SCENESETTER FOR JULY 2 - 4 VISIT OF CODEL PRICE TO

UNCLAS SECTION 01 OF 04 DILI 000150

CODEL
SIPDIS

FOR EAP/MTS AND H - LYNNEA SHANE

E.O. 12958: N/A
TAGS: OREP OTRA PREL EAID TT
SUBJECT: SCENESETTER FOR JULY 2 - 4 VISIT OF CODEL PRICE TO
TIMOR-LESTE


1. Summary. Embassy Dili warmly welcomes the July 2 - 4, 2009,
visit of the House Democratic Assistance Committee under the
chairmanship of Representative David Price. The CODEL will find
Timor-Leste enjoying an unaccustomed phase of political
stability, although the country remains afflicted by extreme
poverty and the social ills that go with it. While increased
government spending and a year free from crisis have resulted in
a visibly more prosperous Dili, grinding rural poverty persists,
and the country faces a demographic time bomb. With
international assistance, the government is making incremental
progress in professionalizing its police and military, a sine
qua non for future stability. Timor-Leste enjoys cordial
relations with its regional neighbors, including former occupier
Indonesia. The U.S. has taken advantage of 2008-09's relative
stability to engage the government of Prime Minister Xanana
Gusmao in new assistance initiatives, including with the support
of the U.S. Pacific Command. USAID is implementing projects in
the areas of economic growth, health and governance. We support
President Ramos-Horta's recent request for the return of the
Peace Corps, which withdrew from Timor-Leste during the 2006
political crisis. The National Parliament benefits from an
HDAC-financed Research Center, and is eager to interact with the
CODEL as part of its ongoing effort to improve its
effectiveness. End Summary.



Breaking the Cycle of Crisis




2. Timor-Leste's transition to independence has been fraught
with violence, instability, and political polarization.
Following the August 1999 referendum which decisively rejected
special autonomy status within Indonesia, the Indonesian Armed
Forces and allied Timorese militias destroyed the country's
infrastructure and displaced tens of thousands of people. Over
the following months, most of the managerial class - Timorese as
well as Indonesian - relocated to Indonesia, depleting the new
nation's technocratic capacity. Following independence in 2002,
Timor-Leste's nascent institutions were further weakened by the
persistence of political and social divisions that had origins
in the turmoil that accompanied the end of the Portuguese
colonial period and Indonesia's 24-year occupation. These
conflicts erupted into political instability or violence
repeatedly after independence, most dramatically in April - June
2006, when the dismissal of a dissident group within the Defense
Forces of Timor-Leste (F-FDTL) sparked a general breakdown of
law and order, the fall of the FRETILIN government headed by
Prime Minister Mari Alkatiri, and the displacement of 150,000
Timorese. At the invitation of the Government of Timor-Leste,
the United Nations Security Council responded in August 2006 by
deploying a peacekeeping operation with 2500 police, and
Australia separately dispatched an International Stabilization
Force (ISF) with more than 1000 troops. Both operations remain
in Timor-Leste as guarantors of the country's security and
stability.




3. Free and fair elections in 2007 selected the current national
leaders, President Jose Ramos-Horta and Prime Minister Kay Rala
Xanana Gusmao. The latter heads a four-party coalition
government, the Alliance for a Parliamentary Majority (AMP).
FRETILIN is the largest opposition party. Despite these
successful exercises in electoral democracy, episodes of
instability recurred. There was sporadic political violence
following the formation of the AMP government in August 2007.
On February 11, 2008 a renegade ex-military faction headed by
Major Alfredo Reinado, at large since the 2006 crisis, shot and
seriously wounded President Ramos-Horta and attempted to
assassinate Prime Minister Gusmao. Reinado was killed in the
incident, and the remainder of his men surrendered in May 2008.




4. Since then, Timor-Leste has entered a phase of stability and
progress. The AMP government, with the support of international
agencies, has succeeded in resettling almost all the internally
displaced persons (IDPs) from the 2006 crisis. Street crime and
gang-related violence have declined. The opposition FRETILIN
party, although it sometimes resorts to incendiary rhetoric, has
not attempted to dislodge the AMP government by direct action.
Instead, it has sought to gain political leverage by publicizing
cases of government corruption and drawing attention to high
salaries paid to foreign and Timorese government consultants by
the World Bank and other donors. FRETILIN has also mounted
court challenges, successful in a few instances, against AMP
measures it saw as illegal.

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5. Reforming the security sector will be essential to continued
stability. To date, the Defense Forces (F-FDTL) and National
Police (PNTL) have been sources of disruption due to ill-defined
roles, indiscipline, and low capacity. Both the PNTL and F-FDTL
have committed human rights violations, notably during the joint
military-police operation that apprehended the February 11
rebels. The F-FDTL in particular has created problems; its core
consists of former guerilla fighters who believe that the
outcome of the independence struggle accords them privileged
status and exempts them from any requirement to professionalize.
There is a history of antagonism between the F-FDTL and the
PNTL, which includes in its ranks some officers who were
affiliated with the Indonesian occupation police. In 2006 there
was armed conflict between the PNTL and elements of the military
in the streets of Dili; the low point of this debacle was the
F-FDTL's shooting of eight police officers who were attempting
to surrender during a standoff. The current government has had
some success in repairing relations between the police and
military. Cooperation in Operation Halibur, the joint task
force that pursued the February 11, 2008 attackers, was an
important benchmark in this effort.




6. Fortunately, the Government of Timor-Leste recognizes the
importance of security sector reform, and, with the assistance
of Portugal, Australia, New Zealand, the U.S., and the UN, is
attempting to professionalize both the PNTL and the F-FDTL.
After several years of exercising police functions, The UN
Police Mission (UNPOL) has begun a phased handover of executive
authority to the National Police of Timor-Leste (PNTL),although
it will remain in a monitoring and support capacity. The
Government of Timor-Leste is gradually drafting a national
security law and policy that will clearly define and separate
the roles of the PNTL and F-FDTL; the U.S. supported this
process by, for example, hosting in September 2008 a landmark
workshop for Timorese policymakers at the Asia Pacific Center
for Security Studies in Honolulu.



Lifting the Curse of Poverty




7. Timor-Leste's greatest challenge is the extreme poverty of
its people with its host of concomitant social ills.
Timor-Leste is Asia's poorest country, with half of its
population living on less than a dollar a day, 85% of its labor
force engaged in subsistence agriculture, functional illiteracy
running at well over 70%, and more than half the population
stunted from malnutrition. These indicators become more ominous
in light of Timor-Leste's incipient demographic boom. 62% of
the population is under the age of 25, and the country's
fertility rate of 7.8 births per mother is one of the world's
highest. Timor's poverty is correlated with enormous gaps in
social infrastructure, distinguished by a poor national road
network; inadequate telecommunications; a single, increasingly
congested seaport; an electricity grid that supplies power to
only a third of the country's households and then only for short
segments of the day; a health services infrastructure barely
able to cope (there are 5 doctors per 100,000 Timorese) with one
of the world's highest rates of maternal and child mortality; an
education system in which less than a fifth of schoolchildren
has a chair or desk, and more than half have no textbook; poor
water and sanitation facilities (two-thirds of adults fetch
water at least once a week).




8. Timor-Leste is not without resources, however. It has more
than $4.9 billion in a sovereign wealth fund due to accruals
from modest oil deposits, and zero international debt. It also
benefits from the generosity of the international community,
with the government forecasting receipts of more than $220
million from bilateral and multilateral donors in 2009. The IMF
estimates the economy grew by a real 12.5% in 2008 due almost
solely to increased government spending. Potential sources of
new growth include future LNG production, tourism, and an
expansion and diversification of the agriculture export sector,
which is now primarily coffee.



How the U.S. Is Helping


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9. All forms of appropriated U.S. assistance to Timor-Leste
since 2000 total $273 million. For 2008, the U.S. appropriated
approximately $25 million in aid. Currently, a robust USAID
program emphasizes strengthening Timor-Leste's institutions of
democratic governance, fostering private sector-led economic
growth and improving health. Flagship projects include
supporting the Timor Coffee Cooperative, which has operated
since 1994, and now supports 22,000 member families, and
produces all of Timor-Leste's high-grade coffee exports to the
U.S., Japan and Europe. A land and property rights project will
for the first time establish a system of land registration which
will lead to securing titles to all landholdings in Timor-Leste.
Through a media project, USAID is helping Timorese journalists
improve the quality and expand the reach of the free press to
all citizens of Timor-Leste. A senior Department of Justice
attorney will soon help Timorese efforts to ensure access to
justice and the rule of law. Departments of State and Defense
programs have focused on police training and assisting the
logistical capabilities of the military. Since February, the
U.S. Navy has deployed a unit of 26 Seabees to launch an
engineering apprenticeship program and rebuild Timorese schools
and health clinics. During a two-week visit in July 2008, the
USNS Mercy hospital ship treated nearly 10,000 Timorese.
Finally, President Ramos-Horta has formally invited the Peace
Corps to resume its Timor-Leste program, an initiative the U.S.
Mission in Dili strongly supports.



Engaging the National Parliament




10. Timor-Leste's National Parliament is a unicameral body with
65 members. Its Members are elected to five year terms; the
current Parliament was elected in June 2007. It has nine
functional committees. Nine parties are represented in
Parliament, with the largest single caucus being the opposition
Revolutionary Front of Independent Timor-Leste (FRETILIN). The
Government's parliamentary majority is a coalition among Prime
Minister Gusmao's National Congress for the Reconstruction of
Timor (CNRT) and other smaller parties. Seats in Parliament are
allocated from party lists according to proportional
representation; MPs do not represent not geographic districts.




11. The Parliament is ineffective in many regards but is
improving. Oftentimes, agendas are not followed, and
absenteeism is a problem. In early 2009, the average attendance
in plenary session was 35 members, but this has improved
following President Ramos-Horta's threat last month to dissolve
Parliament if absenteeism persisted. Committees are weak, and
go for months without meeting. While nothing precludes the
National Parliament from drafting legislation, the body has not
initiated any legislation; Parliament instead debates
legislation submitted by the executive branch. Constituent
services are underdeveloped and informal. MPs have the
reputation of rarely traveling to the districts and relying on
text messages to communicate with citizens. Resources, ranging
from office space to staff and legal counsel, are close to nil.




12. In recent months, however, Parliament has begun to work
more efficiently. It has already passed more bills in 2009 than
during all of 2008. Major pieces of recent legislation include
the Suco (Village) Election law, a law on territorial division,
approval of the new Penal Code, and an education bill. However,
Parliament has provoked ire in this poor country by voting
itself perquisites of office. Within the last six months,
Parliament voted to increase MPs' salaries from $800 USD to
$3,000 USD per month. FRETILIN has strongly opposed the purchase
of a fleet of dedicated official vehicles for MPs, as well as
the increase in salary. FRETILIN MPs are refusing to use the
new cars, and allege that corruption was involved in their
purchase. Although these charges are to some extent "politics
as usual," they speak to justified concerns about official
corruption in general.




13. During the HDAC delegation's National Parliament leaders
have expressed interest in learning more about Parliamentary
rules and ethics. The National Parliament has also complained
that the executive branch has withheld information, and MPs
would like to learn about Congress's experience in oversight of

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the U.S. executive branch. The NP's committee structure remains
weak, and MPs are interested in learning more about how the U.S.
Congress organizes and operates its committees. Finally, the
National Parliament would like to exchange ideas on oversight of
the Timorese military and police.
KLEMM