Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in Timor Leste based on a desk review. The review applies an analytical framework of six Pillars (or "building blocks") of SusPP systems.

The Framework is designed to make clear that countries do not need to follow a linear step-by-step path to build effective GPP systems. Rather it is important to examine local contexts and prioritize the Pillars with the most potential in the country. No matter where a country starts, a balanced approach to implementation calls for progress on all Pillars to some degree.

This Factsheet is organized as follows:

• "Country Overview" section with executive summary, indicative maturity rating, key achievements, potential pathways forward and timeline of key events related to advancing sustainable public procurement.
• "State of Play & Forward Looking Analysis" section that summarizes the research findings from the desk review for each Pillar theme.
• "Key Stakeholders Driving the Agenda" explores opportunities for ADB teams to open discussions with country counterparts and add value to the work of partners.

The Factsheet is intended to be a living document to promote knowledge sharing and support training activities at ADB. It will be revised and improved as new information is uncovered and advances are made. If you have new information, please contact ychu@adb.org.

Timor-Leste is one of the lowest contributors to climate change contributing less than 0.003% of global emissions (NDC, p. 1). However, as a least developed country (LDC) and small island development state (SIDS), remains highly vulnerable to its impacts, especially in rural communities. Rising food and fuel prices have resulted in dramatic increases in inflation. Air pollution, particularly in Dili, is a growing challenge mainly due to vehicle emissions, household cooking with firewood and forest fires.

Since its independence in 2022, Timor-Leste has made significant achievements in building a peaceful, stable and growing economy. However, the government budget has been largely funded through the Petroleum Fund with most of these oil revenues expected to cease in 2023. The country urgently needs to reduce its reliance on petroleum revenue and diversify its economic base to finance its development ambitions (CPEIR p. 10). With over half the total population under the age of 20 (as of 2022), job creation and economic diversification is a key priority.

Timor-Leste’s economy is predominantly driven by public sector spending and oil revenues. The Government has prioritized building agricultural production and markets, improving its limited tourism sector, and shifting to a private-sector led economy (NDC). About 40% of government spending comprises goods, services, and capital goods and is done via procurement (NDC p. 7). However, public procurement remains an underutilized tool for financing its ambitions to tackle climate change, develop its private sector and diversify its economy.

>> Visual snapshot of Sustainable Procurement Maturity Level

Official Procurement Portal: http://www.cna.gov.tl/en/

E-procurement Portal: http://www.eprocurement.gov.tl/public/indexeprtl?&lang=en

Key Achievements

• New Decree-Law on public procurement adopted in 2022 with clauses that support sustainable procurement
  
• Domestic preference encouraged in public procurement to support job creation and technical and knowledge transfer
  
• Mandatory requirement for at least 75% of locally produced foodstuffs in government procurement
  
• Strong political commitment to the SDGs and climate change mitigation with clear sectoral mitigation targets outlined in NDC
  

Ongoing Activities

• Revision and adjustment of Strategic Development Plan underway
  
• Draft National Climate Change Law specifically promotes sustainable public procurement,especially for zero emission vehicles and sustainable agriculture
  
• Climate Public Expenditure and Institutional Review (CPEIR) highlights green procurement as a tool to achieve education-related goals
  

Potential Pathways Forward

• Explore potential to integrate sustainable public procurement into the ongoing discussions to update the Strategic Development Plan
  
• Raise awareness of the recommendations in the CPEIR and draft Climate Change Law to adopt green and sustainable procurement
  
• Develop SusPP commitment, policy and/or action plan
  
• Assess market readiness in key sectors to participate in SusPP
  
• Launch introductory capacity building courses on SusPP
  
• Develop a monitoring system for SusPP, potentially linked to the e-procurement system
  

>> Timeline of Implementation of Sustainable Procurement Activities

2021

2022

2011

2020

Strategic Development Plan 2011-2030 sets out the nation’s vision for sustainable development

National Procurement Commission created to coordinate public procurement policy and practice

Economic Recovery Plan guided by principle of “transforming better”

National Climate Change Policy recognizes government responsibility to lead the climate change response

Updated Nationally Determined Contribution sets out targets on energy efficiency, vehicle emissions, renewable energy, forestry, agriculture, waste, tourism and social inclusion that SusPP can contribute towards

New Legal Regime for Procurement adopted that supports environmental and social procurements

Mandatory requirement set of at least 75% locally produced foodstuffs in government procurement

Pillar 1: Government Vision & Awareness of SusPP

Governments that establish a clear policy vision on SusPP can accelerate the shift from procurement as an adminstrative to strategic function, making clear how SusPP can deliver on important national social and environmental goals.

GPP in national policy framework

No policy or action plan to advance sustainable public procurement (SusPP) exists in Timor-Leste, nor has SusPP been formally integrated into any national policy document as a priority action. Recent studies have proposed the use of government procurement to achieve national development and climate goals. While these proposals have not yet been formally adopted by the Government, they offer an indication of possible pathways forward for SusPP reform.

A zero draft of the National Climate Change Law was released in December 2022, with a call for “Public Administration decarbonisation programs” (Article 18). The draft Law calls for the adoption of behaviours that aim to achieve decarbonisation, including within the scope of public procurement, public investment and public accounting.” Article 18.4 specifies that the “purchase of goods and the contracting of services shall be based on sustainability criteria, taking into consideration the respective impact on the local economy and promoting the use of locally available materials, without prejudice to equal access to economic operators to procurement opportunities.” Article 26(f) calls for “respect for the right to a clean, healthy and sustainable environment in public procurement and tenders documents” within the context of the country’s energy policy.

The draft Climate Change Law also sets out sector-specific policies with priority actions that government procurements could be designed to help achieve:

• Energy-efficient Buildings: Decarbonization of public buildings including by increasing energy efficiency in buildings, improving thermal comfort, using carbon-neutral building materials and assessing the suitability of building solutions to climate change and over the building’s full life-cycle [Article 26(c)].
  
• Low-Emission Transport: Building of a public transport network that encourages reduced emissions or no-emissions vehicles (e.g. walking and cycling, electric mobility in land, maritime and air transport) [Articles 26(f), 28,29]. A program to incentivize the purchase of electric, hybrid or renewable gas-powered vehicles is planned, as well as a legal framework to manage end-of-life vehicles and pollutant emissions. (Article 30)
  
• Renewable Energy: Renewable microgrid solutions and technologies and capacity to inject energy produced from any public or private renewable sources in the National Electricity System [Article 27.2]
  
• Water Efficiency: The State shall promote efficient water use including through awareness raising and the adoption of fiscal benefits for those who demonstrate reduced water use.
  
• Waste, recycling and reutilisation: Prevention of waste production, increasing recycling rates, recovery of materials subject to reutilisation. Implementation of the ‘polluter pays’ principle (Article 34). The adoption of industrial, hospital, construction and demolition, electric and electronic and dangerous urban waste collection and treatment systems (Article 34(e).
  
• Agriculture, fisheries: Foster more efficient use of fertilizers, energy and water in agriculture (Article 35) Promote fisheries practices based on traditional knowledge and combat against marine waste (Article 36).
  

A “Development Financing Assessment” study examined the adequacy and identified opportunities in Timor-Leste’s financing framework to achieve the country’s Strategic Development Plan and Sustainable Development Goals was undertaken in 2022. The study recommends the use of “outcome-purchasing’ models of procurement as a powerful way to directly link government spending with the desired outcomes of a national development plan (Development Finance Assessment p. 61). In doing so, it advocates the shift towards more modern strategic procurement to achieve the country’s economic, environmental and social priorities.

The country's first Climate Public Expenditure and Institutional Review (CPEIR) was conducted by the Ministry of Finance and UNDP Timor-Leste in 2022. The CPEIR reviews the climate-relevant policies, institutions and expenditures from 2018-2021 in sixteen key sectors prioritized for the country’s development. A key finding was that Timor-Leste’s climate-relevant public expenditure has been on the decline mainly due to the political changes and budgetary impasse suffered by the government since 2017. The CPEIR recommends the National Directorate of Procurement adopt measures to ensure green procurement for educational activities, in collaboration with the Ministry of Youth and Sport and Ministry of Higher Education, Science and Culture. Green procurement activities are also recommended as a priority climate action to achieve environmental goals. Notably, SusPP is not mentioned as a climate action tool for any of the remaining 14 key sectors - signaling a potential gap.

Other GPP-related priorities in national climate and development policies

The country’s Strategic Development Plan 2011–2030 recognizes the global definition of sustainability as “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” In the midst of the COVID-19 pandemic, the Government released an Economic Recovery Plan 2020 that

set out a new development focus with short, medium and long-term goals guided by the principle of “transforming better”. A revision and adjustment of the SDP 2011-2030 is planned in an initiative led by an Interministerial Commission to be approved by early 2023 (NDC p. 8). The revised SDP will continue the country’s recognition that climate change presents a serious threat to Timor Leste. However, it is unknown whether it will contain specific provisions supporting the advancement of SPP.

The Government of Timor-Leste has put in place a robust policy framework on climate change. Since 2015, the country has committed to the 2030 Agenda for Sustainable Development and Paris Agreement on climate change. It submitted its first Nationally Determined Contribution (NDC) in 2016 and a revised and updated NDC in 2022. The country adopted its National Climate Change Policy in 2021 committing the country to following its constitutional duty and mandate to become a climate resilient country and protect the constitutional right of its citizens to a “humane, healthy and ecologically balanced environment” (National Climate Change Policy p. 7). The Policy sets a core principle of Timor-Leste’s climate response that the “entire government is committed and takes the responsibility to lead.” More policy developments are expected including a National Climate Change Strategy and Action Plan to guide the implementation of the National Climate Change Policy (with GCF Readiness grant financing) and a low carbon development strategy (NDC p.4). It will be worthwhile to examine these policies when they emerge to identify if sustainable public procurement is included as a tool to achieve climate mitigation goals.

Table 1 provides an illustrative listing of national development and climate policies that SusPP can contribute to achieving.

Table 1. National development and climate priorities in Timor Leste

Pillar 2: Legal & Regulatory Framework

Procurement law reform can be key to clear obstacles to implementation by establishing "value for money", not "lowest price", as a core procurement objective, and authorizing procurement approaches suited to SusPP.

A new Legal Regime for Procurement, Public contracts and its Infractions, Decree –Law n. º22/2022, was adopted in May 2022 and made effective in January 2023. It consolidates all previous legislation aiming to increase transparency and simplify the procurement process. The new Decree-Law aims to build a modern and transparent Public Administration with procurement that promotes the economic and social development of the country. It sets out several procurement principles, including “public interest” and “promoting the national economy” by giving priority to national goods and services.

Basis of award

Article 64 sets out the default award criterion for government procurements as “best quality-price ratio”, which encourages procurers to consider factors beyond price including social and environmental criteria.

Non-price criteria

Procuring entities can apply non-price criteria to evaluate bids, including quality of the product and service, and environmental and social sustainability in contract execution (e.g. sourcing, certified products, transport) [Article 63]. Environmental studies are recommended as specifications for works procurements [Article 47]. Procurers are

encouraged to consider the factors related to the “useful life of the object of the contract” including maintenance, externalities and satisfaction of the public interest [Article 62].

Domestic preference

Article 49 sets out conditions for procurers to apply domestic preferences. For low-value procurements up to US $100,000, contracting entities may limit bidding to national citizens or legal entities incorporated in Timor-Leste and more than 50% owned by citizen nationals with a residence or headquarters in one or more administrative districts. This limitation to national bidders only can be applied to higher value procurements if the procurement relates to sectors, goods, infrastructure or administrative districts qualified as strategic or requiring special protection by an official Government resolution.

For higher value procurements above US $1,000,000, contracting authorities have the flexibility to set out various domestic preference terms in the tender documents. These can include a requirement that the proposal contributes to the economic and social development of the country and national innovation; creates local jobs, supports technical and knowledge transfer to local workers and companies; sources locally produced goods and services and/or employs national workers.

Procurement approaches

Various procurement approaches are allowed in the new Decree-Law that have been used in other jurisdictions to supply sustainable procurements. Article 51 allows contracting authorities to divide contracts into lots, an approach that can improve participation of local and smaller businesses in government contracts. Article 52 allows procuring entities to accept variant proposals, an approach that allows bidders to submit alternative bids that include solutions to meet environmental and social criteria.

Mandatory procurement for national foodstuffs

The Government also passed Decree Law no. 36/2022 in May 2022, setting a mandatory requirement for public procurement of at least 75% of foodstuffs produced in Timor-Leste. This requirement applies to any substance intended for human consumption including beverages and chewing products. All purchases by the direct or indirect administration of the State, including public companies are covered within the scope of the Decree-Law. In August 2022, US $1 million of financing from the UN SDG Fund was confirmed for a project to improve the agricultural sector in Timor-Leste including capacity strengthening activities to reduce post-harvest losses. With this support, farmers in Timor-Leste may be able to respond to public procurements with domestic preferences and criteria on post-harvest losses

Pillar 3: Institutions & Capacity

Procurement agencies

The National Procurement Commission (NPC), is an autonomous public entity under the Ministry of Finance created in 2011. It is responsible for coordinating public procurement policy and practice, which now includes sustainable public procurement due to the recent reform of the Decree-Law on public procurement.

The NPC’s mandate sought to provide procurement services to line ministries and other public entities in major infrastructure projects, achieve proper transparency for the State procurement process and coordinate procurements in internationally financed projects with partners (e.g. ADB, WorldBank, Jica, European Union, China Exim Bank). It carries out procurements valued at or above US $ 1,000,000. The Commission has completed 349 procurement processes from the period 2018—2023 (VNR p. 175). The NPC handles the procurement of contracts funded by the government’s Infrastructure Fund regardless of the amount.

Other relevant procurement institutions include the Audit Chamber, under the Court of Appeals, who is responsible for reviewing government procurements above $5 million. Other institutions involved in initiatives to improve the country’s public financial management are the National Parliament, Court of

Appeal/Chamber of Accounts, Attorney General's Office/Public Ministry, Scientific Criminal Investigation Police (PCIC), Anti-Corruption Commission (CAC) ), General Inspection of the State (IGE), Civil Society and Social Communication.

Interministerial bodies

No interministerial body exists to coordinate a whole-of-government approach to SusPP implementation. However, a Climate Change Working Group was established in 2017 by ministerial decree to help guide consultations on Timor-Leste’s climate change policy and associated plans. This provides a potential forum upon which to engage institutions that may be interested in SusPP related activities and discussions.

Another potentially relevant body is the Inter-Ministerial Working Group on gender, coordinated by the Secretary of State for Equality and Inclusion. It promotes gender mainstreaming at the district level and the continued development of effective local democratic governance.

Capacity Building

A capacity building workshop was held in July 2023 on the new Decree-Law on public procurement in a project co-financed by the European Union. The workshop, attended by CNA staff and more than a dozen public procurers, covered the legal basis and practice implementation of the new public procurement approaches. It was announced that a detailed procedures manual along with supporting templates and documents are planned for release later in 2023. The training was coordinated by the PFMO, a partnership to improve public service provision through strengthening the Management and Supervision of Public Finances in Timor-Leste.

Pillar 4: Market Practices

Market dialogue throughout the procurement process helps procuring entities to choose realistic sustainability criteria and ensure suppliers succeed in delivering on sustainability commitments over the contract duration.

No specific business association that supports green businesses was found in Timor-Leste. However, various agencies exist in the country to support private sector development, including:

• Timor-Leste Chamber of Commerce and Industry (CCI-TL)
  
• Women’s Business Association – Timor-Leste (AEMTL)
  
• TradeInvest is the official investment and export promotion agency in Timor-Leste.
  

Business Development Centres have been established in Baucau, Dili, Maliana, Maubisse, Suai, Lospalos and OeCusse Ambeno by the Instituto de Apoio ao Desenvolvimento Empresarial (IADE). These centers provide training in how to identify and start a business, improve a business and expand a business (SDP p. 111).

The growth of cooperatives has been rapid in Timor-Leste due to focused government support. The Secretary of State for Cooperatives (SSFC) registered 351 new cooperatives over five years, bringing the total number of cooperatives to 452 by June 2023. The Government’s Cooperative Sector Development Program focuses on expanding the cooperative model across farmers, fishermen, cattle breeders, machinists, carpenters and textile mill workers and dealers.

Pillar 5: Procurement Operations

Various tools and procurement approaches can be employed to help procurers more easily identify environmentally friendly goods and services and attract a competitive market response.

No specific tools have been developed to support the adoption of sustainable public procurement.

However, the concept of green buildings is rooted into the Timor-Leste culture through traditional building approaches. Renewable materials, such as bamboo, timber, and clay, are commonly used in building construction. Earthbag construction is a common architectural approach for building walls and foundations. Energy-efficient design is a hallmark of Timor-Leste building design using natural ventilation, shading, and solar orientation. Importantly, design is linked to the social and cultural fabric of the country that leverage traditional knowledge and skills. An Accelerator Lab was hosted in December 2019 to co-create sustainable buildings design principles adapted to the Timor-Leste context. Despite this, no formal green building code has been developed to date.

Documented evidence of sustainable procurement practices was not found during this desk review.

Pillar 6: Monitoring & Impact Measurement

Monitoring systems are essential to gather the information needed to keep SusPP implementation on course and communicate on the benefits achieved for the country.

No monitoring system to track SusPP has been put in place. An e-procurement portal has been in place since 2011 to increase access to procurement information and promote transparency. However the e-procurement system does not track performance indicators on sustainable public procurement.

Projects Supported by ADB

ADB’s support to Timor-Leste is focused on building climate-resilient infrastructure and basic services, and strengthening the enabling environment for economic diversification. Current projects include a $127-million loan in 2022 to develop climate-resilient infrastructure for water treatment and the creation of a new water network to increase access to potable water. Other active projects include an expansion of Dili’s International Airport, four road projects and modernization of the power distribution system. Procurements for these projects could integrate sustainability criteria, especially on energy efficiency, material sourcing and reuse, job creation and female inclusion in the workforce. Supporting sustainable procurement also aligns with the ADB’s work in Timor-Leste to strengthen governance and public financial management in the country and the enabling environment for economic diversification.

Other Initiatives supported by National/International Agencies

The “Partnership for the improvement of service provision by strengthening the Management and Supervision of Public Finances in Timor-Leste ” (PFMO) aims to reinforce the training and qualification of Timorese professionals in public financial management, including implementation of the new public procurement law. The project was launched in August 2017 and has financing of 12 million euros from the 11th European Development Fund and around 600 thousand euros from Instituto da Cooperação e da Língua, I. P. a Portuguese international institution dedicated to the promotion of the Portuguese language, culture and aid on behalf of the Government of Portugal.

References

ADB Member Fact Sheet, October 2023. Timor Leste.

Government of Timor-Leste (2005). Decree-Law No. 10/2005 on the Legal Regime for Procurement.

Government of Timor-Leste (2020). Economic Recovery Plan.

Government of Timor-Leste (2011). Strategic Development Plan 2011-2030.

Government of Timor-Leste (2021). National Climate Change Policy.

Government of Timor-Leste (2022). Decree-Law no. 36/2022 on the Mandatory purchase of foodstuffs produced in the national territory within the scope of public procurement.

Government of Timor-Leste (2022). Updated Nationally Determined Contribution.

Government of Timor-Leste (2022). Legal Regime for Procurement, Public contracts and its Infractions.

Government of Timor-Leste (2022). Zero draft of proposed Climate Change Law.

Government of Timor-Leste (2022). Development Finance Assessment in support of the achievement of the Strategic Development Plan and Sustainable Development Goals in Timor-Leste.

Government of Timor-Leste (2023). The Second Voluntary National Review Report on Progress of the Implementation of the SDGs, 2023 (VNR-2) - People centred sustainable development: Leaving no one behind. Version 2.

International Monetary Fund (2022). Democratic Republic of Timor-Leste: 2022 Article IV Consultation Press Release and Staff Report.

UNDP, Ministry of Finance (2022). Timor-Leste Climate Public Expenditure and Institutional Review.

The World Bank. Global Public Procurement Database “Timor Leste country profile for 2021”.

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