BITTER POLITICAL DIVISION WILL LIKELY HAMPER NEW GOVERNMENT

C O N F I D E N T I A L SECTION 01 OF 03 DILI 000281

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SECSTATE FOR EAP/MTS
USUN FOR RICHARD MCCURRY
SIPDIS

E.O. 12958: DECL: 8/8/2017
TAGS: PGOV KDEM ASEC TT
SUBJECT: BITTER POLITICAL DIVISION WILL LIKELY HAMPER NEW GOVERNMENT

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CLASSIFIED BY: Elizabeth S. Wharton, Political/Economic Officer,
U.S. Embassy, Dili, East Timor, Department of State.
REASON: 1.4 (b),(d)

1. (C) Summary: President Jose Ramos-Horta on Wednesday, August
8 formally swore in the new government formed by the Alliance
with a Parliamentary Majority (AMP),with former President
Xanana Gusmao stepping into the role of Prime Minister. With a
new government in place, the country may be able to begin
addressing pressing policy issues. However the divisive
environment from which this government emerged will result in
serious challenges. First, it appears that FRETILIN will make
things as difficult as possible. In the short term, many
FRETILIN supporters have responded violently in Dili and Baucau
to the news of the new government. Additionally, party
leadership have so far strongly indicated their intention to
play an obstructionist role, repeatedly rejecting the new
government as unconstitutional and continuing a FRETILIN boycott
of Parliament. Second, the Alliance likewise does not appear to
be focused on ensuring a constructive role for FRETILIN. The
total absence of FRETILIN from ministerial positions in the new
government arguably means the loss of significant technocratic
skills and experience and will certainly complicate the
practicalities of transition. All of this will likely make
movement on key issues difficult and contribute to a continued
cycle of division and instability. Post is continuing in all
fora to emphasize the importance of refraining from violence,
encouraging greater efforts on both sides to work together, and
reviewing how we can assist in key policy areas. End summary.


2. (U) President Jose Ramos-Horta on Wednesday, August 8
formally swore in the new government, with former President
Xanana Gusmao stepping into the role of Prime Minister of a
government formed by the Alliance with a Parliamentary Majority
(AMP),comprising four parties who collectively hold 37 of the
65 seats in Parliament. The decision followed weeks of
deliberation and power struggle between AMP and the outgoing
ruling party FRETILIN, which continues to assert that as the
largest single party with 21 seats in Parliament it is
unconstitutional to exclude it from government. Although he
pushed hard to form a government that included FRETILIN,
Ramos-Horta was convinced to call on AMP after they held to
their position to form a government without FRETILIN and
demonstrated their parliamentary unity and strength. AMP
candidates were elected to all leadership positions in
Parliament with votes of 41 to 24 and 40 to 25 respectively
during the first two days the new Parliament convened, July 30
and 31. The new AMP government includes no members of FRETILIN
aside from the internal opposition faction FRETILIN Mudansa,
whom the current party leadership wholly rejects. Mudansa's
leader, Jose Luis Guterres, is the new Deputy Prime Minister.
The new ministers are a mix of representatives of the AMP
membership as well as some independents. Details of the new
government's structure and personalities will be conveyed septel.


3. (C) Ramos-Horta's August 6 announcement that the Alliance
would be asked to form the government was immediately
accompanied by an increase in security incidents in Dili and
significant problems in the eastern city of Baucau in which
multiple buildings were burned and many Alliance supporters fled
their homes and went into hiding. FRETILIN party leadership
insists that they are not involved with orchestrating the
violence, describing it instead as the natural expression of
frustration of democratic yearnings. They state that they are
trying to calm their supporters and issued a press release the
afternoon of August 8 alleging media bias against the party in
reports of FRETILIN youth attacks. However, many observers
regard this stance as lacking credibility. FRETILIN has
throughout the last few weeks carried out ongoing mobilization
meetings with its supporters, particularly in the East, and held
out the veiled threat that it "could not control" their reaction
if FRETILIN were excluded from government. The head of UNMIT's
political section told Poloff on August 8 that FRETILIN's
plausible deniability regarding their culpability in the
violence "ran out about 24 hours ago". He described reports
from his staff in Baucau, noting that the August 6 and 7 attacks
were carried out by multiple groups of 30-40 youth, who first
gathered and were addressed by local FRETILIN leadership.
(UNMIT today issued a statement condemning the violence
perpetrated by FRETILIN supporters, sent by email to EAP/MTS.)


4. (C) Beyond this immediate disruption, generally expected to
be a short-term problem, FRETILIN appears prepared to play an
obstructionist role as the new government starts its work. The

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party's leadership has come out strongly to assert that the new
government is unconstitutional and illegitimate. The party's
secretary general, Mari Alkatiri, announced earlier in the week

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that they will challenge the President's decision in the courts.
However, Aniceto Guterres, who was the party's candidate for
President of Parliament, on August 8 told Poloff that the party
is still considering its options but is unlikely to launch a
legal challenge. Rather, he said, they will continue to "mark
their opposition" while focusing on internal consolidation of
the party over the next two or three years, with an eye toward
possibly unseating the AMP government in 2009 (halfway through
its 5 year mandate). In an address broadcasted this morning,
FRETILIN Secretary General Mari Alkatiri reiterated that they
regard the government as illegal, stating that they will "never,
ever" work with it. No FRETILIN members, aside from the Mudansa
group, were present at the August 8 swearing in and party
sources report that this was a party-wide decision. Following
the election of parliamentary leadership in which their slate
was soundly defeated, all FRETILIN's MPs walked out of the
plenary and have not returned. Guterres described this as a
temporary "suspension" period, to last no more than one month,
during which they will focus on talking to their supporters,
both to explain the recent developments and to consult on what
they should do when they return to Parliament.


5. (SBU) In an August 6 announcement to the diplomatic corps,
Ramos-Horta emphasized his desire to find ways to include
FRETILIN and to balance out the fact that it is now completely
absent both from the leadership of the Parliament and from the
cabinet. He said that he will try to choose FRETILIN candidates
for non-cabinet, presidential appointments (e.g. Prosecutor
General, head of Court of Appeals). In addition, he announced
that a new formal position of "leader of the opposition" in
parliament will be created, with the protocol status of third in
the national leadership after the President of Parliament and
Prime Minister. (Lasama told the Ambassador last week that one
of his first acts as President of Parliament would be to
dedicate a car to this position and today said he continues to
want to coordinate with FRETILIN on the substance of the
position but is repeatedly rebuffed.) Given FRETILIN's current
stance it is uncertain whether such measures can coax them into
playing a more constructive role.


6. (C) AMP sources have cited efforts they have made to reach
out to FRETILIN. For example, Lasama told the Ambassador that
he urged FRETILIN and AMP to present blended slates of
candidates for the parliamentary executive positions on July 31,
but that FRETILIN refused to do so. However, Guterres
characterized Lasama's request for blended candidate lists for
parliamentary leadership as window dressing, saying that AMP had
its list prepared already and no efforts were made to discuss
compromises in advance of the session. In addition both AMP and
FRETILIN sources have confirmed that AMP asked at least one
FRETILIN MP to fill a ministerial position in the new
government, but he refused. This appears to have been a very
limited effort on AMP's part. Many international and Timorese
observers are concerned that the Alliance is not genuinely
working to ensure a constructive role for FRETILIN and our
concerned that this will further provoke FRETILIN's rejectionist
response. Ramos-Horta characterized AMP's behavior on July 31
as childish.


7. (SBU) Comment: In this context, the AMP government faces
significant policy challenges and a probably limited window in
which to start showing progress. Prime Minister Gusmao outlined
an ambitious inaugural agenda today, including the passage of a
new budget as the state is currently running on its equivalent
of a continuing resolution. Over the longer term key, difficult
issues that will test the new government include resolving the
seemingly intractable internally displaced persons (IDP)
problem, security sector reform, justice sector reform, and
getting economic development, which has stagnated since the 2006
crisis, back on track. The total absence of FRETILIN from the
new government arguably means the loss of significant
technocratic skills and governance experience and will certainly
complicate the practicalities of transition. All of this will
likely make movement on key issues difficult and could
contribute to a continued cycle of division and instability.
Post is continuing in all fora to emphasize the importance of
refraining from violence. In addition, we are stressing to

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FRETILIN the importance of responsible opposition and
encouraging AMP to look for ways to ensure that FRETILIN as the
largest party in parliament is able to have a constructive role.
As the new government gets in place we will coordinate with
international partners to focus on how we can assist in key
policy areas. End comment.
KLEMM