Timor-Leste at Crossroads: Economic Challenges, Geopolitical Significance, and the Pursuit of ASEAN Membership

The decisions made by Timor-Leste’s leaders and its people in the coming years will shape the direction of this young nation. While the potential for crisis looms, the prospect of positive transformation and growth is equally present.

Timor-Leste’s economic landscape is heavily reliant on oil and gas revenues, posing a potential vulnerability in the coming decade as these resources may face challenges. The nation experienced a critical juncture in 2006 when a breakdown in civil order nearly led to the failure of the state. This crisis necessitated the redeployment of UN peacekeepers for over six years, underlining the fragility of the nation’s political and security structures.

Political dynamics in Timor-Leste are still significantly influenced by five prominent figures from the “Generation of ’75,” the leaders of the decolonization movement against Portugal in 1975 and the subsequent resistance against Indonesia’s occupation. While instrumental in maintaining the country’s stability, their interpersonal conflicts have impeded the establishment of robust institutions and the emergence of a new generation of leaders.

Moreover, Timor-Leste grapples with unresolved issues inherited from its past occupiers—land, language, and development. A 2019 report from the US Department of State highlights the unclear legal regime governing land and property ownership, posing obstacles to property rights and foreign investment. Portuguese, one of the official languages of government and the primary language of the courts is not widely spoken by the majority of Timorese. This language gap adds complexity to governance and communication.

The legacy of a geographic divide between the eastern and western regions persists, influencing politics, societal dynamics, and economic development. Differences in voting patterns, levels of infrastructure, and overall sophistication highlight the challenges of fostering national unity. Timor-Leste faces the ongoing task of addressing these historical and contemporary issues to build a more inclusive and resilient future, ensuring that the nation’s development is not hindered by the shadows of its past.

Timor-Leste faces considerable challenges in diversifying its economy beyond oil and gas, as efforts to grow the tourism sector and achieve food self-sufficiency have thus far proven unsuccessful. The nation contends with a small domestic market, limited capacity, a high-cost base, and the absence of oil reserves, limiting the prospects for economic development. The heavy reliance on oil and gas revenues poses a vulnerability that necessitates successful diversification to ensure sustainable growth.

The geopolitical landscape surrounding Timor-Leste, situated along the Ombai-Wetar Strait and close to Indonesia and Australia, holds strategic significance for major global players such as Beijing, Canberra, Jakarta, and Washington. Timor-Leste’s future trajectory is far from preordained, and the challenges it confronts could lead to dire straits, potentially triggering a crisis with broader international ramifications.


Xanana Gusmão’s ambitious plan to develop the Greater Sunrise liquid natural gas (LNG) field as Timor-Leste’s economic saviour faces significant challenges. Gusmão insists on processing the LNG in a facility yet to be constructed on the country’s south coast, with an estimated cost of around US$8 billion. This figure does not include the additional expense of constructing a pipeline across the 3300-meter-deep Timor Trench, connecting the LNG field to the proposed processing site.

Partners in the LNG project, including Australia’s Woodside Petroleum, are wary of involvement in what they perceive as a high-risk venture. Threats by political figures like Ramos-Horta and Gusmão to seek Chinese investment if Australia does not support the project have been met with resistance from China’s major development lender.

Consequently, Timor-Leste is left with the daunting task of self-funding the project. This endeavour would significantly deplete the Petroleum Fund coffers, with approximately US$15 billion remaining. The prospects of success are limited, further complicating the economic and political landscape.

Gusmão sees these projects, particularly the pipeline and south coast facility, as his signature initiatives. Drawing parallels to Timor-Leste’s successful quest for independence, he argues that sceptics will be proven wrong regarding the LNG project’s viability. However, the challenges of initiating such large-scale projects in a volatile international market, coupled with low levels of domestic capacity, heighten the inherent risks. Failure could not only jeopardize economic stability but also lead to political turmoil, making the success of these initiatives crucial for Timor-Leste’s future trajectory.


Timor-Leste, since regaining independence, has adopted a foreign affairs strategy rooted in multilateralism, aiming to foster friendly relations with a diverse array of nations. This approach is perceived as a safeguard against potential external dominance. The nation actively engages in international forums, exemplified by its Mission to the United Nations, active participation in the Community of Portuguese Language Countries, and hosting the g7+ headquarters in Dili.

A pivotal element of Timor-Leste’s diplomatic strategy is its pursuit of membership in the Association of Southeast Asian Nations (ASEAN). This goal aligns with the broader vision of diversifying diplomatic relationships and asserting itself regionally. The desire for ASEAN membership has deep historical roots, with President Ramos-Horta expressing Timor-Leste’s support for accession as early as 1987 in his book “Funu: The Unfinished Saga of East Timor.”

The significant breakthrough came in November 2022 when ASEAN, through consensus among existing member states, agreed “in principle” to grant Timor-Leste future membership. This development marked a major stride toward realizing Timor-Leste’s aspiration to become a full member of the regional bloc. The decision reflects the diplomatic efforts of Timorese leaders in navigating regional dynamics and building collaborative relationships.

This approach not only strengthens Timor-Leste’s international standing but also underscores its commitment to a foreign policy rooted in cooperation, inclusivity, and active participation in regional affairs. Becoming a full member of ASEAN is likely to open new avenues for economic, political, and cultural collaboration, further contributing to Timor-Leste’s evolving role in the global community.


The decisions made by Timor-Leste’s leaders and its people in the coming years will shape the direction of this young nation. While the potential for crisis looms, the prospect of positive transformation and growth is equally present. The world is urged to pay closer attention to this oft-forgotten island, particularly given its genesis under the auspices of the United Nations. The international community bears a special responsibility for the well-being of Timor-Leste, and its engagement and support can play a crucial role in determining the nation’s future.