FOOD FOR PROGRESS ELIGIBILITY: THE CASE FOR TIMOR-LESTE

UNCLAS SECTION 01 OF 02 DILI 000022

SIPDIS

USDA FOR/FAS/OA HALE; USDA/FAS/OCBD SHEIKH, KREAMER, CROUSHORN;
USDA/FAS/OCRA PETLOCK, HIGGISTON, RADLER; USDA/FAS/OFSO WAINIO;
STATE FOR E AND EEB

E.O. 12958: N/A
TAGS: EAGR ECON PREL TT
SUBJECT: FOOD FOR PROGRESS ELIGIBILITY: THE CASE FOR TIMOR-LESTE

REF: 2008 DILI 79

Summary and action requested
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1. Classifying Timor-Leste as a Priority Country under USDA's
Food for Progress (FFP) program would directly and strongly
support the U.S. foreign policy objective of building a stable,
secure, prosperous, and democratic Timor-Leste. The country
meets the qualifying criteria for priority countries and there
are organizations currently working in Timor that are interested
in participating in an FPP program. Timor-Leste faces immense
social and economic challenges: grinding poverty, razor thin
managerial capacity, high unemployment/child
mortality/illiteracy rates, stubborn youth unemployment amidst
rocketing population growth, poor infrastructure and, except for
oil, coffee and a handful of other agricultural exports, no
meaningful export sector. Given that 85 percent of the working
population remains engaged in subsistence agriculture, hope for
progress depends on improving the productivity and incomes of
Timorese farmers. 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. Much more can be done, however, 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. The following updates reftel application for Timor-Leste's
designation as a priority country under USDA's Food for Progress
program. The past year has introduced a period of hopeful
stability for Timor-Leste. Following the attempted
assassination of President Ramos Horta on February 11, 2008,
Timor's democratic and security institutions functioned
relatively well. The perpetrators of the 2/11 incident
surrendered peacefully; Prime Minister Gusmao acted to resolve
several domestic political problems, including the reintegration
of thousands of Timorese families made homeless by a 2006
crisis; and the country's leadership sought to take steps to
hasten administrative reform and stimulate economic development.
The UN is schedule to begin a phased turnover of police
responsibilities back to the Timorese authorities in March 2009.
In recognition of the country's enhanced security, the
Department of State lifted its travel advisory in September 2008
and Australia reduced by fifteen percent the number of its
forces in Timor-Leste.


3. The challenges of development facing Timor-Leste
nevertheless remain enormous. They include a still
unreconstructed security sector; weak justice institutions; poor
infrastructure; population growth of 3.5 percent per year; high
youth unemployment; functional illiteracy rates of 70 percent;
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.

U.S. Assistance Priorities
--------------


4. 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 American 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 Cooperativa Cafe 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, horticultural products
and spices. Our NGO partners in agriculture are eager to expand
these programs.


5. 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)

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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
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6. 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.


7. 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 most recent Human Development Report
(2008),annual GDP per capita in Timor-Leste in 2006 at
purchasing power parity (PPP) was $668. Poverty in Timor is
getting worse. A recent World Bank study (2008) indicated that
50% of Timorese households survived on 88 cents or less per
person per day, compared to fewer than forty percent of
households in 2001.

Malnutrition Rate
--------------


8. According to the Food and Agricultural Organization (FAO),
the prevalence of undernourishment in the total population of
Timor-Leste averaged 22% in 2005-2003. In addition, a living
standards survey completed in 2007 revealed that approximately
half of all children under five years of age suffer from
malnutrition. By this criterion, Timor-Leste qualifies as a FFP
Priority Country.

Positive Movement in Political Rights and Civil Liberties
-------------- --------------


9. Freedom house in its most recent rankings (2009) lists
Timor-Leste (East Timor) as an electoral democracy and
"Partially Free", a significant improvement since 2000 when it
was categorized as "Not Free". The numerical ratings have
improved from "six" to "three" for political rights, and from
"six" to "four" for civil liberties over that period. Timor's
combined average rating of 3.5 places it near the top of the
Freedom House's "Partly Free" nations and highest among
Southeast Asian nations after Indonesia.

Action Requested
--------------


10. Embassy Dili strongly requests the designation of
Timor-Leste as a Priority Country for USDA's FFP program in FY

2010. A Priority Country classification would directly and
strongly support U.S. foreign policy objectives to aid the
government of Timor-Leste's efforts to build a stable, secure,
prosperous and democratic future for its citizens.
KLEMM