The government of East Timor has agreed a newbuilding contract with Dutch group Damen for a new passenger/cargo vessel.
The ship will cost EUR 18.6m ($20.75m) and will be delivered in 19 months to operate on the country's north coast.
East Timor is paying about EUR 12.6m, with the German state contributing the rest.
Construction will be carried out in Yichang, China, the Noticias Financieras daily said.
The Diario de Noticias reported that the ship will be 67 metres long, and carry 380 people and more than 940 tons of cargo.
The newbuilding is replacing an older vessel.
Timorese transport and communication minister, Jose Agustinho da Silva, said: "This modern ship responds to the highest standards, reducing costs and improving the efficiency of transport."
"It will be the only ship in East Timor certified for safe transportation, including hazardous materials."
Damen's regional commercial director, Gysbert Boersma, added that the vessel could be the beginning of "much more extensive cooperation" between the Dutch company and the country.
This could include support for fisheries, shipbuilding, oil and natural gas.
