The Power and Potential of Timor-Leste’s Youth in Economic Diversification

Timor-Leste’s Youth Demographic Crossroads

Timor-Leste is frequently referred to as a young nation; not only because it is a relatively new country but also because a large portion of its population is young. Amid the declining trend, Timor-Leste has had the highest annual population growth in Southeast Asia, with a growth rate of 1.8% between 2015 and 2022. One defining feature of Timor’s demography is that its population is largely young, according to the Population and Housing Census 2022, about 65% of its population is under 35, most of whom live in rural areas and due to the lack of opportunities to make a decent living and survive many have moved from rural to urban areas. Explicit knowledge of the country’s youth and demographic structure is essential for understanding its societal, economic, and political dynamics.  

The large youth population in Timor-Leste also presents both opportunities and challenges. This could drive economic growth and innovation by bringing new and innovative ideas to develop the economy. A young population can contribute to a dynamic and productive workforce, enabling the country to harness its demographic dividend. The challenges young Timorese face today are diverse and complex, spanning various aspects mainly in navigating the economic sector. This article outlines some of the challenges and highlights case studies and policy developments to boost employment participation and inclusivity.

Education system

Despite some progress, the country’s education is a public concern, resulting from outdated curriculum and books, lack of library facilities, poor infrastructure, language of instruction, quality of teachers, unequal access, and low public investment. This means that the youth in Timor-Leste are not fully equipped with the necessary skills and knowledge to contribute and have the maximum ability of critical thinking and analysis, creativity and innovation so that they can compete in a globalized world.

Lack of economic opportunity

The biggest challenge facing the youth today is on the economic opportunities. This is because existing economic structures do not create sufficient economic opportunities for the population. As already widely discussed, Timor’s economy highly depends on government spending to stimulate domestic economic activities. This does not generate much employment, nor formal employment in the economy. Most formal employment is concentrated in the public sector at about 80%, and less in the private sector, which has led to youth who have completed secondary school preferring to seek employment overseas.

The group that suffers significantly from a lack of economic opportunities is the youth. Although the unemployment rate is relatively low at 5.1%, the labour participation rate is very low. According to the 2021 Labor Force Participation Survey, Timor-Leste’s labour force participation rate is merely 30.5%, compared to 66.1% in Southeast Asia. Youth specifically have even more challenges: the youth unemployment rate is nearly double the national unemployment rate, with the youth labour force participation rate at merely 9.2% – three times lower than the national rate. At the same time, 30% of youth between 15–24 are not in employment, education, or training (NEET). Based on the Oxfam Timor-Leste research, it is estimated that only 30% of Timor-Leste's youth want to carry out activities in the agriculture sector (Oxfam Timor-Leste, 2022). All of these data confirm the magnitude of challenges the youth face due to a lack of economic opportunity. 

Why is youth important for economic diversification?

The challenges that youth in Timor-Leste are facing are part of the challenges that the nation is facing, which is the unsustainable development path that the country has been following. The solution to youth unemployment and low labor force participation rate should involve restructuring and diversification of Timor’s economy. At the same time, given the large size, the potential, and the energy, youth should be part of the solution to this economic problem. The National Youth Policy, adopted in 2016 recognized the potentials offered by youth as “assets for socio-economic transformation of the society.” Thus, youth is an excellent asset in economic diversification, especially in a developing country like Timor-Leste.

Despite challenges and a lack of coherent and integrated policy, youth in Timor-Leste are not passive agents. Listening to them, youth in Timor-Leste are well aware of the economic challenges that the country is facing, such as dependency on petroleum revenues, the impending fiscal cliff, high rates of poverty, and limited employment opportunities. At the same time, they also realized the potential that they have and their responsibility.

Some have shown their power and resiliency to be agents for economic transformation in society. Many creative young people started their own social and economic activities, but they have received minimum attention from the Government. Those who get jobs are often engaged in in short-term, temporary of employment and often remain in the informal economy where they work as own-account and casual wage laborers. Many young Timorese nowadays are using their curiosity and voluntarism motivation to learn through online content to be able to open businesses such as restaurants, coffee shops, barber shops, and more.

Some real examples of them are TILOFE (Timor-Leste Organic Fertilizer), Dilicious, Corner Store Network, and Ermera Aikulat Mutin Organiku (EAMO), to mention only a few. One clear exemplary case is the TILOFE organization, which aims to improve the economy of vulnerable communities, especially farmers around Ermera. They produce organic fertilizer whose raw materials are collected from the farmers. The establishment of the organization was inspired by the conditions the youth faced, especially the lack of job opportunities, which drove many to migrate to other countries to survive. Therefore, this organization started its initiative to increase opportunities for youth and stimulate the function of local products, which also involve rural communities.

Since TILOFE was established in November 2018, it started its business with a capital of USD 250 with seven workers consisting of three women and four men. Now they can employ 15 people along with the surrounding communities who have joined them. In addition to the organization being able to employ 15 employees, although it is slow, they are making progress with gross revenue ranging from USD 500–1000 per month. Their customers now include the Government through the Ministry of Agriculture and some local consumers in Ermera and Maliana. They also distribute products through international organizations such as Peace Wind Japan and Parcic that deliver to other areas such as Maubisse. In the future, after covering their neighborhood and partners, they are also trying to expand their distribution to other municipalities in Timor-Leste.

Another example of success demonstrated by youth is Dilicious. This organization was formed to promote the traditional food of Timor-Leste. The inspiration for establishing the business was due to the imbalance of domestic and foreign cash flow, as well as domestic consumption dominated by imported products and changing to a healthier diet, especially avoiding white rice and noodles for consumption.

Since 2010, they started selling all traditional foods at around USD 4-5/meal, but there were many complaints about the high price and there were still few customers. However, when changing their way of marketing with a mobile kitchen, the number of customers doubled from 30 to 60. In addition, the menu of dishes that started with 5 increased to 30 variants of food dishes, and staff working increased from 5 people to 42 staff who also included farmers, consisting of 16 men and 26 women who were mostly university students and are now almost all graduates.

Along with the increasing demand from customers, Dilicious also added branches that are currently operating in three places, with total visits of around 150 people per weekday located in the UN compound, Sporting, and Hera areas. Despite the limitations in supply, Dilicious ensures that 80% of the products are domestic such as the supply of meat taken from its livestock and other products from various regions in the country.

The above examples have proven that there are opportunities to be realized in a varied economy generated by youth. However, it is undeniable that there is still much that needs to be improved holistically so that it is supported by other sectors, such as socio-economic, political, and environmental. In addition to the potential developed voluntarily by the youth, many other Asian countries have successfully boosted the potential of the youth, such as Japan and Thailand, which made a policy of one village, one product movement by involving youth to enhance various local products, as well as traditional crafts and other regional potential to be developed (UNDP Timor-Leste, 2018).

To support and unlock the potential of the youth, some international agencies and individuals have provided assistance to support youth initiatives. For example, the Knua Juventude Fila Liman or English Youth Entrepreneurship program (UNDP Timor-Leste, 2017). This program helps youth to become agents of change and to be more innovative in leadership skills, driving them to do business.

One of the most visible policies is the Soft Loan program, launched by the government of Timor-Leste. Over the last few years, they also launched Soft Loan Programs aiming to incentivize small and medium enterprises with access to credit with low-interest rates. Aside from bureaucratic issues, the program was designed to provide access to soft loans for small and medium-sized enterprises.

Some policy recommendations to unlock youth’s potential

Despite the multifaceted challenges that young people in Timor-Leste are facing, they have shown their resiliency and are committed to being the agents of change. The governments have an essential role to play in unlocking the potential of the youth through a conducive policy environment.

To unlock the potential of the youth, several strategies and steps can help increase economic development. Addressing this challenge requires a multi-faceted approach, including economic diversification, investment in infrastructure, and promoting small and medium-sized enterprises. This includes improving education and vocational training, providing access to financing for young entrepreneurs, creating a conducive business environment, and ensuring that youth have the necessary skills and opportunities to contribute effectively to the diversification process.

1. Skills, education, training

Investment in good quality education and vocational training at different levels can increase their capacities and make it more attractive for youth to live and work. It has also been proven in various countries in the world that when countries invest in education, it will provide more opportunities than obstacles to the development of the country (Brett Inder, 2021). Therefore, formal advanced skills are a critical investment in the future of Timor-Leste’s youth and its economic growth. They provide individuals with the skills and knowledge they need to succeed and contribute to a more productive, innovative, and stable economy.

2. A youth-friendly environment for business and entrepreneurship. To maximize the potential of the youth, one mechanism is to create a conducive environment to support youth entrepreneurship to grow. This includes reducing bureaucracy in terms of business registration, providing easy access to start-ups, rather than an experience that hinders or undermines the micro and small business to growth; facilitating the existing business sector to expand their market, access or facilitating access to inputs and raw materials, facilitating access to finance, and more.
3. Improving infrastructure and connectivity

Infrastructure development, connectivity, and accessibility also play a significant role in enabling sustainable enterprises in urban and rural areas, by reducing the distance between young farmers and entrepreneurs and markets, thereby shortening the supply chain. Such investments also enhance productivity and competitiveness and bring down production costs to ultimately strengthen rural-urban linkages and attract further investment. Certainly, in the Timor-Leste context several viable development strategies are needed:

• Investment in infrastructure and transportation networks: Build and maintain well-developed rural roads, and ports as well as focus on improving infrastructure in developing regions where supply chain challenges are more significant. Properly maintained infrastructure and transportation networks ensure smooth movement of goods, reducing transit times and transportation costs. When things stabilize, youth interest and enthusiasm increase significantly, which encourages entrepreneurial ventures. In addition, it reduces barriers, allowing youth to attend schools, colleges, and training centers, enhancing their skills and knowledge.
• Technology integration: Implement advanced technologies such as GPS tracking, RFID (radio frequency identification), and IoT (Internet of Things) devices to monitor and track the movement of goods in real time. This improves visibility and enables better decision-making throughout the supply chain as well as reduces the number of workers needed. Thus, essential infrastructures like fiber optics are essential to reduce internet costs, which is very critical for innovation. Surely that integrates technology, fostering innovation. Youth can engage in tech-driven projects, enhancing their skills, encouraging creativity as well and expanding their horizons.
• Warehousing and storage facilities: Improve warehousing facilities with modern technology for efficient storage and retrieval of goods. Implement automation and robotics to streamline warehouse operations, reducing errors and improving efficiency.

By focusing on these strategies, businesses and governments can work together to improve infrastructure and connectivity in the supply chain, leading to increased efficiency, reduced costs, and enhanced overall competitiveness in the global market.

4. Giving youth a voice and a larger role in their communities

Young people should have access to opportunities for more meaningful participation in decision-making and policy formulation at different levels. Their involvement in and leadership of organizations should be promoted, including through support for establishing youth associations, and through their integration into producer organizations and cooperatives. They should also be encouraged to participate in employers’ and workers’ organizations to enhance their involvement in social dialogue processes. Timor-Leste can learn from other countries, such as Thailand, which has made remarkable progress in providing the positive value of social and economic development, moving from a low-income to an upper middle-income country for four decades and they also managed to significantly lower the poverty rate from 58% down to 6.8% in urban areas. Thailand is also quite resilient in facing various obstacles, including those that have recently occurred such as the global Covid-19 pandemic. The main factor they did was to provide opportunities for youth to voice their opinions through the formulation of Development policies.

Therefore, there is a need for policies in the decision-making process, for example, consulting youth to get empirical opinions related to what they think can help improve economic opportunities, and having resilience planning in Timor-Leste, such as discussions between government and youth, and online platforms provided for youth to and providing a space for the youth to amplify their voices in the decision-making process.
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Marta da Silva (Abata) is a Researcher at La’o Hamutuk, responsible for of good governance and human rights, the economy, and the state finance.

Eliziaria Febe Gomes is a Researcher at La’o Hamutuk with 6 years of experience working in economy and petroleum issues.

This article is a personal opinion and does not represent the opinion of any institutions that the authors are affiliated with.

The views expressed by the authors are not necessarily those of Heinrich Böll Stiftung.

This article is a chapter from Neves, da Silva, Gomes, and Cardoso (2023), “Timor-Leste´s Economic Diversification: Challenges and the Way Forward”, Bangkok: Heinrich Böll Stiftung Southeast Asia Regional Office.