Timor-Leste became independent from Indonesia in 2002. Following the referendum in favour of independence, civil unrest ensued, and the majority of the country’s infrastructure was destroyed. Now politically stable, East Timor continues to be regarded as a fragile state. The country is rich in offshore oil and gas and the government is keen to explore opportunities to diversify the economy. However, port facilities in the capital Dili are congested, accruing high costs as a result of cargo handling delays. East Timor’s Strategic Development Plan (2011 to 2030) identifies construction of alternative port infrastructure at Tibar Bay and Suai as a national priority. The government views private sector investment as key to addressing the infrastructure deficit and achieving rapid and sustainable growth.
Value of PIDG investment
The Government of Timor-Leste approached the International Finance Corporation to develop a Public Private Partnership (PPP) structure to address the port infrastructure crisis. DevCo provided US$1.5m to support the vital work of establishing the country’s first infrastructure PPP. Balancing the needs of the government and the market, the PPP will enable development of a state-of-the art port at Tibar Bay, 10km west of Dili. Replacing the Dili facility, Tibar Bay Port is designed to handle up to 750,000 containers annually, with construction of a two-berth 630 metre pier and associated cargo, customs and administrative buildings. Following a competitive international tender, Bolloré Group won a 30-year concession to design, build, own and operate Tibar Bay Port. Ownership of the port will pass to the government when the concession ends.
Tibar Bay Port will provide access for more and larger vessels, reducing the costs of imports and exports. The new port will overcome congestion and safety concerns and will cut the cost of doing business in Timor-Leste. The Government of East Timor had no experience of attracting large-scale foreign investment to the country or of managing an infrastructure PPP process. The project built government capacity and developed a PPP transaction capable of attracting a world class investor, something which had previously proved challenging. The demonstration effect of the Tibar Bay Port transaction places the government in a stronger position to attract future private sector infrastructure investment to the country.
The port will contribute to the economic growth of Timor-Leste, playing an important role in external trade.