PRESIDENT TO ASK GUSMAO-LED COALITION TO FORM COALITION

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SIPDIS

SECSTATE FOR EAP/MTS, USUN FOR RICHARD MCCURRY, SIPDIS

E.O. 12958: DECL: 7/31/2017
TAGS: PGOV ECON KDEM TT
SUBJECT: PRESIDENT TO ASK GUSMAO-LED COALITION TO FORM COALITION

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CLASSIFIED BY: Hans Klemm, Ambassador, EXEC, State.
REASON: 1.4 (d)

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CLASSIFIED BY: Hans Klemm, Ambassador, U.S. Embassy, Dili, East
Timor, Department of State. REASON: 1.4 (b),(d)


1. (C) Summary. President Jose Ramos Horta told the ambassador
on July 31 that he will ask this afternoon the CNRT-led
coalition to select a prime minister as the initial step towards
forming a new government. The widespread expectation is former
president Xanana Gusmao will be the new prime minister. Ramos
Horta decided to ask the coalition to form a government based on
yesterday's solid vote for its candidate for president of
parliament, thereby abandoning his quest for an "all-inclusive"
government. The president's policy priority is poverty
reduction and he will urge this on the new government, including
stimulating investment and establishing property rights. First
steps for the new government are to select a cabinet and pass a
policy program through parliament. The president will speak to
the nation tomorrow to urge all parties to accept the new
government peacefully. We will engage the new government
quickly as it develops policy priorities. End summary.


2. (C) During a meeting on July 31, President Jose Ramos Horta
told me that later today he will formally ask the Alliance for a
Parliamentary Majority (AMP) coalition to select a prime
minister and form a government. The AMP includes the CNRT, PD
and ASDT-PSD parties, with former president Xanana Gusmao the
all-but-certain coalition designee to be prime minister.


3. (C) Ramos Horta stated that yesterday's election of PD leader
Lasama as president of the new parliament made two points clear.
The solid majority of 41 votes for Lasama and 24 votes for
FRETILIN's candidate Guterres indicated that the AMP coalition
remained solid despite a relentless FRETILIN campaign over the
past month to tempt defections or otherwise impose its vision of
a FRETILIN-led new government. Further, yesterday's solid vote
in parliament against the FRETILIN candidate established that
FRETILIN could not form a parliamentary majority or pass a
government program. The president said he could not predict
that the AMP coalition will remain forever unified, but
yesterday's coherence and discipline convinced him that it
deserved the opportunity to govern.


4. (C) The president said he will instruct the AMP coalition to
quickly designate a prime minister, establish a cabinet and
propose a government program, all within this week. He asserted
no disappointment that his vision of an all-inclusive government
failed to take root. To overcome CNRT's electoral weakness in
the eastern districts of Baucau, Viqueque and Lautem, JRH will
urge the coalition to develop programs specific to the
development needs of those areas and to invite a couple of
FRETILIN representatives ("those that are skilled and
experienced") to join the new government. On August 1, Ramos
Horta will give a speech to the nation, with the commanders of
the national police force (PNTL) and military (F-FDTL) present,
to urge Timorese citizens to accept the new government
peacefully and support it.


5. (C) On policy priorities, the president will recommend that
the new government focus on poverty reduction and economic
growth, including his proposal to create an open, low tax
economy a la Hong Kong. I offered continued U.S. assistance.
Further, I urged that if investment and business opportunities
are to be created in Timor Leste, a land law must be passed and
clear property rights established. The president agreed,
stating that clarifying property rights is included among his
"top ten list" of policy priorities, along with reform of the
justice sector. He suggested the creation of an arbitration
commission to resolve land disputes. I noted that we have
already begun work on such mechanisms and would be eager to
assist the new government. Ramos Horta stated that he would
have the new government contact us quickly to develop a full
policy response to the question of property rights.


6. (C) In a quick press spray after the meeting, I again urged
all parties to accept and support the new government peacefully.
As a close friend of Timor Leste, I said the United States
hopes to work effectively with the new government to secure

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stability, better governance and economic prosperity for Timor
Leste.


7. (C) Comment. A new, non-FRETILIN coalition government will
provide the government of Timor Leste the opportunity to
vitalize efforts to stimulate the economy, strengthen its
institutions of governance and reform the justice and security
sectors. Several challenges remain, including the creation of
a coherent cabinet, a smooth transfer of power (including the
retention of skilled, experienced but typically FRETILIN public
servants in an otherwise capacity poor government),and the
selection and execution of meaningful policy priorities. The
embassy actively will engage the leaders of the new government
towards the goals of economic prosperity and strengthening Timor
Leste's democratic institutions in concert with the UN and other
international donors. End comment.
KLEMM