Timor-Leste’s Petroleum Fund currently earns about 2% return above inflation, which is less than the 3% assumption which underlies the calculation of the Estimated Sustainable Income (ESI) guideline for how much the state can spend from the Petroleum Fund each year. In an effort to increase the return on the Fund, and therefore to make the ESI more sustainable, the Government is exploring modifying its investment strategy (currently all in bonds issued by governments, mostly the USA) to include stocks and other forms of investment. In addition, they are discussing revising the Petroleum Fund law, which currently limits investments in instruments other than government-issued bonds to 10% of the fund’s total. The Ministry of Finance has retained a Hong Kong-based investment advisory company, Towers Watson, to provide advice on investment strategies.
Last June, La’o Hamutuk published a short article “Diversify Petroleum Fund Investment? Not Now,” available at http://www.laohamutuk.org/Bulletin/2009/Jun/bulletinv10n1.htm#diversify . We continue to believe that this topic should be approached carefully, especially since the Government has not yet made use of the 10% which the current law allows to be invested in equities, in order to gain experience before revising the law.
On 6 March 2010, the Ministry of Finance hosted a seminar for Parliament and Civil Society on this topic, with presentations from:
Ministry advisor Vidar Ovesen: http://www.mof.gov.tl/en/par/DME/download/TLPF_2005-10.pdf
Towers Watson staffer Peter Ryan-Kane: http://www.mof.gov.tl/en/par/DME/download/OiltoFin_TW.pdf
In the next two weeks, two more seminars will be held on this topic. Both are open to the public, although they will be primarily in Tetum and are intended mainly to involve Timorese citizens, especially civil society.
On Tuesday 4 May, the Timorese NGO Luta Hamutuk is hosting a National Seminar “Vantazen no Dezafiu Diversifikasaun Investimentu Fundu Petroliferu” (Advantages and Challenges in Diversifying Petroleum Fund Investments). The program will be at Delta Nova Conference Hall, Comoro, Dili, from 8:30 am to 4:00 pm. Invited speakers include Vice Minister of Finance Rui Hanjam, Executive Director of the Banking and Payments Authority Abraao Vasconselos, former Prime Minister Mari Alkatiri and others. For further information contact Luta Hamutuk at 726-3783 or lutahamutuk.timorleste@gmail.com.
On Monday and Tuesday 10-11 May, the RDTL Ministry of Finance is organizing “Seminariu kona-ba Jestaun Fundu Petroleu” (Seminar about Managing the Petroleum Fund). The event at the Dili Convention Center (former Expo or Mercado Lama) is from 8:30 am to 5:30 pm Monday and 8:30-5:00 Tuesday. The Minister of Finance has describes “the objective of improving the Timorese capacity on issues related to the international financial market, fund management and investment strategies.” Speakers include Tim Mitchell from the New Zealand Superannuation Fund, Martin Skancke from the Norwegian Ministry of Finance, investment advisor Kevin Bailey and Peter Ryan-Kane from Towers Watson, as well as Timorese people currently involved in managing the Petroleum Fund.
La’o Hamutuk looks forward to lively debates at both these events, which we hope will help Timor-Leste’s Government and Parliament make wise decisions as they consider changing how Timor-Leste’s Petroleum Fund is invested and managed.
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Charles Scheiner
La’o Hamutuk (The Timor-Leste Institute for Development Monitoring and Analysis)
P.O. Box 340, Dili, Timor-Leste (East Timor)
Telephone: +670-3325013 or +670-734-0965 mobile
email: cscheiner@igc.org website: http://www.laohamutuk.org skype: cscheiner
