The Country Environmental Analysis (CEA)for Timor-Leste identifies environmental priorities througha systematic review of environmental issues in naturalresources management and environmental health in the contextof the country's economic development and environmentalinstitutions. Lack of data has been the main limitation inpresenting a more rigorous analysis. Nevertheless, thereport builds on the best available secondary data, presentsnew data on the country's wealth composition, andderives new results on the costs of water and air pollution.The CEA calls for urgent attention to gaps in theenvironmental management framework, the lack of capacity toimplement the few regulations in place, and the high cost ofindoor air pollution and poor water, sanitation, andhygiene. Timor-Leste is a young country that regainedindependence in 2002, and it has emerged from a bitter pastburdened by colonialism and violent conflicts. It is still afragile state facing enormous challenges. The report alsopoints out the lack of clean water, appropriate sanitation,and hygiene as an environmental priority. The CEA estimatesthat this imposes an economic cost of about $17 million peryear by way of illness and premature death. The CEA alsolooks at outdoor air pollution and at natural resourcemanagement for land, forestry, and coastal and marineresources. Outdoor air pollution is not a serious problemfor the time being, but it could become so in the long runif the economy grows rapidly, urbanization continues, heavyindustry emerges, and motorization increases rapidly. Thisunderlines the need for good forward territorial anddevelopment planning. In conclusion, much good work hasalready been done to enhance the quality of the environmentin Timor-Leste. Efforts are under way to improve the database for environmental management.