TIMOR-LESTE: LEVERAGING USG EFFORTS IN AGRICULTURE

UNCLAS SECTION 01 OF 03 DILI 000079 SIPDIS SIPDIS USDA FOR US KEENAN, D/US TERPSTRA; FAS/OA/YOST MILLER, JACKSON; FAS/OCRA ALEXANDER, RADLER, HIGGISTON, RIKER; FAS/OTP FOSTER, FAS/OCBD SHEIKH, JAKARTA FORAG COUNSELOR; STATE FOR E AND EEB E.O. 12958: N/A TAGS: EAGR ECON PREL TT SUBJECT: TIMOR-LESTE: LEVERAGING USG EFFORTS IN AGRICULTURE Summary and action requested -------------- ¶1. Classifying Timor-Leste as a Priority Country under USDA's Food for Progress (FFP) program would directly and strongly support U.S. foreign policy objectives to support Timor-Leste's efforts to build a stable, secure, prosperous, and democratic future for its citizens. The country meets the qualifying criteria for priority contries and there are organizations currently working in Timor that are interested in participating in the program. More importantly, this is Timor's time of need and we urge that all possible avenues of U.S. support be considered. In addition to many short term priorities, Timor-Leste's leaders face immense social and economic challenges: grinding poverty, razor thin managerial capacity, astonishingly high unemployment/child mortality/illiteracy rates, soaring youth unemployment amidst skyrocketing population growth, breathtakingly poor infrastructure and, except for oil, coffee and a handful of other agricultural exports, no meaningful connection with the rest of the regional or global economy. Given that 85 percent of the working population remains engaged in subsistence agriculture, hope for progress depends on improving Timor farmer productivity and income. USAID has an excellent record in supporting agriculture in Timor-Leste, including a partnership with a U.S. NGO and the country's leading and most successful coffee cooperative. That said, much more can be done and our private sector partners are eager to expand their programs including through FFP. Embassy Dili strongly requests that USDA designate Timor-Leste a priority country for FFP assistance. End Summary and action requested. ¶2. Timor-Leste is Asia's poorest country, emerging as an independent state in 2002 following four centuries of Portuguese colonial neglect and a brutal 24-year Indonesian occupation. Timor's short democratic history has been marked by frequent, violent political instability. The nadir occurred in the spring of 2006, when the government collapsed, rivalries between the military and police descended into armed conflict, widespread property destruction left 100,000 homeless, and the leadership resorted to calling in Australian forces to restore order. Democratic Timor-Leste, sandwiched between our ally Australia and our increasingly important partner Indonesia, is described even locally as a potential failed state. ¶3. 2007 witnessed hopeful signs for recovery. Timor-Leste successfully completed three national presidential and parliamentary elections, taking encouraging steps toward national reconciliation. 1,500 UN police and 1,000 troops in the Australian-led International Stabilization Force have maintained stability. Oil revenues have begun to amass and now exceed $2 billion, a patrimony that represents Timor's best long term hope for economic and social development. Prime Minister Xanana Gusmao's government has accumulated a number of legislative successes and brought in a largely technocratic cabinet committed to improving public services and the investment environment. Not withstanding all of the above, we were tragically reminded of Timor-Leste's political fragility on February 11, 2008, when rebels attacked the prime minister and critically wounded the president. Fortunately, Timor's institutions stood up well to this latest challenge, although not unblemished. ¶4. The challenges of development facing Timor-Leste are enormous. They include a still unreconstructed security sector; inaccessible justice (the formal system adjudicated only 300 cases in 2007 and sits on a backlog of 4,700); astonishingly poor infrastructure; a highly centralized government with poor public outreach and feedback mechanisms; explosive population growth of 4 percent per year; dangerously high youth unemployment; functional illiteracy rates of 70 percent; a shrinking non-oil economy; and enormous requirements for investment in education and human capital. Fully 85 percent of the working population is engaged in little more than subsistence farming; food insecurity is chronic for large segments of the population. Timor-Leste's maternal and child mortality rates are among the highest in the world. DILI 00000079 002 OF 003 ¶5. Besides the energy of its people and its nascent natural resource wealth, Timor-Leste has benefited from the strong commitment to its democratic development by the international community. In partnership with U.S. NGOs, the U.S. has been a generous source of support even before Timor-Leste's independence. Our aid has focused on strengthening the country's governance and democratic institutions, establishing the rule of law, and meeting basic humanitarian needs. But our assistance programs also have had a strong economic development component, especially in the agricultural sector. A signature program has been with the Cooperativea Cafi Timor (CCT),an organization with a membership of more that 20,000 Timorese families and responsible for more than 40 percent of the country's coffee production. We also support activities to develop and expand Timor's currently miniscule, but potentially substantial exports of cattle, candlenut, horticultures and spices. Our NGO partners in agriculture are eager to expand these programs. ¶6. Given the country's non-existent industrial base and vacant service sector, economic development in Timor-Leste will depend in the medium term on raising productivity and incomes in agriculture. The current Timorese government is committed to these goals, but given limited resources and weak technical capabilities, support from international donors such as the U.S. will be critical. A properly targeted Food for Progress (FFP) program would strongly complement--indeed accelerate--agricultural programs that have been at the core of USAID efforts in Timor for more than a decade. By leveraging existing programs, FFP would help provide the agricultural income generating mechanisms required to boost the rural economy of Timor-Leste. Priority Country Status -------------- ¶7. We understand that USDA uses three criteria to determine Priority Country status for FFP: per capita income, malnutrition rates, positive movement with respect to human rights and civil liberties. ¶8. According to USDA, any country that has a Purchasing Power Parity (PPP) per capita Gross Domestic Product (GDP) of more than $3,465 fails to qualify as a Priority Country for FFP. According to the UNDP's human Development Report Purchasing Power Parity (PPP) per capita GDP for Timor-Leste in 2004 was $732, significantly below the $3465 threshold used by USDA. Removing income generated by natural energy (which is largely saved in an offshore petroleum fund and does not appear in the pocketbooks of Timorese),non-oil per capita GDP for Timor-Leste in 2005 was $366. The great majority of the population lives on less than 50 cents per day. Malnutrition Rate -------------- ¶9. According to the World Health Organization (WHO),Timor Leste has some of the highest malnutrition rates in Asia. The WHO estimates that about 47 percent of children under the age of five are chronically malnourished (stunted) and 43 percent are underweight. The WHO estimates that 33 percent of women are malnourished (Body Mass Index