PRESIDENT TO ASK GUSMAO-LED COALITION TO FORM COALITION

C O N F I D E N T I A L SECTION 01 OF 02 DILI 000274 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 DILI 00000274 001.2 OF 002 CLASSIFIED BY: Hans Klemm, Ambassador, EXEC, State. REASON: 1.4 (d) _____ 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 DILI 00000274 002.2 OF 002 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