VZCZCXRO0985
RR RUEHDT
DE RUEHDT #0079/01 0710511
ZNR UUUUU ZZH
R 110511Z MAR 08
FM AMEMBASSY DILI
TO RUEHC/SECSTATE WASHDC 3917
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
INFO RUEHJA/AMEMBASSY JAKARTA 0965
RUEHDT/AMEMBASSY DILI 3344

UNCLAS SECTION 01 OF 03 DILI 000079 
 
SIPDIS 
 
SIPDIS 
 
USDA FOR US KEENAN, D/US TERPSTRA; FAS/OA/YOST MILLER, JACKSON; 
FAS/OCRA ALEXANDER, RADLER, HIGGISTON, RIKER; FAS/OTP FOSTER, 
FAS/OCBD SHEIKH, JAKARTA FORAG COUNSELOR; STATE FOR E AND EEB 
 
E.O. 12958: N/A 
TAGS: EAGR ECON PREL TT
SUBJECT: TIMOR-LESTE: LEVERAGING USG EFFORTS IN AGRICULTURE 
 
 
Summary and action requested 
 
---------------------------- 
 
 
 
¶1.  Classifying Timor-Leste as a Priority Country under USDA's 
Food for Progress (FFP) program would directly and strongly 
support U.S. foreign policy objectives to support Timor-Leste's 
efforts to build a stable, secure, prosperous, and democratic 
future for its citizens.  The country meets the qualifying 
criteria for priority contries and there are organizations 
currently working in Timor that are interested in participating 
in the program.  More importantly, this is Timor's time of need 
and we urge that all possible avenues of U.S. support be 
considered.  In addition to many short term priorities, 
Timor-Leste's leaders face immense social and economic 
challenges: grinding poverty, razor thin managerial capacity, 
astonishingly high unemployment/child mortality/illiteracy 
rates, soaring youth unemployment amidst skyrocketing population 
growth, breathtakingly poor infrastructure and, except for oil, 
coffee and a handful of other agricultural exports, no 
meaningful connection with the rest of the regional or global 
economy.  Given that 85 percent of the working population 
remains engaged in subsistence agriculture, hope for progress 
depends on improving Timor farmer productivity and income. 
USAID has an excellent record in supporting agriculture in 
Timor-Leste, including a partnership with a U.S. NGO and the 
country's leading and most successful coffee cooperative.  That 
said, much more can be done and our private sector partners are 
eager to expand their programs including through FFP.  Embassy 
Dili strongly requests that USDA designate Timor-Leste a 
priority country for FFP assistance.  End Summary and action 
requested. 
 
 
 
¶2.  Timor-Leste is Asia's poorest country, emerging as an 
independent state in 2002 following four centuries of Portuguese 
colonial neglect and a brutal 24-year Indonesian occupation. 
Timor's short democratic history has been marked by frequent, 
violent political instability.  The nadir occurred in the spring 
of 2006, when the government collapsed, rivalries between the 
military and police descended into armed conflict, widespread 
property destruction left 100,000 homeless, and the leadership 
resorted to calling in Australian forces to restore order. 
Democratic Timor-Leste, sandwiched between our ally Australia 
and our increasingly important partner Indonesia, is described 
even locally as a potential failed state. 
 
 
 
¶3.  2007 witnessed hopeful signs for recovery.  Timor-Leste 
successfully completed three national presidential and 
parliamentary elections, taking encouraging steps toward 
national reconciliation.  1,500 UN police and 1,000 troops in 
the Australian-led International Stabilization Force have 
maintained stability.  Oil revenues have begun to amass and now 
exceed $2 billion, a patrimony that represents Timor's best long 
term hope for economic and social development.  Prime Minister 
Xanana Gusmao's government has accumulated a number of 
legislative successes and brought in a largely technocratic 
cabinet committed to improving public services and the 
investment environment.  Not withstanding all of the above, we 
were tragically reminded of Timor-Leste's political fragility on 
February 11, 2008, when rebels attacked the prime minister and 
critically wounded the president.  Fortunately, Timor's 
institutions stood up well to this latest challenge, although 
not unblemished. 
 
 
 
¶4.  The challenges of development facing Timor-Leste are 
enormous.  They include a still unreconstructed security sector; 
inaccessible justice (the formal system adjudicated only 300 
cases in 2007 and sits on a backlog of 4,700); astonishingly 
poor infrastructure; a highly centralized government with poor 
public outreach and feedback mechanisms; explosive population 
growth of 4 percent per year; dangerously high youth 
unemployment; functional illiteracy rates of 70 percent; a 
shrinking non-oil economy; and enormous requirements for 
investment in education and human capital.  Fully 85 percent of 
the working population is engaged in little more than 
subsistence farming; food insecurity is chronic for large 
segments of the population.  Timor-Leste's maternal and child 
mortality rates are among the highest in the world. 
 
 
 
DILI 00000079  002 OF 003 
 
 
 
¶5.  Besides the energy of its people and its nascent natural 
resource wealth, Timor-Leste has benefited from the strong 
commitment to its democratic development by the international 
community.  In partnership with U.S. NGOs, the U.S. has been a 
generous source of support even before Timor-Leste's 
independence.  Our aid has focused on strengthening the 
country's governance and democratic institutions, establishing 
the rule of law, and meeting basic humanitarian needs.  But our 
assistance programs also have had a strong economic development 
component, especially in the agricultural sector.  A signature 
program has been with the Cooperativea Cafi Timor (CCT), an 
organization with a membership of more that 20,000 Timorese 
families and responsible for more than 40 percent of the 
country's coffee production.  We also support activities to 
develop and expand Timor's currently miniscule, but potentially 
substantial exports of cattle, candlenut, horticultures and 
spices.  Our NGO partners in agriculture are eager to expand 
these programs. 
 
 
 
¶6.  Given the country's non-existent industrial base and vacant 
service sector, economic development in Timor-Leste will depend 
in the medium term on raising productivity and incomes in 
agriculture.  The current Timorese government is committed to 
these goals, but given limited resources and weak technical 
capabilities, support from international donors such as the U.S. 
will be critical.  A properly targeted Food for Progress (FFP) 
program would strongly complement--indeed 
accelerate--agricultural programs that have been at the core of 
USAID efforts in Timor for more than a decade.  By leveraging 
existing programs, FFP would help provide the agricultural 
income generating mechanisms required to boost the rural economy 
of Timor-Leste. 
 
 
 
Priority Country Status 
 
----------------------- 
 
 
 
¶7.  We understand that USDA uses three criteria to determine 
Priority Country status for FFP:  per capita income, 
malnutrition rates, positive movement with respect to human 
rights and civil liberties. 
 
 
 
¶8.  According to USDA, any country that has a Purchasing Power 
Parity (PPP) per capita Gross Domestic Product (GDP) of more 
than $3,465 fails to qualify as a Priority Country for FFP. 
According to the UNDP's human Development Report Purchasing 
Power Parity (PPP) per capita GDP for Timor-Leste in 2004 was 
$732, significantly below the $3465 threshold used by USDA. 
Removing income generated by natural energy (which is largely 
saved in an offshore petroleum fund and does not appear in the 
pocketbooks of Timorese), non-oil per capita GDP for Timor-Leste 
in 2005 was $366.  The great majority of the population lives on 
less than 50 cents per day. 
 
 
 
Malnutrition Rate 
 
----------------- 
 
 
 
¶9.  According to the World Health Organization (WHO), Timor 
Leste has some of the highest malnutrition rates in Asia.  The 
WHO estimates that about 47 percent of children under the age of 
five are chronically malnourished (stunted) and 43 percent are 
underweight.  The WHO estimates that 33 percent of women are 
malnourished (Body Mass Index