COUNTRY PARTNERSHIP FRAMEWORK FOR THE DEMOCRATIC REPUBLIC Public Disclosure Authorized OF TIMOR-LESTE For the Period FY2020-FY2024 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Indonesia and Timor-Leste Country Management Unit International Finance Corporation Multilateral Investment Guarantee Agency East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise disclosed without World Bank authorization. Document of The World Bank FOR OFFICIAL USE ONLY Report No. P134792 - TP COUNTRY PARTNERSHIP FRAMEWORK FOR THE DEMOCRATIC REPUBLIC OF TIMOR-LESTE For the Period FY2020-FY2024 International Bank for Reconstruction and Development International Development Association International Finance Corporation Multilateral Investment Guarantee Agency DEMOCRATIC REPUBLIC OF TIMOR-LESTE COUNTRY PARTNERSHIP FRAMEWORK Date of Last Country Partnership Strategy: February 19, 2013 (Report No. 75263-TP) CURRENCY EQUIVALENTS Currency Unit = US Dollar GOVERNMENT FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES Metric System The World Bank Group Team IBRD/IDA IFC MIGA Vice President: Victoria Kwakwa Snezana Stoiljkovic Keiko Honda Country Director: Rodrigo Chaves Vivek Pathak/Azam Khan Merli Baroudi Country Representative: Macmillan Anyanwu Soneath Hor Task Team Leader: Macmillan Anyanwu Soneath Hor Eugeniu Croitor The Timor-Leste Country Partnership Framework (CPF) was prepared under the guidance of Rodrigo Chaves (Country Director) and Azam Khan (Country Manager). The CPF benefitted from contributions from members of the Timor-Leste Country Team, including: Rolande Pryce, Dinara Djoldosheva, Camilla Holmemo, Yongmei Zhou, Alessandra Campanaro, Elena Chesheva, Almud Weitz, Ndiame Diop, Pedro Martins, Frederico Gil Sander, Stephan Garnier, Susiana Iskandar, Christophe Prevost, Daniel Street, Raul Alfaro-Pelico, Adelaide Goretti Neves De Camoes, Iwan Gunawan, Eric Vitale, Maria Isabel Alda Da Silva, Leila Maria Gusmao dos Reis Martins, Neelam Nizar Verjee, Berta Macheve, Matt Wilkinson, Ekaterina Gratcheva, Ririn Purnamasari, Jan Joost Nijhoff, Rodrigo Archondo-Callao, Moussoukoro Soukoule, Rideca Duarte, Manuela Da Cruz, Cipriana Teresa Tita De Jesus E Sousa, Saumya Mitra, Alka Patel, Bertine Kamphuis, Diane Francisco, Eugeniu Croitor. CONTENTS List of Acronyms ..................................................................................................................................... ix I. Introduction ...........................................................................................................................................1 II. Country Context ...................................................................................................................................3 A. Political Background ................................................................................................................................. 3 B. Economic Developments and Outlook ................................................................................................... 4 C. Poverty and Gender .................................................................................................................................. 9 III. The Emerging Development Agenda ...............................................................................................12 A. Addressing the Causes of Fragility ........................................................................................................ 12 B. Ensuring Macroeconomic Sustainability .............................................................................................. 13 C. Diversifying the Economy for Sustained Growth ................................................................................ 14 D. Building Human Capital .......................................................................................................................... 15 E. Addressing Climate Change. .................................................................................................................. 18 F. Building Capacity within the Government ........................................................................................... 19 IV. World Bank Group Partnership Framework (FY2020-2024) ..........................................................20 A. Government Program and Medium-Term Strategy ............................................................................ 20 B. Proposed World Bank Group Country Partnership Framework ....................................................... 21 C. Overview of the World Bank Group Strategy ....................................................................................... 22 D. The World Bank Group Program: Knowledge, Advisory Services and Financing Support ............. 26 V. Implementing the Country Partnership Framework .....................................................................34 A. Financial Envelope .................................................................................................................................. 34 B. Proposed Lending and Advisory Services and Analytics Program ................................................... 35 C. Financial Management and Procurement ............................................................................................ 35 D. Partnerships ............................................................................................................................................. 35 E. Monitoring and Evaluation ..................................................................................................................... 37 F. Managing Risks ....................................................................................................................................... 37 Annex 1: Results Matrix .........................................................................................................................45 Annex 2: Lending Operations IDA/IBRD/Trust Fund: Planned Vs Actual Approval .........................49 Annex 3: Advisory Services and Analytics ...........................................................................................50 Annex 4: Selected Indicators of Bank Portfolio Performance and Management ...........................51 Annex 5: Timor-Leste Operations Portfolio (IBRD/IDA and Grants) .................................................52 Annex 6: Timor-Leste: Statement of IFC Held and Disbursed Portfolio ...........................................53 Annex 7: Development Partners in Timor Leste: Areas of Focus ......................................................54 Annex 8: Timor-Leste Country Partneship Strategy for FY 2013-2018 Completion and Learning Review .....................................................................................................................................59 Country Partnership Framework for The Democratic Republic of Timor-Leste (FY2020-2024) v LIST OF FIGURES Figure 1. Timor-Leste: Annotated Timeline of Economic Performancea ................................................. 4 Figure 2. Timor-Leste: Petroleum Fund Trends (USD million) ................................................................... 5 Figure 3. Timor-Leste: Non-Oil GDP Growth Rates ..................................................................................... 6 Figure 4. Timor-Leste: Real GDP Growth and Contributions to Real GDP Growth ................................. 8 Figure 5. Timor-Leste: Poverty Rate, 2007-2014 ......................................................................................... 9 Figure 6. Timor-Leste: Petroleum Funds Projections (US$ million) ........................................................ 14 Figure 7. Timor-Leste: Benchmarking Human Capital Index .................................................................. 16 Figure 8. Timor-Leste: Trends in Nutritional Status of Under-5 Children, 2009-10 and 2016 ............ 17 Figure 9. Timor-Leste CPF – Selectivity Filters ........................................................................................... 23 vi Country Partnership Framework for The Democratic Republic of Timor-Leste (FY2020-2024) LIST OF TABLES Table 1. Timor-Leste: Macroeconomic Developments (Non-Oil GDP) (annual percent change unless indicated otherwise) .......................................................................................................... 7 Table 2. Timor-Leste: Human Capital Index (HCI) by Gender ................................................................ 10 Table 3. Timor-Leste – Mapping the CPF Objectives to SCD Priorities ................................................. 24 Table 4. Risk Assessment ........................................................................................................................... 37 Table 5. Proposed CPF Program (FY20-FY24): Lending Operations (IBRD, IDA and IFC) .................... 40 Table 6. Proposed CPF Program (FY20-FY24): Advisory Services and Analytics (ASA), Trust Funds and Global Partnerships ....................................................................................... 41 Table A. Summary of Timor-Leste CPS (FY13-FY18) Results Matrix Evaluation ................................... 60 Table B. Summary of Actual CPS Lending Program (FY13-FY18) ........................................................... 69 Country Partnership Framework for The Democratic Republic of Timor-Leste