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This paper discusses Timor-Leste’s capacity to engender the conditions for rapid growth and structural change to escape the poverty trap. While natural resources offer the foreign exchange to fnance economic progress, Timor-Leste shall have to break out from the Dutch disease to sustain this process. The evidence shows that Timor-Leste is facing a trend fall in cereal yields in the agricultural sector while oil and gas continue to be the prime contributors to its GDP growth. In addition, with the incidence of poverty rising over the last decade and child mortality and life expectancy rates falling very slowly, Timor-Leste is very much stuck in a whirlpool of poverty. The paper presents a stylised framework to assist the Timor-Leste government to engender the conditions that would stimulate rapid growth and structural change in the non-natural resource sectors through a focus on knowledge-based activities targeted at the productive sectors of agriculture and manufacturing in order to save the country from being strangled by the resource curse.
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