Timor-Leste

Timor-Leste achieved independence through referendum in 1999, survived Indonesian militia violence, and discovered oil wealth that should have funded development—except the oil is running out before the development materialized.

The Portuguese arrived in the 16th century, drawn by sandalwood trade. For 400 years, East Timor remained a colonial backwater while Dutch Indonesia surrounded it. When Portugal's dictatorship fell in 1974, the new government moved to decolonize. Indonesia invaded in 1975, beginning a 24-year occupation that killed an estimated 100,000-180,000 Timorese through violence, famine, and disease—perhaps one-quarter of the pre-invasion population.

The 1999 UN-supervised referendum delivered 78.5% support for independence. Indonesian military and militia responded with destruction: burning infrastructure, destroying records, displacing hundreds of thousands. Australian-led peacekeepers restored order. Timor-Leste formally achieved independence in 2002—the first new sovereign state of the 21st century.

What followed was a petro-state compressed into two decades. Oil and gas from the Timor Sea, divided between Australian and Timorese waters, filled a Petroleum Fund that reached over $19 billion by 2022. The fund, modeled on Norway's sovereign wealth system, was designed to save windfall revenue and spend only sustainable returns, preserving wealth for future generations.

The problem: production peaked in 2012 and has declined since. The Greater Sunrise field holds substantial reserves but remains undeveloped amid disputes over pipeline routing and revenue sharing. Without new production, the Petroleum Fund will be exhausted by the early 2030s—possibly sooner if withdrawals for government spending continue at current rates.

Non-oil development has lagged. Agriculture remains subsistence-level. Tourism potential exists but infrastructure is limited. Manufacturing is negligible. The coffee sector—Timor-Leste produces high-quality arabica—generates some export revenue but cannot replace petroleum. Ninety percent of government revenue still comes from oil and gas.

The 2025 reality is a race against depletion. Greater Sunrise development could extend the oil era; without it, fiscal crisis arrives within a decade. The youngest nation in Southeast Asia has one of the youngest populations—median age under 20—entering working age just as the resource that funded state-building runs dry.

By 2026, Timor-Leste must demonstrate either that Greater Sunrise will proceed or that non-oil revenue sources can scale rapidly. The Petroleum Fund's existence created an opportunity; its depletion represents a deadline. Whether independence leads to sustainable development or post-oil crisis depends on decisions made in the next few years.