RAMOS-HORTA BECOMES PRIME MINISTER IN NEW FRETILIN

C O N F I D E N T I A L SECTION 01 OF 04 DILI 000355

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SUBJECT: RAMOS-HORTA BECOMES PRIME MINISTER IN NEW FRETILIN
GOVERNMENT

REF: (A) DILI 224; (B) DILI 231; (C) DILI 239; (D) DILI 243; (E) DILI 316; (F)
DILI 327; (G) DILI 334; (H) DILI 352

DILI 00000355 001.2 OF 004


CLASSIFIED BY: Grover Joseph Rees, Ambassador, U.S. Embassy
Dili, Department of State.
REASON: 1.4 (b),(d)



(1) (C) Summary: President Xanana Gusmao announced on July 8
his appointment of Jose Ramos-Horta as Prime Minister.
Ramos-Horta's name was put forward by leaders of the ruling
Fretilin party on condition that President Gusmao also appoint
two Deputy Prime Ministers. Fretilin leaders initially insisted
that both Deputies be members of their own inner circle, but
they and Gusmao eventually reached agreement on Minister of
Agriculture Estanislau Da Silva and Minister of Health Rui de
Araujo. Da Silva is a Fretilin insider and close ally of former
Prime Minister Mari Alkatiri while Dr. Araujo, like Ramos-Horta,
is regarded as an independent and a reformer. Ramos-Horta and
the two Deputies were sworn in today by President Gusmao. In
his acceptance speech Ramos-Horta acknowledged that an early
test for the new government will be whether it can create
conditions under which the many thousands of internally
displaced persons (IDPs) will be persuaded that it is safe to
return to their homes. He also promised to root out corruption,
mismanagement, and abuses by security forces --- practices that
most Timorese associate with the previous government --- and to
work closely with the Catholic Church and others whom the
Alkatiri government had alienated. He also emphasized, however,
that as the leader of a Fretilin government he will consult
regularly with Fretilin leaders, including Alkatiri, on policy
matters. Ramos-Horta's speech included effusive praise for
Alkatiri, who faces serious charges that could include
conspiracy to murder, and who announced today that he will drop
his attempt to assert Parliamentary immunity. The remaining
members of the new Cabinet will be announced within the next few
days and are expected to consist primarily of reappointments
from the former government. Ramos-Horta's appointment was
greeted enthusiastically by almost everyone in East Timor, but
many expressed doubts about whether he will be able to satisfy
both the Fretilin leadership and the general population. The
inauguration of the new government puts an end, at least for
now, to the President's plans to dissolve the Fretilin-dominated
Parliament and call early elections. End Summary.

Compromise leadership includes two independents and one Fretilin
insider
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(2) (U) On Saturday, July 8, President Gusmao announced his
appointment of former Foreign/Defense Minister and 1996 Nobel
Peace Prize winner Jose Ramos-Horta as Prime Minister. The
President also announced the appointment of Minister of
Agriculture Estanislau Da Silva as "First Deputy Prime Minister"
and of Minister of Health Rui de Araujo as "Second Deputy Prime
Minister."

(3) (C) East Timor's constitution provides that the Prime
Minister shall be nominated by the party or coalition that
controls a majority in Parliament. The President then consults
with other parties in Parliament and decides whether to appoint
the ruling party's nominee. The process of choosing a successor
to former Prime Minister Mari Alkatiri, who resigned on June 26,
had been complicated by the President's belief that the Fretilin
Party currently has no legally elected leaders and by his
reluctance to deal with Alkatiri, who remains Secretary General
of Fretilin. See Reftels. The President finally met on Friday,
July 7, with a delegation of Fretilin leaders that did not
include Alkatiri. They proposed a slate of three persons, on
the condition that the President could choose one of the three
for Prime Minister and designate the other two as Deputy Prime
Ministers with broad power over significant areas of Government.
The three names they proposed were Ramos-Horta, a non-Fretilin
member of Alkatiri's cabinet whom the Fretilin leaders knew to

DILI 00000355 002.2 OF 004


be the President's choice for Prime Minister; Da Silva, a
capable cabinet minister who is also a leading member of
Alkatiri's "Mozambique group"; and Antoninho Bianco, a less
distinguished member of the Mozambique group. The President
reportedly counterproposed Dr. Araujo, a capable and popular
Minister who like Ramos-Horta is not a member of Fretilin, and
Minister of Labor Arsenio Bano, an Alkatiri associate who is
regarded as a moderate, for the two Deputy Prime Minister
positions. The Friday meeting ended with no agreement but
resumed on Saturday, when the two sides reached the compromise
of Ramos-Horta, Da Silva, and Araujo. The compromise includes
the designation of Da Silva as "first" of the two Deputies, but
sources close to Ramos-Horta indicate that both deputies will
report to the Prime Minister who will retain ultimate authority
over all ministries.

(4) (C) Da Silva is a bright and engaging man who is generally
regarded as having been a capable Minister of Agriculture. He
speaks good English and has worked closely with the Embassy and
USAID on numerous projects. However, a number of the Alkatiri
government's many critics have expressed dismay at his prominent
role in the new government, characterizing him as a "radical"
member of Alkatiri's tiny inner circle of ex-Mozambique exiles.
As chair of the Fretilin Congress in May, Da Silva presided over
the controversial decision to ignore the statutory requirement
of a secret ballot for the election of party leaders, which
guaranteed Alkatiri's re-election over reformist challenger Jose
Luis Guterres. See Refs A-D. During the run-up to Alkatiri's
resignation in June, there were reports that the former Prime
Minister had offered to resign if and only if the President
would agree to appoint Da Silva as his replacement.

(5) (U) Dr. Araujo is a non-Fretilin member who is generally
regarded as a reformer. A medical doctor trained in New
Zealand, he was perhaps the most highly regarded Minister in the
former Government, not only for his intelligence and sincerity
but also for his technical and managerial skills. Like Da
Silva, he speaks good English and has a good relationship with
the Embassy and USAID. Like Prime Minister Ramos-Horta, Dr.
Araujo is well-liked by critics of the former Government
including President Gusmao, opposition party leaders, and
Catholic Church officials.

Ramos-Horta promises reconciliation and sweeping reform, but
will work with Fretilin
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(6) (U) The new Prime Minister and his two deputies were sworn
in this morning by President Gusmao in a ceremony at the
President's "Palace of Ashes." The small group of attendees
included officials of the former Government (but not Alkatiri),
parliamentary leaders from Fretilin and opposition parties,
heads of diplomatic missions, and the Timorese and international
news media. The ceremony consisted of the President's
administration of the oath of office to each of the three new
leaders and then a speech by Ramos-Horta delivered in each of
the two national languages, Portuguese and Tetum.

(7) (U) Ramos-Horta's speech included admissions of important
failures by the former Government in which he served and
promises to do better: "We failed in the area of internal
security, we failed in the dialogue with the people, we stand
accused of insensitivity and arrogance, and corruption started
to invade institutions of the state. We say that we want
foreign investment . . . . [but created] a bureaucratic
stranglehold that undermines our best intentions . . . ." He
promised to attack corruption by enhancing the transparency of
government procurement and other processes, to simplify
government bureaucracy "immediately" so that it does not deter
private enterprise, to alleviate poverty, and to address the
problems in the military (FDTL) and police (PNTL) that
contributed to the political and security crisis. He also
promised reconciliation with groups and institutions that had

DILI 00000355 003.2 OF 004


been alienated by the Alkatiri government, in particular with
the Catholic Church, "the only continuous solid institution" in
Timorese life, which "must be venerated and called once again to
partnership with our young State, help us get out of this
crisis, heal the wounds, . . . [and] assume a bigger role in
education and in the human development of our people and the
fight against poverty." He praised the Church's work in caring
for IDPs, and added that among his government's first tasks
would be to create security conditions in which the IDPs would
feel safe in returning to their homes.

(8) (U) Dr. Ramos-Horta also emphasized, however, that he is now
the head of a Fretilin government and that he will work with
Fretilin. He said he will have monthly meetings with the
party's "National Political Committee" (frequently referred to
by friends and foes as the "Politburo") and weekly meetings with
Alkatiri and Francisco "Lu'Olo" Guterres, President of Fretilin
and also of the National Parliament, to consult on questions of
policy and governance. Although Ramos-Horta has confided to
associates that he intends to be an independent leader who will
reach out to all segments of society including the political
opposition, a Fretilin insider told Emboff yesterday that the
party regards Ramos-Horta as "bound to implement Fretilin
programs."

Ramos-Horta praises Alkatiri, soon to be questioned as a
"suspect"
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(9) (U) Ramos-Horta's address included several passages of
effusive praise for Alkatiri, whom he called "my brother and
friend from my youth" whose decisions were "always guided by
prudence and loyalty to the people whom he really loves."

(10) (C) In what may be a related development, Alkatiri sent a
letter to the Parliament today reversing, at least for the time
being, his earlier assertion of Parliamentary immunity from
prosecution in connection with an ongoing investigation into
charges that he authorized the arming of a "hit squad." See Ref

G. Alkatiri's letter said he would defer his assumption of
membership in Parliament until after July 20, when he has been
ordered to appear for questioning in the case. Although a
former order had designated Alkatiri as a "witness" in the case,
the latest order indicates that he is a "suspect." The July 20
hearing could result in Alkatiri's immediate arrest, although
sources close to the case indicate that Ramos-Horta may have
been urging prosecutors not to proceed with the charges against
Alkatiri, at least until after the report of the United Nations
commission of inquiry into the violence committed in East Timor
during April and May. Ramos-Horta's swearing-in speech also
included a respectful mention of the commission of inquiry.

Remaining cabinet members to be named soon
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(11) (U) The remaining cabinet members will reportedly be named
soon, perhaps this week. Ramos-Horta has stated that he does
not intend to make major changes in the Alkatiri cabinet,
although he would like it to be smaller than its current 41
members. There are unconfirmed reports that he will appoint
current Ambassador to China (and former Vice Foreign Minister)
Olimpio Branco or current Ambassador to Australia Hernani Coelho
as the next Foreign Minister, and that independent Minister of
Education Armindo Maia may be replaced by Rosalia Cortereal, the
current Vice Minister. Da Silva will reportedly retain his
Agriculture portfolio and Dr. Araujo will reportedly retain
Health. Ramos-Horta met yesterday with the Fretilin political
committee to discuss the composition of the cabinet.

Timorese greet new Government with cautious enthusiasm
--------------

(12) (C) Ramos-Horta's appointment was greeted enthusiastically
by almost everyone in East Timor. He appears to be well-liked

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by most elites, including those who do not particularly like
each other, and even more popular with ordinary citizens. Many
have cited his appointment as an important step toward giving
people the confidence in government that will persuade them to
return to their homes and go back to their normal lives.
Opposition members and Church officials were particularly happy
with the appointment, although some expressed reservations about
whether anything would really change with Da Silva as First
Deputy Prime Minister and other Alkatiri associates in key
ministries. As Bishop Basilio Nascimento of Baucau told
Ambassador, "today was a positive development that will reduce
tension," but "this may not be the end of the problem. It may
be the beginning of a new problem," since Fretilin leaders
"still don't recognize that they have done wrong."

Comment
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(13) (C) Ramos-Horta is a talented, energetic, likeable man who
sincerely wants to make East Timor a mature and participatory
democracy governed by the rule of law. This makes him an
enormous improvement over the former Prime Minister, whose many
good qualities were no match for his love of power and his
belief that power rightfully belonged to him. If Ramos-Horta
has a tragic flaw, it is the opposite of Alkatiri's: he likes
to be liked, he himself sometimes likes and trusts people he
shouldn't, and he believes implicitly that everything can be
worked out. As his close friend Bishop Nascimento puts it,
"Ramos-Horta is a negotiator. His instinct is to equilibrate
between Almighty God and the Devil. This sets bad precedents."
Ramos-Horta will have to make some hard choices during the next
few months: he wants to end corruption in government
procurement, but most reports of such corruption involve the
Fretilin leadership with whom he has pledged to consult
regularly. He wants free and fair elections either administered
or supervised by the United Natons, but the Fretilin leadership
(including Ramos-Horta's ex-wife, Minister of State
Administration Ana Pessoa, whom Ramos-Horta still holds in high
regard) have vigorously opposed this. He endorses the
international investigation into the April-May violence, but
such an investigation will quite possibly implicate Fretilin
leaders and senior FDTL officers in serious crimes.
Ramos-Horta's instincts on the substance of all these issues are
shared by President Gusmao, by the Church and other civil
society institutions, and apparently by a substantial majority
of ordinary Timorese including many who identify themselves as
Fretilin supporters. But these instincts are clearly at odds
with the views and interests of the Fretilin inner circle who
will occupy most positions in his government and with whom he
has promised to consult closely. Ramos-Horta may find himself
faced sooner rather than later with the difficulty of serving
two masters.

(14) (C) The swearing-in of the new Government puts an end, at
least for now, to President Gusmao's plan to dissolve Parliament
and call early elections. If all goes even minimally well, this
Government will serve until the expiration of Parliament's term
in May 2007. If, however, the political/security crisis should
recur, or if Ramos-Horta and the Fretilin leadership should have
differences that result in the Fretilin-dominated Parliament
failing to pass key elements of the Government's program, the
President would retain the constitutional power to dissolve
Parliament when necessary to resolve a "grave institutional
crisis." The effect of such dissolution would probably be to
leave Ramos-Horta --- together with whatever cabinet members he
and the President decided to retain --- in office as a caretaker
government until the spring elections. End Comment.
REES