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.