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RUEHDT/AMEMBASSY DILI 4049

UNCLAS SECTION 01 OF 04 DILI 000223 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: OVIP PGOV PREL PHUM ECON TT
SUBJECT: SCENESETTER FOR PRESIDENTIAL DELEGATION TO INDEPENDENCE 
COMMEMORATION 
 
DILI 00000223  001.2 OF 004 
 
 
¶1.  SUMMARY:  Embassy Dili warmly welcomes the August 29-31, 
2009, visit of a Presidential Delegation led by The Honorable 
Nancy Soderberg and The Honorable Harriet Babbitt on the 
occasion of the 10th anniversary of Timor's independence 
referendum.  The delegation 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 immense 
demographic challenges.  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.  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 systematically 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). 
The former ruling party, FRETILIN, is now 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 
 
DILI 00000223  002.2 OF 004 
 
 
the World Bank and other donors.  FRETILIN has also mounted 
court challenges, successful in a few instances, against AMP 
measures it saw as illegal. 
 
 
 
¶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 
2008 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 seemingly 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, the latter 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. 
Timor-Leste's crime levels are very low by international 
standards, with murder rates and assault rates less than half of 
regional averages.  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 
 
DILI 00000223  003.2 OF 004 
 
 
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 
 
 
 
¶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 has begun to 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 2009, 
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. The 
U.S. Air Force's Pacific Angel operation provided medical care 
to more than 4,000 patients in July 2009.  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. 
 
 
 
Relations with Indonesia 
 
 
 
¶10.  Despite the violence and destruction that followed the 1999 
referendum and the legacy of 24 years of occupation, domestic 
politics evolved in both Timor-Leste and Indonesia to create an 
atmosphere conducive to reconciliation.  Indonesia redefined 
itself in the post-Suharto era and Timor-Leste acknowledged the 
unavoidable imperative of repairing relations with its much 
larger neighbor.  The positive state of the relationship between 
Timor-Leste and Indonesia today is a considerable accomplishment 
in which both sides can justifiably take great pride. 
Representative of the current warm state of bilateral relations, 
Timor-Leste recently invited the commander of Indonesia's armed 
forces to visit.  Likely to take place in September 2009, the 
Indonesian general's sojourn to Dili would be the first since 
the events of 1999. 
 
 
 
¶11.  The referendum anniversary will, however, serve as a 
reminder of the Indonesian period.  Despite the suffering that 
took place in 1975-99, the desire to hold Indonesia accountable 
for the crimes committed during its occupation is not a pressing 
issue for most Timorese.  Timor-Leste views itself as the 
victorious party, having won its independence.  The Timorese 
leadership has not prioritized the pursuit of criminal cases 
against Indonesians, although the arrest in Timor-Leste of a 
former militia leader in early August 2009 and the resulting 
protest from the Indonesian Government demonstrated how 
sensitive accountability issues still can be. 
 
 
 
Anniversary Celebration 
 
 
 
 
DILI 00000223  004.2 OF 004 
 
 
¶12.  The Government of Timor-Leste is hosting a series of events 
to mark the referendum anniversary.  A center piece is the Tour 
of Timor bicycle race, a multi-stage contest involving 
approximately 300 cyclists taking place from August 24 to 28. 
On the anniversary weekend itself, the Timorese Government 
expects senior leaders to attend from Southeast Asia as well as 
from the Lusophone community.  Confirmed attendees include the 
Speaker of the Portuguese National Parliament, the Portuguese 
Foreign Minister, the Governor-General of Australia, and the 
retired commander of the New Zealand armed forces.  The UN will 
be represented by Ian Martin, the first Special Representative 
of the Secretary-General for Timor-Leste. 
KLEMM