Five Principles for the Management of Natural Resource Revenue: the Case of Timor-Leste’s Petroleum Revenue

Abstract

Natural resource revenue management is a challenge for poor countries dependent on the exploitation of their natural resources to achieve sustainable development. A review of the literature reveals that five principles for the management of natural resource revenue recur in the discussion: responsibility for petroleum revenue management is defined; all natural resource revenue is received by the state; natural resource revenue is invested wisely; natural resource revenue is managed transparently; and some natural resource revenue benefits future generations. Countries that manage their natural resource revenue based on these five principles are more likely to avoid the problems associated with an influx of natural resource wealth and achieve sustainable development. Timor-Leste is used as a case to explore these five principles. Timor-Leste is dependent on its petroleum revenue, and established a Petroleum Fund Law with the aim of managing its wealth wisely and for the benefit of future generations. But Timor-Leste has all the hallmarks of a country that would be unable to manage its natural resource revenue wisely. Timor-Leste’s troubled history has rendered its state institutions weak, and conflict, corruption and financial mismanagement exist. This article explores whether the Government of Timor-Leste’s plans to manage its petroleum revenue fulfil the five principles of natural resource revenue management.