VZCZCXRO0931
OO RUEHDT
DE RUEHDT #0150/01 1680829
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O 170829Z JUN 09
FM AMEMBASSY DILI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4413
INFO RUEHJA/AMEMBASSY JAKARTA IMMEDIATE 1053
RUEHDT/AMEMBASSY DILI 3943

UNCLAS SECTION 01 OF 04 DILI 000150 
 
CODEL 
SIPDIS 
 
FOR EAP/MTS AND H - LYNNEA SHANE 
 
E.O. 12958: N/A 
TAGS: OREP OTRA PREL EAID TT
SUBJECT: SCENESETTER FOR JULY 2 - 4 VISIT OF CODEL PRICE TO 
TIMOR-LESTE 
 
¶1.  Summary.  Embassy Dili warmly welcomes the July 2 - 4, 2009, 
visit of the House Democratic Assistance Committee under the 
chairmanship of Representative David Price.  The CODEL will find 
Timor-Leste enjoying an unaccustomed phase of political 
stability, although the country remains afflicted by extreme 
poverty and the social ills that go with it.  While increased 
government spending and a year free from crisis have resulted in 
a visibly more prosperous Dili, grinding rural poverty persists, 
and the country faces a demographic time bomb.  With 
international assistance, the government is making incremental 
progress in professionalizing its police and military, a sine 
qua non for future stability.  Timor-Leste enjoys cordial 
relations with its regional neighbors, including former occupier 
Indonesia.  The U.S. has taken advantage of 2008-09's relative 
stability to engage the government of Prime Minister Xanana 
Gusmao in new assistance initiatives, including with the support 
of the U.S. Pacific Command.  USAID is implementing projects in 
the areas of economic growth, health and governance.  We support 
President Ramos-Horta's recent request for the return of the 
Peace Corps, which withdrew from Timor-Leste during the 2006 
political crisis.  The National Parliament benefits from an 
HDAC-financed Research Center, and is eager to interact with the 
CODEL as part of its ongoing effort to improve its 
effectiveness.  End Summary. 
 
 
 
Breaking the Cycle of Crisis 
 
 
 
¶2. Timor-Leste's transition to independence has been fraught 
with violence, instability, and political polarization. 
Following the August 1999 referendum which decisively rejected 
special autonomy status within Indonesia, the Indonesian Armed 
Forces and allied Timorese militias destroyed the country's 
infrastructure and displaced tens of thousands of people.  Over 
the following months, most of the managerial class - Timorese as 
well as Indonesian - relocated to Indonesia, depleting the new 
nation's technocratic capacity.  Following independence in 2002, 
Timor-Leste's nascent institutions were further weakened by the 
persistence of political and social divisions that had origins 
in the turmoil that accompanied the end of the Portuguese 
colonial period and  Indonesia's 24-year occupation.  These 
conflicts erupted into political instability or violence 
repeatedly after independence, most dramatically in April - June 
2006, when the dismissal of a dissident group within the Defense 
Forces of Timor-Leste (F-FDTL) sparked a general breakdown of 
law and order, the fall of the FRETILIN government headed by 
Prime Minister Mari Alkatiri, and the displacement of 150,000 
Timorese.  At the invitation of the Government of Timor-Leste, 
the United Nations Security Council responded in August 2006 by 
deploying a peacekeeping operation with 2500 police, and 
Australia separately dispatched an International Stabilization 
Force (ISF) with more than 1000 troops.  Both operations remain 
in Timor-Leste as guarantors of the country's security and 
stability. 
 
 
 
¶3. Free and fair elections in 2007 selected the current national 
leaders, President Jose Ramos-Horta and Prime Minister Kay Rala 
Xanana Gusmao.  The latter heads a four-party coalition 
government, the Alliance for a Parliamentary Majority (AMP). 
FRETILIN is the largest opposition party.  Despite these 
successful exercises in electoral democracy, episodes of 
instability recurred.  There was sporadic political violence 
following the formation of the AMP government in August 2007. 
On February 11, 2008 a renegade ex-military faction headed by 
Major Alfredo Reinado, at large since the 2006 crisis, shot and 
seriously wounded President Ramos-Horta and attempted to 
assassinate Prime Minister Gusmao.  Reinado was killed in the 
incident, and the remainder of his men surrendered in May 2008. 
 
 
 
¶4. Since then, Timor-Leste has entered a phase of stability and 
progress.  The AMP government, with the support of international 
agencies, has succeeded in resettling almost all the internally 
displaced persons (IDPs) from the 2006 crisis.  Street crime and 
gang-related violence have declined.  The opposition FRETILIN 
party, although it sometimes resorts to incendiary rhetoric, has 
not attempted to dislodge the AMP government by direct action. 
Instead, it has sought to gain political leverage by publicizing 
cases of government corruption and drawing attention to high 
salaries paid to foreign and Timorese government consultants by 
the World Bank and other donors.  FRETILIN has also mounted 
court challenges, successful in a few instances, against AMP 
measures it saw as illegal. 
 
DILI 00000150  002 OF 004 
 
 
 
 
 
¶5. Reforming the security sector will be essential to continued 
stability.  To date, the Defense Forces (F-FDTL) and National 
Police (PNTL) have been sources of disruption due to ill-defined 
roles, indiscipline, and low capacity.  Both the PNTL and F-FDTL 
have committed human rights violations, notably during the joint 
military-police operation that apprehended the February 11 
rebels.  The F-FDTL in particular has created problems; its core 
consists of former guerilla fighters who believe that the 
outcome of the independence struggle accords them privileged 
status and exempts them from any requirement to professionalize. 
 There is a history of antagonism between the F-FDTL and the 
PNTL, which includes in its ranks some officers who were 
affiliated with the Indonesian occupation police.  In 2006 there 
was armed conflict between the PNTL and elements of the military 
in the streets of Dili; the low point of this debacle was the 
F-FDTL's shooting of eight police officers who were attempting 
to surrender during a standoff.  The current government has had 
some success in repairing relations between the police and 
military.  Cooperation in Operation Halibur, the joint task 
force that pursued the February 11, 2008 attackers, was an 
important benchmark in this effort. 
 
 
 
¶6.  Fortunately, the Government of Timor-Leste recognizes the 
importance of security sector reform, and, with the assistance 
of Portugal, Australia, New Zealand, the U.S., and the UN, is 
attempting to professionalize both the PNTL and the F-FDTL. 
After several years of exercising police functions, The UN 
Police Mission (UNPOL) has begun a phased handover of executive 
authority to the National Police of Timor-Leste (PNTL), although 
it will remain in a monitoring and support capacity.  The 
Government of Timor-Leste is gradually drafting a national 
security law and policy that will clearly define and separate 
the roles of the PNTL and F-FDTL; the U.S. supported this 
process by, for example, hosting in September 2008 a landmark 
workshop for Timorese policymakers at the Asia Pacific Center 
for Security Studies in Honolulu. 
 
 
 
Lifting the Curse of Poverty 
 
 
 
¶7. Timor-Leste's greatest challenge is the extreme poverty of 
its people with its host of concomitant social ills. 
Timor-Leste is Asia's poorest country, with half of its 
population living on less than a dollar a day, 85% of its labor 
force engaged in subsistence agriculture, functional illiteracy 
running at well over 70%, and more than half the population 
stunted from malnutrition.  These indicators become more ominous 
in light of Timor-Leste's incipient demographic boom.  62% of 
the population is under the age of 25, and the country's 
fertility rate of 7.8 births per mother is one of the world's 
highest.  Timor's poverty is correlated with enormous gaps in 
social infrastructure, distinguished by a poor national road 
network; inadequate telecommunications; a single, increasingly 
congested seaport; an electricity grid that supplies power to 
only a third of the country's households and then only for short 
segments of the day; a health services infrastructure barely 
able to cope (there are 5 doctors per 100,000 Timorese) with one 
of the world's highest rates of maternal and child mortality; an 
education system in which less than a fifth of schoolchildren 
has a chair or desk, and more than half have no textbook; poor 
water and sanitation facilities (two-thirds of adults fetch 
water at least once a week). 
 
 
 
¶8.  Timor-Leste is not without resources, however. It has more 
than $4.9 billion in a sovereign wealth fund due to accruals 
from modest oil deposits, and zero international debt. It also 
benefits from the generosity of the international community, 
with the government forecasting receipts of more than $220 
million from bilateral and multilateral donors in 2009. The IMF 
estimates the economy grew by a real 12.5% in 2008 due almost 
solely to increased government spending.  Potential sources of 
new growth include future LNG production, tourism, and an 
expansion and diversification of the agriculture export sector, 
which is now primarily coffee. 
 
 
 
How the U.S. Is Helping 
 
 
DILI 00000150  003 OF 004 
 
 
 
 
¶9.  All forms of appropriated U.S. assistance to Timor-Leste 
since 2000 total $273 million. For 2008, the U.S. appropriated 
approximately $25 million in aid.  Currently, a robust USAID 
program emphasizes strengthening Timor-Leste's institutions of 
democratic governance, fostering private sector-led economic 
growth and improving health.  Flagship projects include 
supporting the Timor Coffee Cooperative, which has operated 
since 1994, and now supports 22,000 member families, and 
produces all of Timor-Leste's high-grade coffee exports to the 
U.S., Japan and Europe.  A land and property rights project will 
for the first time establish a system of land registration which 
will lead to securing titles to all landholdings in Timor-Leste. 
 Through a media project, USAID is helping Timorese journalists 
improve the quality and expand the reach of the free press to 
all citizens of Timor-Leste.  A senior Department of Justice 
attorney will soon help Timorese efforts to ensure access to 
justice and the rule of law.  Departments of State and Defense 
programs have focused on police training and assisting the 
logistical capabilities of the military.  Since February, the 
U.S. Navy has deployed a unit of 26 Seabees to launch an 
engineering apprenticeship program and rebuild Timorese schools 
and health clinics.  During a two-week visit in July 2008, the 
USNS Mercy hospital ship treated nearly 10,000 Timorese. 
Finally, President Ramos-Horta has formally invited the Peace 
Corps to resume its Timor-Leste program, an initiative the U.S. 
Mission in Dili strongly supports. 
 
 
 
Engaging the National Parliament 
 
 
 
¶10.  Timor-Leste's National Parliament is a unicameral body with 
65 members.  Its Members are elected to five year terms; the 
current Parliament was elected in June 2007. It has nine 
functional committees.  Nine parties are represented in 
Parliament, with the largest single caucus being the opposition 
Revolutionary Front of Independent Timor-Leste (FRETILIN).  The 
Government's parliamentary majority is a coalition among Prime 
Minister Gusmao's National Congress for the Reconstruction of 
Timor (CNRT) and other smaller parties.  Seats in Parliament are 
allocated from party lists according to proportional 
representation; MPs do not represent not geographic districts. 
 
 
 
¶11.  The Parliament is ineffective in many regards but is 
improving.  Oftentimes, agendas are not followed, and 
absenteeism is a problem.  In early 2009, the average attendance 
in plenary session was 35 members, but this has improved 
following President Ramos-Horta's threat last month to dissolve 
Parliament if absenteeism persisted.  Committees are weak, and 
go for months without meeting.  While nothing precludes the 
National Parliament from drafting legislation, the body has not 
initiated any legislation; Parliament instead debates 
legislation submitted by the executive branch.  Constituent 
services are underdeveloped and informal.  MPs have the 
reputation of rarely traveling to the districts and relying on 
text messages to communicate with citizens.  Resources, ranging 
from office space to staff and legal counsel, are close to nil. 
 
 
 
¶12.  In recent months, however, Parliament has begun to work 
more efficiently.  It has already passed more bills in 2009 than 
during all of 2008. Major pieces of recent legislation include 
the Suco (Village) Election law, a law on territorial division, 
approval of the new Penal Code, and an education bill.  However, 
Parliament has provoked ire in this poor country by voting 
itself perquisites of office.  Within the last six months, 
Parliament voted to increase MPs' salaries from $800 USD to 
$3,000 USD per month. FRETILIN has strongly opposed the purchase 
of a fleet of dedicated official vehicles for MPs, as well as 
the increase in salary.  FRETILIN MPs are refusing to use the 
new cars, and allege that corruption was involved in their 
purchase.  Although these charges are to some extent "politics 
as usual," they speak to justified concerns about official 
corruption in general. 
 
 
 
¶13.  During the HDAC delegation's National Parliament leaders 
have expressed interest in learning more about Parliamentary 
rules and ethics.  The National Parliament has also complained 
that the executive branch has withheld information, and MPs 
would like to learn about Congress's experience in oversight of 
 
DILI 00000150  004 OF 004 
 
 
the U.S. executive branch.  The NP's committee structure remains 
weak, and MPs are interested in learning more about how the U.S. 
Congress organizes and operates its committees.  Finally, the 
National Parliament would like to exchange ideas on oversight of 
the Timorese military and police. 
KLEMM