With the benefit of almost 20 years of hindsight, in this article we evaluate the legacy of state-building in Timor-Leste. We find that much of the academic critique of the state-building mission has proven to be largely accurate: political and economic development has indeed been challenged by the legacy of key decisions made during the early state-building process. First, the focus on centralised state institutions has led to the underdevelopment of administrative, political, and economic decentralization. Second, the partisan nature of the constitution-making process has facilitated the continued concentration of political and economic power in the hands of certain elites. Third, the ambiguous—and at times conflictual—division of powers between state institutions has facilitated the emergence of political clientelism and undermined broad-based economic diversification and development.

Timor-Leste’s extractive industry became economically and politically important during the post-conflict transition period. The government established the Petroleum Fund in 2005 to protect the economy from a “resource curse.” However, the management of the Fund has since become a source of controversy as it created opportunities for corruption and unsustainable spending practices. We argue in this article that political dynamics, in addition to if not more than weak institutions, engendered corruption, clientelist rule, and economic disenfranchisement in postconflict Timor-Leste. Using the Political Settlements approach as an analytical framework, we demonstrate that patronage, rivalry, and rent seeking in the management of petroleum revenues are associated with economic and political challenges in Timor-Leste’s state-building process.

This article focuses on the concept of “fragility,” which gained prominence in literature on conflict-driven countries and serves as an analytical tool for policy analysis. Using this concept, this article provides a review of Timor-Leste since its independence in 2002. The country has achieved high economic growth, though the economy has remained fragile in terms of its high dependence on external factors, namely oil revenues. This study suggests that foreign aid and investments do not automatically improve fragility in resource-dependent economies unless they help diversify the monoculture economy, based upon democratic consensus-building among stakeholders.

The case of East Timor is distinct in that it offers both its own specifics and a common perspective widely shared among peacebuilders. Its unique trajectory of developments could be more succinctly understood through a four-dimensional taxonomy: “givens,” the past, the present, and the future. Three “givens” represent the unique historical, political, and geographical dimensions of the country. Its distinct position in the historical context of UN peace operations is marked not only by reaffirmed relevance as a “success” model despite its increasingly complicated form, but also by unprecedented challenges for consent of the host country and adoption of local wisdom. However, East Timor is subject to pitfalls in the progress of peacebuilding. Also, as time passes it may face changing agendas and disquieting woes.