Re-imagining decentralization policy in Timor-Leste

Decentralization is not new in Timor-Leste. During the Indonesian occupation (1975-1999), selected socio-economic decision-making functions were devolved to local municipal governments. Municipal assemblies known then as Dewan Perwakilan Rakyat or DPR, functioned both at provincial and municipal levels with relatively sufficient funding awarded to them to implement local policies and programs.

The current state of decentralization in Timor-Leste

Since Timor-Leste gained independence (2002), some progress towards a decentralized state has been achieved with the creation of the territorial division law in 2009 (Decree Law No.11/2009). In its efforts to devolve more power to local government, the government operationalized its territorial divisions with administrative decentralization reforms in 2016 (guided by Decree Law No. 03/2016). This brought considerable changes to municipalities. Municipal government was restructured and for the first time since independence, funds were allocated directly to municipal administrations.

Although central line ministries continue to be responsible for providing the majority of public services (e.g., hiring school administrators and teachers, local health workers, and so on), under the current framework, municipalities can implement local programs in functional areas that include among others, education, health, agriculture, public works and water and sanitation. This enables municipalities to procure basic services in the health sector such as maintenance of ambulances and fuel for vehicles. In the education sector, municipalities can offer meals in schools under their jurisdiction and implement school infrastructure improvement projects. Municipalities can also implement infrastructure projects up to half a million dollars.

Shortcoming of current decentralization efforts

In contrast to more extensively decentralized countries, municipal institutions in Timor-Leste have only limited autonomy. For instance, rather than each municipality hiring their own staff and paying them from their own (autonomous) budget, municipal staff and budgets are fully incorporated into the central government budget. This effectively gives central government officials a veto over any municipal spending.

In addition, delegated functions have been thwarted by insufficient funding. Recent decentralization reviews have pointed out that funding allocated to municipalities is merely adequate to cover salaries and travel costs for employees. Implementation of programs that produce tangible benefits to local communities remains to be seen. While this can be explained by successive years of political deadlock compounded by the effects of Covid-19 pandemic and natural disaster, municipalities find it hard to comprehend why many planned activities remain unfunded by the central government.

Central government’s treatment of sub-national governments across the country have been uneven, to put it mildly. Many municipalities on the mainland receive much less budget than their counterparts in the enclave of Oe-Cussi and Atauro island. In the 2023 state budget, Oe-cussi alone received $120 million USD which is almost twice as much as the budget of all 12 other municipalities combined. Perhaps surprisingly, Dili, the biggest municipality by population, has the smallest budget allocation per capita in 2023. This favoritism obviously creates regional imbalance and tends to breed social jealousy. Resentment over this disproportionate treatment has been expressed by municipal authorities, but these concerns have been largely ignored by central government decision-makers.

Despite local competencies being defined by law, duplication and lack of coordination of activities between national and sub-national government continue to occur. The current decentralization program is weak, in that, it allows central government to voluntarily relinquish and retrieve its promises to local government at its discretion. In addition, there is also lack of clarity on various program implementation at all levels. Multiple decentralized programs are only prescribed in paper but are not seriously implemented in reality.

What explains the status quo?

One explanation for this is that central government wants to retain power and status quo by controlling financial resources. This becomes apparent in the continued reluctance of the central government to allocate sufficient funding to municipalities, for example, in agriculture and public works sector. This lack of funding is coupled with the fact that human capacity building programs remained stagnant. Furthermore, there is often confusion between the division of labor between national and subnational governments. Municipalities have often complained about overlapping of program implementation. All these reasons combined can potentially make decentralization programs counter-productive to socio-economic progress in municipalities.

Moreover, there has been no feasibility studies carried out to determine what levels of capacity exists in different municipalities to indicate what programs municipalities can deliver efficiently and effectively. Current decentralization policies and programs seem to have been implemented based on study tours to foreign countries. The decentralization strategy was less tailored to the needs of local communities. Furthermore, there is no strong evidence to support that Timorese public had been adequately consulted. The current decentralization framework was largely based on hasty consultation with elected politicians who may have been motivated merely by sectarian interests than sound socio-economic analysis. The current decentralization policy seems to be mainly political in nature with the view of strengthening local democratic institutions and less on creating economic opportunities.

Re-imagining decentralization in Timor-Leste

There is only one decentralization law that is applicable to all municipalities, (excluding Oe-Cusse but including Dili), without consideration given to unique socio-economic conditions that individual municipalities may possess. Municipalities should have been clustered according to their common characteristics in agricultural production or geographic landscape. Allocation of financial resources needs to be customized to the unique and specific needs of each municipality and based on their capabilities to implement them. Not all programs should be decentralized to all municipalities as not all municipalities have the same capacity to implement them.

The current decentralization framework needs to be thoroughly rethought and reconfigured if necessary. Creating decentralization legal framework should be preceded by a comprehensive local governance policy that was aligned with real needs of people and their communities. The laws must then be accompanied by clear implementation guidelines, laws that are common to all and yet flexible enough to allow municipalities to rediscover their unique potential for creating their own socio-economic vibrancy. Allocation of funding should follow this basic rule to ensure the most efficient use of dwindling petroleum resources.

Dili, by virtue of its proximity and home to national government offices, must not be treated in the same way as other municipalities. Dili’s population is much greater than the size of the other, smaller municipalities put together and as such it deserves a special decentralization regime.

Public investment should be proportionately granted to municipalities according to their socio-economic potential. When proportionate investment is applied, it will stimulate economic activities in rural municipalities that prevent further internal migration to Dili. Dili will gradually become less congested and the strain on infrastructure and services reduced.

Against the backdrop of dwindling petroleum fund and sovereign reserve, a carefully well-thought decentralization policy should be a strategic imperative for government, otherwise the decentralization silver bullet may as well miss the target.

This blog post is an edited version of an article written by Alexandre Rosa Bruno Sarmento (May 2023).

Alexandre Rosa Bruno Sarmento is a Timorese citizen and has worked in various organizations in Timor-Leste. He has led and coordinated several studies related to rural development and environment including decentralization. The views expressed in this article is fully his own and does not, in any manner, represent the institutions/programs he may be associated with. He can be reached at

Image credit: “Impressionist style painting of rural landscape in Timor Leste” by LPSA & DALL-E.