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Agriculture and Food Security

Promoting Prosperity and Equality in Indonesia and Timor-Leste

  • Project Name: Enhanced Cooperation and Integration between Indonesia and Timor-Leste: Scoping Study
  • Region/Country: Southeast Asia/Indonesia and Timor-Leste
  • Sector and Themes: Agriculture and Food Security
  • Year: 2017–Present
  • Project Leaders: Anna Fink
Promoting Prosperity and Equality in Indonesia and Timor-Leste
ADB President Takehiko Nakao, Indonesia’s Minister of Finance Sri Mulyani Indrawati (left), and Timor-Leste’s Minister (Acting) of Finance Sara Lobo Brites (right) at the signing of the memorandum of understanding in Nadi, Fiji in May 2019.

Supporting livelihoods in lagging border areas is critical to tackling inequality and ensuring our region’s growing prosperity is shared by all.

—Takehiko Nakao, former president, ADB

Development challenge

Enhancing regional cooperation between markets in the Asia and Pacific is a critical driver for spurring economic growth and reducing inequality. The Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership are both stellar examples of cooperation and integration in the region.

In 2017, Indonesia requested support from ADB in tackling spatial inequality and poverty in the nation’s second-poorest province, Nusa Tenggara Timur. Meanwhile, Timor-Leste required assistance on its Strategic Development Plan goals for economic growth and diversification, and specifically on its application for membership to the Association of Southeast Asian Nations (ASEAN). Both governments requested assistance to explore avenues for cross-border cooperation.

Solution

ADB’s Regional Cooperation and Integration (RCI) Thematic Group led the scoping study with assistance from the Pacific Department and Southeast Asia Department (SERD). The RCI group worked with the Fiscal Policy Agency in Indonesia and the Fiscal Policy Commission in Timor-Leste to consult with more than 250 individuals in government, the private sector, and civil society in both countries. Previous studies conducted in Timor-Leste under the Pacific Department’s Trade and Transport Facilitation in the Pacific and other studies conducted by SERD on cross-border cooperation between Indonesia and Malaysia were used. Funding from the study included cofinancing from Australia and the United Kingdom.

Knowledge products and services delivered

ADB published Enhanced Cooperation and Integration between Indonesia and Timor-Leste: Scoping Study, which identified areas of cooperation as well as barriers between Indonesia and Timor-Leste. It explored opportunities that could arise from establishing a border economic zone linked to an economic corridor such as livestock trade and cross-border tourism. Trade and transport facilitation were identified as essential enablers.

Impact and results

The recommendations of the scoping study were used to draft a memorandum of understanding (MOU) between ADB, Indonesia, and Timor-Leste in May 2019. Both countries pledged to reduce barriers to cross-border land and air transportation and harmonize procedures at border crossing points. It also sought to reduce animal health barriers to livestock trade and bolster tourism promotion in Nusa Tenggara Timur and Timor-Leste through joint marketing. ADB granted $1 million (TA 9767) to support implementation of the MOU.

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Delegations from the High-Level Dialogue between Indonesia and Timor-Leste wrapped up the scoping study on cross-border cooperation in a meeting held in Bali, Indonesia in March 2019.

Based on agreements in the MOU, the Government of Timor-Leste removed visa fees for Indonesian tourists entering Timor-Leste. A Timor-Leste immigration officer at Mota’ain border post between Indonesia and Timor-Leste reported that visitors increased from 300 to 400 per day. The TA supported discussions among the governments on the text of an MOU for cross-border movement of buses and coaches, which will remove barriers to seamless transport connectivity.

Lessons for Replication

The scoping study provides critical insights on how to identify avenues and sectors for cooperation and integration between two countries and implement the same. ADB’s RCI thematic group can use this study for guidance on key issues affecting the future of regional cooperation in the Asia and Pacific region.

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Consultations were conducted in Indonesia and Timor-Leste to refine the priority actions under the memorandum of understanding. In the photo is ADB Country Director for Timor-Leste Resident Mission Sunil Mitra giving remarks in a consultation meeting held in 2019.

Timor-Leste has made significant strides since independence but if this is to continue, we must integrate more closely into ASEAN and the world economy as well as diversify our economy. Reducing barriers to trade and cooperation with our closest neighbors is an essential step in achieving this goal.

—Sara Lobo Brites, Timor-Leste Acting Minister of Finance