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T.I.A GROWTH TRIANGLE

Sub Regional Economic Integrated Development Timor-Leste, Indonesia and Northern Territory of

Australia.

V GOVERNO CONSTITUCIONAL

Sub Regional Economical Integrated Development Timor-Leste, Indonesia and Northern Territory of Australia.

1. Synopsis

2. Background1. Events2. Unit Mission’s start up3. Sub Regional Cooperation in South East Asia4. Master Plan on ASEAN Connectivity

3. Action Plan (first approach)1. Timeline2. International Agreement3. Scope of Activities4. Flag projects5. Guidelines for structure 6. Drivers of success7. Conclusions

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The TIA-GT is a combined initiative of the governments of these countries, ignited by the government of Timor-Leste in order to promote and foster economic growth, as well as an integrated sub-regional development between Timor-Leste, Eastern Indonesia and Northern Australia.

So far, the leaders of the countries involved have been demonstrating a strong support for this initiative. The Indonesian government envisages it as a major contribution to promote the much required growth and development in Eastern Indonesia and the Australian Government as a great opportunity to foster the development of Northern Australia, diversifying its industries that have been mainly focused on mining. On his side, the Government of Timor-Leste launched, in September 2013, a Mission Unit for the negotiation and establishment of the platform for cooperation and sub regional integrated economic development across Timor-Leste, Indonesia and Australia, under the sponsorship and direct supervision of the Prime Minister. Mr. João Mendes Gonçalves, former Minister of Economy and Development, has been appointed as the Head of this Mission Unit and Representative of the State.

The leitmotiv of this venture comprehends the start

up and foster of transnational manufacturing value and logistics chains in this sub-region.

Considering the preferred Commercial Agreements that Timor-Leste established with several Geographies, namely the European Union, under the Cotonou agreement, and also USA, China, India, Australia and CPLP, the Community of Portuguese speaking countries which includes countries like Brazil, Angola and Mozambique. Timor-Leste has the potential become a manufacturing and logistic hub for the raw materials and semi-processed products of the surrounding Indonesian islands with the technology and knowledge support of Northern Australia, generating vast benefits for all parties involved.

In order to accomplish a sustainable success, the involvement of private sector and international investors must be intensive and assertive, so as to suitably contribute for the outline of the activities and drivers of development. Nevertheless, considering the present state of knowledge, there are significant reasons to believe that there will be an emphasis on matters such as Agribusiness, Fisheries, Sea & Biodiversity besides Natural Resources and Tourism.

TIA-GT (Timor-Leste, Indonesia and Australia Growth Triangle) 1/2

TIA-GT (Timor-Leste, Indonesia and Australia Growth Triangle) 2/2

For this reason, not only the issues of infrastructure and physical connectivity will be fundamental, but also a strong effort on Knowledge Management & Human Capital Enhancement in order to sustainably prepare the human resources involved in these operations. The main idea will be to start up with very simple and easy operations on activities that may nurture the opportunities to move to higher links of the value chain such as Life Sciences & Biotechnology.

The sub-regional integration of value & logistics chains requires liberalizing or seriously expediting the flow of raw materials, products & services, skilled labor, capital & finance, foreign direct investment, as well as knowledge & intellectual property, with several implications on the issues of ASEAN connectivity.

Regarding physical connectivity, its core subject concerns with the efficiency and competitiveness of logistics and operations. Therefore, it requires a thoughtful identification of necessities and sources of funds, prioritizing plans and actions to set up the infrastructure projects, in order to successfully proceed with its expedite and efficient deployment.

People-to-people connectivity focuses on human capital enhancement, innovation research &

development together, with other activities such as socio cultural exchange like sports and cultural events.

Concerning institutional connectivity, it must address the overall consistency of procedures, requiring a productive regulatory dialogue capable of providing financial stability and trust, generating a stable and reliable business and investment friendly environment.

The concept of a Growth Triangle between Timor-Leste, Eastern Indonesia and Northern Australia is inspired on the experiences of proven success, with operating models that can be properly assessed, analyzed and adapted to local realities, such as the main sub-regions promoted by ASEAN, namely the SIJORI and the IMT Growth Triangles.

It is expected that this initiative will strongly contribute towards promoting economic, social and cultural development; attracting valuable investment; promoting the development of manufacturing industries; enhancing human capital; strengthening the friendship and cooperation ties between the three countries; fostering & accelerating the process of accession of Timor-Leste to ASEAN and fulfill the objectives of the Strategic Development Plan of Timor-Leste.

Background

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Recognizing the potentialities of an Integrated Regional Economical Development Framework with T-L and Indonesia, comes the Idea by former MED to launch an initiative to start up a project in order to foster it and to provide legal and institutional support.

Events

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2010/May Bilateral Meeting, Indonesia / Timor-Leste

Visit of PM Xanana Gusmão and former MED João Gonçalves to Jakarta

Proposal by former MED to President Susilo Bambang Yudhoyono, during lunch

2011/AprBilateral Meeting, RDT-L / NT Australia

Visit of Deputy Prime-Minister and Minister of Economy to Darwin

2012/AprVisit of former MED, João Gonçalves to Jakarta

Meeting with Coordinating Minister for Economic Affairs of the R.I. Mr.Hatta Radjasa

2012/NovV Bali Democracy Forum – Meeting of the Executive Leaders of 3 countries: PM Julia Gilard, President Susilo Bambang YUDHOYONO and PM Xanana Gusmão

Restating the importance of Economic Cooperation and integration between Timor-Leste, Indonesia and Australia.

Events

Statements of Chief Ministers of Northern

Territory of Australia, willing to join the process

2011/Apr - Paul Henderson

•Visit of Deputy Prime-Minister and Minister of Economy & Development to

Darwin for the Bilateral Meeting between RDT-L and NT Australia

• Issue raised with NT Chief Minister, who immediately supported and expressed

interest in being part of the initiative

2013/May - Adam Giles

•During his visit to Dili, reiterated NT Gov. interest in pursuing with this initiative

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Events2012-May

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1 . The objective of the approach is to develop and implement programs to strengthen connectivity between the two Countries based on a multi-sectorial approach;

2 . The development may be implemented among others in Nusa Tenggara Timur, Timor-Leste and whereas necessary, their surrounding areas;

3 . To study and develop such approach, a Joint Task Force shall be established between the two governments under a Memorandum of Understanding;

4 . The Task Force shall report its work to the Sub-Committee on Economic Cooperation under the Bilateral Joint-Commission between Timor-Leste and Indonesia

Protocol signed between the Foreign Affairs Ministers of RDT-L and RI, witnessd by the Pres. of RI and the P.M of RDT-L

1.2 Sub Regional Cooperation in South East Asia

The sub-regional initiatives usually

focus on less developed areas of the ASEAN region with less favorable infrastructure stock

and weak intra-regional connectivity

and hence, most projects involve infrastructure

projects and trade and transport

facilitation as well as investment promotion

and facilitation.

The major three sub-regional initiatives in the ASEAN region include:

The Greater Mekong Sub-region (GMS)

Cambodia, Laos PDR, Myanmar, Thailand, Viet Nam + 2 provinces of PR China (Yunnan Province & Guangxi Zhuang Autonomous Region)

BIMP- EAGA, East ASEAN Growth Area

Brunei Darussalam, Indonesia, Malaysia, and the Philippines

IMT-GT,Growth Triangle

Indonesia, Malaysia and Thailand

Other sub-regional initiatives related to ASEAN Connectivity

• SIJORI Growth Triangle

• Indonesia-Malaysia-Singapore Growth Triangle

• ASEAN-Mekong Basin Development Cooperation (AMBDC)

• Mekong River Commission (MRC)

• Cambodia- Laos-Viet Nam (CLV) Development Triangle

• Cambodia-Lao PDR-Myanmar-Viet Nam (CLMV)

• Ayeyarwady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS)

• Heart of Borneo (Brunei, Indonesia and Malaysia)

Master Plan on ASEAN Connectivity *

Key Elements of ASEAN Connectivity:• Physical Connectivity

• Institutional Connectivity

• People-to-People Connectivity

*Adopted by the ASEAN nations on 18/Nov/2010 in Ha Noi,Vietnam

Connectivity in ASEAN refers to the physical, institutional and people-to-people linkages that comprise the foundational support and facilitative means to achieve the economic, political-security and socio-cultural pillars towards realizing the vision of an integrated ASEAN Community

Physical Connectivity

• Transport– Land Transport

• Road infrastructure ASEAN/Asian Highway Network Map

• Rail infrastructure Trans-Asian Railway Network

– Maritime Transport “Ring” Shipping Route

– Air Infrastructure Development ASEAN Single Aviation Market

• ICT - Information & Communications TechnologyASEAN ICT Masterplan (AIM2015)

• EnergyASEAN Power Grid Network

Trans-ASEAN Gas Pipeline Project

Master Plan on ASEAN Connectivity

“Ring” Shipping Route

ASEAN Single Aviation Market

Trans-ASEAN Gas Pipeline Project

ASEAN Power Grid Network

Master Plan on ASEAN Connectivity

Institutional Connectivity•Trade liberalization and facilitation•Investment and services liberalization and facilitation•Mutual recognition agreements/arrangements•Regional transport agreements•Cross-border procedures•Capacity building program

People-to-People Connectivity•Education and Culture•Tourism

Physical Connectivity• Cheaper transportation and logistic costs

• At the end, competitiveness

People-to-People Connectivity• Fill skill-shortage

• Exchange learning

• Expedite Innovation

• New opportunity from service industry

Institutional Connectivity• Regulatory Coherence

• Financial Stability

• Overall Increase Business Predictability

Physical Connectivit

y

People to People

Connectivity

Institutional

Connectivity

Beyond Connectivity

Action Plan - UM TIA-GT

2013/Sep

UM TIA-GT “Kick Off”(Timor, Indonesia & Australia - Growth Triangle)

•Government Resolution nº 20/2013, of the V Constitutional

Government of the RDT-L, published on 11th September;

•Launched a Mission Unit for the negotiation and establishment of

the platform for cooperation and regional integrated economic

development across Timor-Leste, Indonesia and Australia;

•Under the sponsorship and direct supervision of the Prime Minister

of RDT-L;

•Appointed, as the Head of this Mission Unit and Representative of

the State, Mr. João Mendes Gonçalves, former Minister of Economy

and Development.17

Mission Unit for TIA-GTOperative Organogram

Head of Mission Unit

& State Representative

NAT Technical Support Team

Socioeconomic Advisory

Institutional& Legal

Advisory

NALAAdministration and Logistics

Support Team

Secretariat Administration & Logistic Support

Deputy Headof Mission Unit

SeniorAdvisor

Operations’ Macro Activities

Action Plan

1. Preparation of a MOU to start up the process

2. Signature of MOU

3. Set up an ad hoc tri-party independent working group

4. Prepare and approve an Agreement on Sub Regional Integrated Economic Development to be agreed by the 3 countries, Timor-Leste, Indonesia and Australia

5. Signing of International tri-party Agreement

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To carry on with the obligations concerning the Protocol signed between RDTL and RI in 2012/May/19

Immediately

Deadline 20/05/2014

Deadline 15/11/2014

Deadline 31/03/2014

Deadline 31/10/2014

(First Interaction)

Action Plan - Agreement

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ApprovingObjectives

Strategies

Action Plans

Funding model

LaunchingAgency for Regional Integrated Economic Development of Timor-Leste, Indonesia and Northern Territory of Australia

Agreement on Subregional Integrated Economic Development to be agreed and signed by the 3 countries, Timor-Leste, Indonesia and Australia.

Deadline 31/12/2014

Scope of Activities

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Economy• Business development

• Agribusiness (including Livestock)

• Fisheries

• Manufacturing

• Tourism

• Energy / Natural Resources

• Technology• Infrastructure

• Inter-regional connectivity

• ASEAN Connectivity

• Management• Tourism• Knowledge

• R & D

Social

• Cultural andSocial Interchange

• Health

• Education & Culture

• Sports

“…Key Opportunities from an Indonesia-Australia Economic Partnership

With complementary patterns of consumption and production between Indonesia and Australia, the IA-BPG has identified the following key areas for partnership opportunities:

Developing cross-border, integrated industries and value chainsTo supply both domestic and third-country markets.

Enabling greater sharing of knowledge and technologythrough harmonising standards and regulations; recognising qualifications; recognising intellectual property rights; establishing dispute resolution mechanisms; building education, training and professional development cooperation; facilitating joint ventures and business licensing; and encouraging movement of skilled people between the two countries.

Facilitating economic cooperation through an enhanced program of development assistance

that is focused on building economic capacity, developing skills, sharing market information, enabling market access, facilitating development of value chains, building local businesses and enhancing cooperation between government development assistance activities and the private sector.

Building two-way investmentby developing competitive markets, lowering barriers, reducing risks and promoting investment opportunities, including joint ventures…”

Position Paper on Considerations towards the Indonesia-Australia Comprehensive Economic Partnership Agreement,page 6

“…Strategic Models for PartnershipThe IA-BPG believes that there are a number of prime areas of opportunity which could serve as models for strategic partnerships. These opportunities can become models upon which the economic relationship between Indonesia and Australia can be built and hence a permanent IA-BPG should be established to discuss more comprehensively how to best realize these opportunities.

Securing domestic food availability and participation in global food supply.

Advanced education and human resources development.

Improving health and quality of life.

Technology sharing and development. Establishing integrated value chains to increase consumer choice.

The IA-CEPA should promote cooperation in the manufacturing sector and create cross-border value chains to develop products for a world market. Indonesia is capable of becoming a manufacturing hub for Australia similar to the way Australia has previously engaged with Japan and currently engages with China.

Pilot Projects.In

order to build momentum for the IA-CEPA the IA-BPG has identified and agreed on two specific pilot projects which can be implemented with immediate effect.

1. “A Healthy Diet” – Support for the MP3EI goal of increasing consumption of red meat in Indonesia, and also consumption of Indonesian tropical fruit in Australia.

2. “A Skilled Workforce” – To support increased skills development in Indonesia and Australia by facilitating easier movement of skilled people between countries and increased capability transfer…”

Position Paper on Considerations towards the Indonesia-Australia Comprehensive Economic Partnership Agreement, page 8 to 9

Lighthouse ProjectsThe archipelago economy: Unleashing Indonesia’s PotentialMcKinsey Global Institute September 2012, Page 82

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“…Businesses need to find new ways of partnering with government to address critical barriers to growth.

Businesses will need to work together with Indonesia's government to address many of the challenges ahead. However, cooperation between the public and private sectors is not easy, and businesses will need to learn from the failures and successes of past partnerships around the world. Understanding the priorities of central and local government, and determining how or whether these align with business priorities, is an ever-present imperative.

One option would be to pilot partnerships through "lighthouse projects” that focus on a particular area (e.g.,food waste) and/or defined geographical area before scaling up more broadly to help ensure that these projects assemble the right set of actors…”

Lighthouse Project Integrating a Sub Regional Logistics & Value Chain

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Considering the preferred Commercial Agreements that Timor-Leste established with several Geographies

European Union (Cotonou agreement) + USA + China + India + Australia

ASEAN + CPLP (partial) For consideration in the future

Setting up Timor-Leste as a Logistic and Manufacturing Hub forRaw materials & Semi-processed products of the surrounding Islands.

Development Macro driversAgribusiness, Fisheries, Sea & BiodiversityKnowledge Management & Human Capital EnhancementNatural ResourcesStarting with very simple and easy operation, move to higher

links of the value chain

Life Sciences & Biotechnology.

Sub Regional Integration of Logistics & Value Chains

Timor Leste

Australia

Indonesia

Requires Liberalizing or seriously expediting the flow of:

• Raw Materials, Products & Services• Skilled Labor• Capital & Finance• Knowledge & Intellectual Property

Physical ConnectivityEfficiency & competitivenessIdentification of necessities, Prioritize and planning activitiesSetting up and deployment

People-to-People ConnectivityHuman Capital EnhancementInnovation Research & DevelopmentSocio Cultural exchange

(Sports + Cultural Events)

Institutional ConnectivityOverall Consistency of proceduresProductive Regulatory DialogueFinancial Stability and TrustStable and Reliable Business Environment

Agency– Guidelines for structure

•Directive Committee • Composed with representatives of the 3 countries• Executive chairman + Directors• Secretariat location (Considering Dili)

•Strategic Institutional Supporting Tools• On the “Demand side”

• Promotion and advertising - “Hunting Unit”

• Client Support, Nurture and Fidelity - “Farming Unit”

• Joint Ventures Support

• On the “Supply side”• Business Location Management• Venture Capital and Fund Management• Human Capital “Enhancer”• Technology, Management & Knowledge

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Establishment of a formal unit to lead,

energize and supervise the process

TIA-GT Drivers for success

• Institutional Model • Tested with many successful cases• Adaptable to local conditions (TL+I+A - Growth Triangle)

•Strong Leadership• Agency & Strategic Institutional Supporting Tools• Flag projects (it can be done!)• Strong and direct involvement of the top leadership of the 3 countries

•KEY - Commitment, Involvement, Attachment & Belief

Elements of ASEAN Connectivity

•National Pride WE CAN DO IT!!

Timor Leste + Indonesia + Australia29

Players / StakeholdersEntrepreneurs and private sector

People (pride)Governments & Public Institutions

ToolsBusiness Facilitation

Human Capital EnhancementKnowledge Management

TIA- GT A Growth Triangle between Timor-Leste, Indonesia and Australia

This initiative:• To be considered under the context of the accession process of RDT-L

to ASEAN and fulfill the requirements of the Master Plan on ASEAN Connectivity

• Inspired on the experiences of proven success, with operating model that can be properly assessed, analyzed and adapted to local realities such as the sub-regions promoted by ASEAN

• Will strongly contribute towards:

• Promoting economic, social and cultural development;

• Attracting valuable investment ;

• Promoting the development of manufacturing industries;

• Enhancing human capital;

• Strengthening the friendship and cooperation ties between the three countries

• Fostering & accelerating the process of accession of Timor-Leste to ASEAN

• Fulfill the Objectives of the Strategic Development Plan of RDT-L

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Obrigado

barak

V GOVERNO CONSTITUCIONAL

Indonesia Economic Corridor1. Sumatra Economic Corridor as a “Center for

Production and Processing of Natural Resources and As Nation’s Energy Reserves”

2. Java Economic Corridor as a “Driver for National Industry and Service Provision”

3. Kalimantan Economic Corridor as a “Center for Production and Processing of National Mining and Energy Reserves”

4. Sulawesi Economic Corridor as a “Center for

Production and Processing of National Agricultural, Plantation, Fishery, Oil & Gas, and Mining”

5. Bali – Nusa Tenggara Economic Corridor as a “Gateway for Tourism and National Food Support”

6. Papua – Kepulauan Maluku Economic Corridor as a “Center for Development of Food, Fisheries, Energy, and National Mining”

MP3EIMasterplan, Pag. 46