“A small nation able to inspire the world” is how UN Secretary General Kofi Annan described Timor-Leste on 19 May 2002, as the nation gained independence. Fast-forward two decades and the small-island developing state with a population of just over one million people continues to inspire with its progress towards joining the World Trade Organization (WTO) and Association of Southeast Asian Nations (Asean) — a twin goal targeted for 2023.
With its 2022 presidential election garnering praise by the EU electoral observer mission as “competitive, credible and transparent”, Timor-Leste is a young democracy in a pivotal region. The Timorese people re-elected Noble prize winning president Jose Ramos-Horta to lead the country again at this transformational period of its history. And while his country has made significant progress over the years — including a 25% increase in its Human Development Index value buttressed by increased life expectancy of 21 years and a gross national income per capita increase of 74% — multi-dimensional poverty remains a major challenge, with an estimated 30% of the population living below the poverty line.
Strengthening trade and investment are an important part of Timor-Leste’s strategy to accelerate economic growth, diversify the economy and address challenges like poverty.
Timor-Leste is setting an example for other less-developed countries seeking to join the WTO by expediting its accession efforts through enhanced transparency, ambitious commitments to participate in WTO plurilateral initiatives, and by securing initial bilateral market access agreements with Australia, Canada, New Zealand and Philippines.
The WTO’s working party on Timor-Leste’s accession managed a rapid succession of meetings whose momentum has been fuelled by Timor-Leste’s substantive work establishing WTO-consistent legislation and pursuing policy reforms that demonstrate that the country has all necessary frameworks in place. Timor-Leste has also benefited from targeted support of partners like the Enhanced Integrated Framework — which provides a country-driven, catalytic support through an ongoing WTO accession project — as well as the World Bank, Asian Development Bank, Australia, New Zealand, the EU, Portugal, ITC and USAID.
But why is Timor-Leste pushing hard to join the WTO?
While the short answer is centred around expanded opportunities for market access and economic diversification, the longer answer looks at how trade integration promotes transparency, good governance and sustained peace. By joining the WTO, Timor-Leste will expand its limited domestic markets, leveraging most-favored nation privileges and benefiting from pre-existing global trade agreements. This particularly helps smaller countries avoid myriad bilateral trade negotiations by utilising WTO’s existing agreements and mechanisms for dispute resolution to promote fair trade. Furthermore, joining the WTO positions countries to boost foreign direct investment and increase sovereign credit ratings — 80% of countries that joined WTO since 2004 have seen their OECD credit rating increase within three years of accession.
Participation in the multilateral trading system is an essential element of development and the path to accession brings greater stability, predictability, consistency, accountability
Joaquim Amaral, coordinating minister of economic affairs and chief negotiator for Timor-Leste’s WTO accession, highlighted in his October 2022 interview with fDi that “participation in the multilateral trading system is an essential element of development and the path to accession brings greater stability, predictability, consistency, accountability and all the accompanying benefits of comprehensive reform.”
WTO accession is widely seen as a parallel goal alongside Timor-Leste’s long-endeavored pursuit of Asean membership with requirements for each partially overlapping. Encouragingly, the Asean released an official statement on 11 November 2022 indicating that they “agreed in principle to admit Timor-Leste to be the 11th member of Asean” as well as granting observer status and committing to formalising a roadmap for it to secure full membership.
As outlined in UN resident coordinator Roy Trivedy’s recent article, the UN and partners continue to facilitate the country’s progress towards diversification into a blue economy through renewable energy and green port development. With support of key partners, Timor-Leste has developed a blue economy financing roadmap to chart the path towards a more sustainable future.
With successful, peaceful elections in 2022 and rapid advancements towards joining WTO and Asean, Timor-Leste is continuing an impressive growth trajectory that also represents an important vote for multilateralism at a critical moment where the pull towards nationalism is omnipresent. And with the exceptional determination and leadership of the government, the Timorese people can look forward to a future of continued growth with good potential for higher incomes in a more dynamic, diversified and globally integrated economy.
David Daepp is regional portfolio manager with the Enhanced Integrated Framework at UNOPS.
Roy Trivedy is the UN’s former resident coordinator in Timor-Leste.
Anna Varyanik is a legal affairs officer with the WTO Secretariat.