East Timor Oil Fund

East Timor government prepares review of Oil Fund Law [ 2010-11-16 ]

Dili, East Timor, 16 Nov The East Timor
government Wednesday is due to analyse the
proposal to review its Oil Fund Law, which
outlines where oil revenues may be invested, a
source from the prime ministers office said Monday in Dili.

Since the creation of the fund, in 2005 – despite
only having revenues from a single field,
Bayu-Undan, which is jointly explored with
Australia the rise in oil prices has provided
East Timor with a significant fund of US$6.604
billion and no domestic or foreign debt.

The law, as it currently stands, requires that at
least 60 percent of oil revenues be invested in
US Treasury bonds, with a rating of AA or above,
and an average maturity of less than six years
and investment in other assets must be applied to
foreign debt issues, with liquidity and
transparency negotiated on highly-regulated financial markets.

As the five-years in which the Oil Fund Law could
not be altered are now up, three major issues are
being debated in relation to its review the
rise in the percentage that the government can
withdraw from the Fund (currently just 3
percent), the possibility of the Timorese State
accessing foreign funding, when through that
route it can pay lower interest rates than those
it receives from its financial applications, and
finally, the diversification of its assets.

The first issue involves the governments
Strategic Development Plan, which outlines
significant investments in infrastructure and
creation of an industrial base that the country does not yet have.

The second issue relates to negotiations to
receive loans from China, Japan and even
Portugal, which announced the creation of a
credit line for East Timor and the third issue is
a question of diversifying assets.

Meanwhile the Timorese Banking Authority (ABP),
the countrys future central bank, said in Dili
that the Oil Fund had had a return of 1.62
percent in the third quarter, and its current value stood at US$6.604 billion.

The Oil Fund Law specifies that the ABP is the
agent responsible for the operational management
of the Fund and the Finance Ministry is
responsible for defining the Funds overall investment strategy. (macauhub)

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