Sustainable Financing for Resilient Roads in Timor-Leste
Published: 21 October 2021
Building roads for socioeconomic development depends on an efficient O&M system that considers the difficult topology and fiscal issues.
Timor-Leste has made impressive progress in developing its roads during the last decade. However, a large part of the country’s road infrastructure has deteriorated over the years due to lack of maintenance.
The country’s Strategic Development Plan 2011–2030 identified the development of road, air, and sea transport as central to building a “modern and productive country in which its people are connected with each other and with the world.” The plan highlights the importance of transport infrastructure in delivering social and economic development benefits, providing people with access to goods, services, and jobs, and reducing industry and trade bottlenecks.
An estimated 70% of the population lives in rural areas, and roads are the main means of transportation. Improvement of the core road network to link municipalities and provide access to villages and remote areas is critical for socioeconomic development.
Of the total 7,500 kilometers (km) of roads in Timor-Leste, about 1,000 km—which include half the national roads—have been upgraded and rehabilitated since 2011. This large public investment program was financed primarily through withdrawals from the Petroleum Fund, the country’s sovereign wealth fund, with support from grants and loans from development partners.
Several national road development programs will end in the coming years. Although additional investments are required for further rehabilitation, the need for road maintenance is progressively taking the center stage.
Without addressing this aspect, the sustainability of the country’s extensive newly developed road network is at risk. It is also important from a fiscal sustainability perspective to promote economic diversification and reduce dependency on the Petroleum Fund, with depleting oil resources.
Timor-Leste is highly vulnerable to natural hazards; earthquakes are common occurrences. Disasters cause destruction to people, damages to infrastructure, and high economic losses. Climate change is predicted to further aggravate these issues with rising sea levels, increased flooding, extreme drought and heat, intensified tropical cyclones, and acidification.
The country’s Strategic Development Plan targets completing the rehabilitation of all national roads by 2030. The Asian Development Bank (ADB) is assisting with 460 km of the 1,400 km of national roads. With environmental challenges, improving regulations, and standards, compliance for climate-resilient physical infrastructure assumes greater importance.
With the development plan at the core, various plans and strategies have informed successive government programs. Budgeted plans and sub-sector strategies have been developed, including the Five-Year Plan 2019–2023 by the Directorate for Road, Bridges, and Flood Controls.
Limited capacity and lack of experience
The government’s capacity to implement road projects has improved as a result of large investments in the road network and with the introduction of standards and contracting procedures through projects financed by development partners.
However, the directorate’s maintenance department was established only in 2015, and Timor-Leste’s experience in road maintenance is still limited. Capacity gaps for contracting of maintenance activities can be more complex and difficult compared to the construction of investment projects as O&M often requires smaller contract amounts spread over longer periods of time, varying work volume, and possible unexpected, emergency work.
Good O&M management and capacity in medium-term budgeting and planning need to be built into the Ministry of Public Works to strengthen Timor-Leste’s overall public financial management system. There is also limited capacity within the local private sector as most road rehabilitation projects funded by development partners have been implemented by international contracting companies with international consultant supervision.
Lack of accurate data
The last full traffic survey in Timor-Leste dates back 10 years, making precise planning difficult due to the lack of accurate data on vehicle load. The directorate is currently preparing a comprehensive 20-year strategy for integrated national road development, which will address gaps in planning and detail investment needs with costings. The inclusion of a capital investments and operation and maintenance (O&M) strategy will be crucial for an efficient and fiscally sustainable investment plan for the sector.
Increase in routine maintenance
The proposed Maintenance Program 2020–2030 predicts a sharp increase in the roads that need annual routine maintenance to 1,000 km in 2023 from 150 km in 2019. As ongoing improvement contracts are completed and roads handed back to the directorate, road maintenance will increase further to 1,100 km in 2024 and 1,800 km in 2027. In addition, the completion of improvements to national roads between 2014 and 2020 will require periodic maintenance.
In the long term, routine maintenance needs are estimated at about 2,000 km per year, far beyond the current financial allocations. Building and maintaining a sustainable, resilient road network in Timor-Leste requires addressing gaps in both financing capacity and human capacity.
The current gaps in O&M funding is also a major challenge. Budget allocations for maintenance come to about only two-thirds of the requirement despite a significant increase to $6 million in 2019 from $1 million in 2018. This limits the size of the road network to be maintained.
The lack of adequate road maintenance funding will result in the deterioration of a significant portion of the network by 2030 and a significantly higher share requiring rehabilitation by 2040—negating the large investments that have been made.
Climate and topology also challenge the durability of new roads due to regular droughts, floods, and heavy rains. The wet season brings intense rainfall and long-term subsurface water accumulation that affect the roads’ physical sustainability, including those rehabilitated and climate-proofed as per international standards. Road constructions in Timor-Leste requires higher standards than the norm, and maintenance activities need to account for the additional constraints.
Addressing the Challenges
Current allocations for maintenance activities in the state budget will not fully cover the needed road rehabilitation in the coming years. Addressing the financing gap, while simultaneously reducing pressure on the budget, requires rethinking the current funding model.
A possible measure under discussion is the establishment of a road maintenance fund that would help provide predictable and consistent O&M funding, facilitating multi-year planning and contracting. Create regular inflows of funding by imposing user charges, such as a fuel tax and heavy vehicles surcharge, and increasing vehicle registration fees. This would progressively reduce the share drawn from the state budget.
By applying the “user pays” principle, the road maintenance fund will help establish a fair means of charging for road services without increasing pressure on other sources of domestic revenue. It will also facilitate the allocation of funding between the different organizations responsible for road maintenance, both at the central government and municipal levels. It has been assessed that pooling different road user charges and taxes could generate up to $65 million per year in the long term.
Under the current road rehabilitation scenario, even a mature road maintenance fund will not be sufficient to cover investments and maintenance needs, which are currently estimated at $95 million per year over the next 20 years.
Alternative scenarios where road size and cost estimates are based on sound economic analysis need to be considered while building an economically viable transport system. Careful choices will also have to be made regarding the sizing of future roads which will present a long-term tradeoff between price and capacity.
The establishment of a road asset management system would enable the government to prioritize maintenance needs of each road with its limited resources and support the formation of an effective road asset management policy. The system would support the collection and analysis of good quality data using modern sensing technology.
Addressing the capacity gap is another key objective. ADB recommended some restructuring of the directorate to further integrate its increasing central role in O&M management and to account for the institutional changes of an ongoing decentralization. Broader support to the implementing agency is also needed.
A skills gap analysis provides directions for training programs through formal and on-the-job training in such areas as project and safeguards management, work health, and safety and leadership. Development of local contractors’ capacity and the improvement of quality standards in the private sector are also an urgent need.
The Way Forward
Road development is key to Timor-Leste’s socioeconomic development. Progress in rehabilitating the country’s road network has provided connectivity and access to its population.
However, the durability and sustainability of the roads is dependent on an efficient O&M system that considers the need for high-quality maintenance required by the difficult topological and meteorological conditions and the increasingly pressing fiscal constraints.
Introducing new sources of user-based revenues dedicated to funding maintenance would allow addressing part of the financing gap and facilitate budget management and contracting of maintenance activities.
Additionally, reviewing the needs for new rehabilitation investments and scaling them against future available resources will be required to ensure that maintenance costs match available funds.
Accelerating efforts for building the capacity of various line agencies involved in maintenance activities must also be at the heart of the plan, while local private sector capacity must be built to reduce reliance on international contractors.
This policy brief was prepared by Pedro Aquino, Claire Potdevin, Witoon Tawisook, and Kavita Iyengar.
Asian Development Bank. 2021. Baucau to Viqueque Highway Project. Consultant’s report. Manila (TA 9502–TIM).
ADB. “Better Roads Help Timor-Leste Promote Economic Growth Outside Capital City.” March 5, 2019. Video.
ADB. 2018. Timor-Leste Transport Operations. Manila.
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