prosperity and social discipline as a necessary
channel markets to better serve the nation’s long- condition for that prosperity.
Over the years, Lee’s political opponents and other PAP won an overwhelming majority of seats, and
dissenters often found themselves in prison. While the Workers’ Party—the most viable opposition
many experts credit his model with enabling party and the only one to enter parliament—won
Singapore’s incredible economic growth, Lee’s the rest. Issues that will likely dominate the
approach also earned him a reputation as a soft upcoming election include growing inequality, an
authoritarian. Singapore today is considerably freer increase in the goods and service tax, and a rising
than it was during Lee’s rule. cost of living.
Having witnessed the legacy of ethnic violence in Singapore’s economy depends heavily on trade,
Malaysia in the early 1960s, Lee understood the and the country has long supported international
need for racial harmony in multi-ethnic Singapore. efforts to reduce trade barriers. At 326 percent in
Accordingly, the government has, over the years, 2018, Singapore had the fourth-highest trade-to-
engineered a range of policies to promote social GDP ratio in the world, which leaves it particularly
stability, including racial quotas in housing and vulnerable to turns against globalization and free
racial representativeness requirements for election trade in the West. The country’s domestic market is
candidates. relatively small, but Singapore ranks as the world’s
top transshipment hub. Its primary exports include
However, Singapore’s record on human rights has
electronics, pharmaceutical products, petroleum
drawn criticism from nongovernmental
and mineral products, and industrial equipment.
organizations. The country’s use of capital
and corporal punishment and its strict regulation of Singapore was among the Pacific Four group of
speech have drawn particular scrutiny. The countries, along with Brunei, Chile, and New
2019 World Press Freedom Index ranks Zealand, which launched the negotiations in 2008
Singapore 151st out of 180 countries, citing the that eventually led to the twelve-member Trans-
government’s liberal use of defamation suits Pacific Partnership (TPP) talks. After the United
against journalists. Public acts of protest are States withdrew from the TPP in 2017, Singapore
strongly proscribed. signed an agreement with the eleven remaining
countries. Singapore has several other free trade
In recent years, social media has given the
agreements, including one with the United States
opposition a greater voice and improved their
and one with China.
competitiveness in national elections, which poses
obvious challenges for the country’s entrenched While U.S.-Singapore ties remain close, trade
leadership. The PAP-led government has attempted policies under President Donald J. Trump have
to crack down on the use of social media. In 2019, drawn a rebuke from the highly trade-dependent
it passed the Protection From Online Falsehoods country. In 2018, Singaporean Prime Minister Lee
and Manipulation Act [PDF], which requires media criticized the Trump administration’s unilateral
companies to correct or remove statements that tariffs on China, Singapore’s top trading partner. “A
the government deems false. Companies that trade war between the two largest economies in
violate the law can be fined a maximum of S$1 the world will have a big, negative impact on
million ($718,000) and individuals face Singapore,” Lee wrote in the Washington Post. As
imprisonment for up to ten years. The opposition the U.S.-China trade war worsened in 2019,
Workers’ Party has criticized the law for Singapore’s trade minister Chan Chun Sing said the
being antidemocratic. lack of trust between the United States and China
was “the most dangerous trajectory for the world
Singapore’s next general election must take place
economy.” The trade war’s impact on the global
before April 2021, though the date has yet to be
economy, including reduced shipping, has already
announced. In the last general election in 2015, the
bruised Singapore: in 2019, the country’s GDP grew
by only 0.7 percent, its slowest annual pace in a South China Sea; Singapore is not a claimant state
decade. in the disputes there. The extent to which
Singapore should voice its preferences on the South
China Sea and other regional issues also remains an
As a small country that keeps close ties with both active debate. The Singaporean government has
the United States and China, Singapore has had to also refrained from publicly commenting on
walk a careful line between these competing Beijing’s repression of Uighurs and other Muslims
powers. in the Xinjiang region.

Today, Singapore is a close strategic partner for the Beyond the United States and China, Singapore
United States in Asia, and the two countries have maintains close diplomatic and economic ties with
particularly advanced military ties. The U.S. and its Southeast Asian neighbors as a member of the
Singaporean militaries conduct regular exercises Association of Southeast Asian Nations (ASEAN). As
together, and the U.S. Navy uses Singaporean naval a former British colony, it is also a member of the
facilities to support its operations in Southeast Asia. Commonwealth and participates in the Five Power
Though it is not a U.S. treaty ally, in 2020, Singapore Defense Arrangements, in which it coordinates on
became the first and only Southeast Asian state to military matters with Australia, Malaysia, New
field F-35 fighter jets, the most advanced U.S.-made Zealand, and the United Kingdom.
fighter aircraft. The two countries also have close
TIMOR LESTE
economic ties. The United States is Singapore’s
largest foreign investor, and Singapore’s investment Timor-Leste is a nation defined still by its 1975–99
in the United States accounts for an struggle for independence, first from Portugal and
estimated 250,000 jobs. then from Indonesia. Since regaining formal
independence in 2002 after a three-year United
Singapore has also sought warm ties with China,
Nations mission, Asia’s youngest country has
but their relationship has been difficult at times. In
navigated the ups and downs of post-conflict
recent years, China has taken steps to drive a
nation-building. It has managed its natural resource
wedge between Singapore and its longtime partner
wealth in a largely responsible fashion, fostered a
Taiwan, which China considers a breakaway
spirited democracy that consistently ranks as one of
territory. Tensions spiked in 2016 when China
the most effective in Southeast Asia, and combated
seized several Singaporean military vehicles that
the Covid-19 pandemic better than many of the
were returning from maneuvers with Taiwan. In
world’s developed countries.
2017, Singaporean Prime Minister Lee was not
invited to China’s inaugural Belt and Road Forum as However, its journey has not been without
relations remained cool. Nonetheless, China is challenges. Timor-Leste’s economy is dependent on
Singapore’s biggest trading partner, and in 2017, oil and gas revenues, and, under current
Singapore was the second-largest foreign projections, state finances are headed for a “fiscal
investor in China. In 2019, the two countries signed cliff” within the next decade if the Greater Sunrise
multiple agreements to collaborate on trade and gas field is not developed. In 2006, the state nearly
security, and they agreed to work together on Belt collapsed due to violence between rival political
and Road Initiative projects in other countries. factions, which was only quelled by the
redeployment of international peacekeeping forces
More recently, Singapore has broadly refrained
that stayed until 2012.
from commenting on great powers matters. For
instance, in a bid to improve its relationship with Five political figures from the “Generation of ‘75”
China, senior Singaporean officials have not — the group of individuals who led the
criticized China’s militarization of islands in the decolonisation movement against Portugal in 1975
and the resistance against Indonesia’s subsequent other hand, it has afflicted the country with the so-
occupation — continue to dominate Timor-Leste’s called “resource curse” — a predicament of social,
politics. They have been crucial to stability, but political, and financial instability that has bedevilled
their personality conflicts have hindered institution- oil and gas-dependent countries worldwide.
building. The next generation of leaders stands Despite some level of domestic awareness around
ready, yet the shift may create a power vacuum the issue, it may still spell trouble for Timor-Leste’s
that destabilises the political system. future. [12]
As Timor-Leste enters this period of economic and TIMOR-LESTE’S RESOURCE CURSE
political transition, it will also have to grapple with
With a 2022 GDP of US$2.02 billion ($1,500 per
transnational threats that are challenging the entire
capita), [13] Timor-Leste is one of the world’s
world and put the country at the mercy of events it
smallest economies. Its dominant petrochemical
cannot fully control. Collectively, these elements
sector accounts for the vast majority of GDP, with
create a combustible mix of circumstances that will
remittances, agriculture, coffee, and tourism
define the country’s next decade. The ramifications
making up much of the rest. At 4.9 per cent, [14] the
of domestic instability in this strategically
official unemployment rate is low but does not
significant nation stand in contrast to the relatively
reflect the realities of labour markets. With a
limited global attention presently shown to it.
poverty rate of 42 per cent, [15] nearly half the
population still gets by on the bare minimum.
Like many developing nations, Timor-Leste has Much of the country’s wealth is concentrated in
undergone significant demographic change and has and around its growing capital Dili, and those who
an overwhelmingly young and growing population, live in rural areas face starker poverty than their
with 73 per cent estimated to be under 35 years of urban compatriots. Someone residing in Laga, a
age. [10] The ramifications of this demographic coastal town located in the country’s east, or
change are only starting to materialise but will Maliana, an interior town near the border with
reverberate in the years to come. Indonesia, lives a fundamentally different life than
one does in Dili, where access to job opportunities,
If one travels to Suai, on Timor-Leste’s south coast,
consumer goods, and mobile phone coverage is
they will see the makings of Tasi Mane, a
more abundant than in the rest of the country.
megaproject intended to provide the necessary
infrastructure for processing liquefied natural gas For the country to prosper beyond its capital city,
(LNG) from the Greater Sunrise gas field. [11] So far, economic development and diversification will be
the project includes the first leg of the Suai crucial. As a December 2022 World Bank report
Highway, Kay Rala Xanana Gusmão International notes, “Timor-Leste remains overly reliant on
Airport, and new housing, mainly for residents hydrocarbon production for sustaining its
displaced due to construction. The geopolitical economy…without the oil revenues, the
undertones are impossible to miss, with signage undiversified economy of the country will solely
from Indonesian and Chinese state-owned rely on the rapidly depleting Petroleum Fund to
companies dotting the landscape. bridge the considerable fiscal gap in its annual
budget”. [16]
Tasi Mane personifies the promise and peril that oil
and gas hold for Timor-Leste. On one hand, oil and Timor-Leste is staring at a potential budgetary
gas have catalysed economic growth and, since catastrophe that, under current projections, will
regaining independence, allowed the country to occur between the late-2020s [17] and mid-
achieve a level of development that has markedly 2030s, [18] when the state’s Petroleum Fund — the
improved the lives of its young population. On the sovereign wealth fund from which more than 90
per cent of government revenue is derived [19] — is which Timor-Leste shares a land border. In addition,
projected to run dry. If nothing is done to change the newly operational Tibar Bay Port — 12
this trajectory, Timor-Leste will eventually see its kilometres from Dili — gives Timor-Leste a
state coffers completely depleted. competitive advantage as it aims to integrate itself
into regional logistics networks.
This is a worst-case scenario, and it is one that can
be avoided by acknowledging its possibility. It can It remains to be seen how viable the Oecusse
be fended off in one of two ways: by developing the ZEESM and FTZs with Indonesia will be. In 2019,
Greater Sunrise gas field in time to produce Michael Rose, who has conducted extensive
substantive royalties for the Timorese state, or by research in Oecusse, wrote that the ZEESM’s
diversifying the economy so it is no longer development had been a “mixed bag”, [46] and in
dependent on oil and gas for state revenue and 2020, Fredrik Sjöholm argued that “there is a real
economic growth. risk that Tasi Mane and the Oecusse industrial
cluster will turn out to be white elephants”. [47]
Closer economic ties with Indonesia may seem an
To compensate for Timor-Leste’s market size,
obvious path, but formidable political hurdles exist.
companies may need to export to external markets
The author raised this prospect with a Timorese
to turn a profit and sustain operations. The
government official, who immediately pointed to
country’s coffee sector provides a good example. In
apprehensions about economic dependence on
2017, Starbucks, the world’s largest coffee
Indonesia and how it might enable de facto control
company, exported beans from Timorese producers
over Timor-Leste. Current data gives a level of
to feature in specialty blends carried at locations
credence to this viewpoint. In 2021, nearly 40 per
worldwide, [43] making Timorese coffee accessible in
cent of Timor-Leste’s imports came from Indonesia,
cities such as Washington, DC, where it had never
and more than 73 per cent of its exports went to
previously been available at scale.
Indonesia. [48] The Timorese official noted regional
For a host of reasons, Indonesia is the most likely integration as one way the country protects itself
market for exports, which the Timorese are from over-reliance on any one external
pursuing through initiatives such as Special Zones power, [49] reflecting the long-standing emphasis
of Social Market Economy (ZEESM). The ZEESM in placed on multilateralism by Timorese decision-
Oecusse — a special administrative region of Timor- makers.
Leste — is a billion-dollar megaproject intended to
incubate basic manufacturing growth through links
with Indonesian supply chains. It includes a new
international airport and the country’s largest
bridge, echoing the same “build it and they will
come” mentality as Tasi Mane.
Closer economic ties with Indonesia may seem an
obvious path, but formidable political hurdles exist.
In this vein, Fidelis Magalhães, a senior Timorese
government minister from 2018-23, has called for a
free trade zone (FTZ) with Indonesia, [44] which
would help Timor-Leste benefit from recently
announced plans for manufacturing growth in East
Nusa Tenggara, [45] the Indonesian province with