FRETILIN investment strategy protects Timor-Leste’s petroleum fund

FRENTE REVOLUCIONÁRIA DO TIMOR-LESTE INDEPENDENTE

FRETILIN

Media Release
15 October 2008

FRETILIN today said its conservative investment strategy for
Timor-Leste’s petroleum fund had prevented the fund from losing as
much as 30% of its value during the current global financial crisis.
By the end of 2008 the petroleum fund is expected to be worth USD$4
billion.

FRETILIN parliamentarian Jose Teixeira said, “The world class
legislative framework and investment strategy devised by FRETILIN has
helped the petroleum fund withstand some of the shocks of the global
financial crisis.

“When the petroleum fund was created FRETLIN took the view that money
earned from petroleum exploration be invested in what is regarded
internationally as safe investments.

“We took this approach because there was a very low level of financial
literacy in Timor-Leste and a real need to build public confidence and
understanding of the petroleum fund.”

Teixeira said although the entire amount of the petroleum fund was
invested in US Treasury Notes, the petroleum fund investment strategy
allowed up to a maximum of 10% to be invested in equities.

He said, “The 10% limit was put in place to allow the manager of the
petroleum fund, the Banking and Payments Authority, to build capacity
within the institution to invest in equities.

“Once the BPA had proven it could successfully manage a small amount
in equities, their performance over a period of time could be
evaluated and careful consideration given to whether the BPA should be
allowed to invest a greater amount in equities.”

Teixeira said recent comments by de facto Finance Minister Emilia
Pires stating that the AMP Government’s conservative investment
approach helped insulate Timor-Leste from the financial crisis were
off the mark.

Ms Pires comments were reported by Australian’s Herald Sun on 14 October 2008.

Teixeira said, “The conservative investment strategy was devised by
FRETILIN and it was only as recently as June this year when Ms Pires
and the de facto Prime Minister [Xanana Gusmao] were saying that 40%
of the petroleum fund should be invested in equities.

“If Ms Pires and Mr Gusmao got what they wanted the petroleum fund
would have lost as much as 20% or even 30% of its value; this equates
to losses of at least USD$350 million.”

“Losses of this scale for the petroleum fund would have been
disastrous not only from a financial perspective but also for public
confidence in the petroleum fund.

“Luckily for the people of Timor-Leste, the prudent investment
strategy created by FRETILIN did not allow the de facto government to
carry out their disastrous investment strategy.”

Under the guidance and leadership of then Prime Minister Mari
Alkatiri, Teixeira was one of the key architects of the
internationally renowned petroleum fund. He led a nationwide
consultation process of the Petroleum Fund Law which created the
petroleum fund and is to date the only law in Timor-Leste’s history to
receive the unanimous support of all members of National Parliament.

For more information, please contact Jose Teixeira +670 728 7080.

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