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Cablegate: Timor-Leste Fiscal Transparency for Congressionally Mandated

VZCZCXRO5225
PP RUEHCHI RUEHCN RUEHHM
DE RUEHDT #0072/01 0642349
ZNR UUUUU ZZH
P R 042349Z MAR 08
FM AMEMBASSY DILI
TO RUEHC/SECSTATE WASHDC PRIORITY 3903
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 0843
RUEHBJ/AMEMBASSY BEIJING 0084
RUEHBY/AMEMBASSY CANBERRA 1148
RUEHJA/AMEMBASSY JAKARTA 0961
RUEAIIA/CIA WASHDC
RUEHUL/AMEMBASSY SEOUL 0022
RUEHC/USAID WASHDC
RUEHDT/AMEMBASSY DILI 3330

UNCLAS SECTION 01 OF 02 DILI 000072

SIPDIS

SIPDIS

DEPARTMENT FOR EAP/RSA, EAP/MTS, EAP/RSP, EEB/IFD/OMA

E.O. 12958: N/A
TAGS: EFIN ECON EAID PREL PGOV ID
SUBJECT: TIMOR-LESTE FISCAL TRANSPARENCY FOR CONGRESSIONALLY MANDATED
REPORT

REF: STATE 16737

DILI 00000072 001.2 OF 002


1. (U) This cable responds to reftel request for an update on
fiscal transparency and accountability of countries receiving
USG assistance.

Transparency of National Budget
-------------------------------

2. (U) Once approved by the National Parliament and promulgated
by the President, the Government of Timor-Leste's (GOTL) annual
budget is published in the official gazette, the Jornal da
Repzblica. The process for approving the budget is outlined in
the newspaper. The budget is also available on the Ministry of
Finance website, www.mof.gov.tl
. Efforts are made to publish
the budget in three languages: Tetum, Portuguese, and English.
The 2008 Parliamentary budget deliberations were carried live on
local radio.

3. (U) The Ministry of Finance also publishes quarterly and
annual budget execution reports while the Banking and Payments
Authority (BPA), Timor-Leste's quasi-central bank that serves as
the custodian of the Petroleum Fund, publishes quarterly reports
on the Fund's assets. The Ministry of Finance publishes annual
reports on the performance of the Petroleum Fund. All of these
are available via the internet. As an aside, many experts agree
that Timor-Leste's Petroleum Fund is managed in accordance with
international best practices.

Revenues and Expenditures
-------------------------

4. (U) All revenues and expenditures are included in the
publicly-available budget, although foreign assistance to
Timor-Leste is usually not well reflected in the combined
sources budget. The information contained in the various
publicly available reports on revenues and expenditures is
generally considered to be accurate, but the budget often lacks
the level of detail necessary to understand the nature of
Government programs. For example, the 2008 budget includes $20
million of transfers to be managed by the Office of the Deputy
Prime Minister. Much of these funds are understood to support
internally displaced persons, but that is not specified in the
budget itself. Nor does the budget provide any indication of
how the funds might be spent - e.g., additional humanitarian
assistance, construction of transitional or permanent housing,
cash payments, etc. In addition, rates of budget execution are
typically presented on a commitment rather than cash basis, and
cash spending tends to be poorly documented.

Fiscal Transparency
-------------------

5. (U) Weaknesses in the area of fiscal policy are generally
attributed to the extremely limited capacity of GOTL
institutions. The most glaring are budget execution and
monitoring of program implementation. Government institutions
simply do not have the capacity to effectively implement capital
development projects. Weaknesses exist at each step in the
process: strategic planning, budgeting, project design,
procurement, evaluation of proposals, and monitoring
implementation. As a result, large amounts of funds have
historically been carried over from year-to-year. If and how
these carry-over funds are spent is often unclear.

6. (U) The limited capacity of GOTL institutions is mirrored in
Timor-Leste's civil society sector, particularly among media
outlets. Journalists generally lack the knowledge and skills to
effectively utilize the budget documents that are publicly
available and thereby provide citizens of Timor-Leste with
objective, independent analysis and oversight of the
Government's budget and performance. There are few if any
policy research organizations that might provide independent
policy analysis to inform public debate.

USG Support to Strengthen Fiscal Policies, Transparency, and
Good Governance
--------------------------------------------- --------------
-----------------


DILI 00000072 002.2 OF 002


7. (U) USAID provides support to strengthen the administrative
capacity of justice institutions, including budget execution. A
Financial Management Training and Support program imparts
financial, administrative, and management skills to members of
the justice system, such as court administrators, finance
officers, and administrative personnel from the Ministry of
Justice, the Office of the Prosecutor General, the Public
Defenders' Office, and the judiciary. The same project also
supported the establishment of the Provedor's Office,
Timor-Leste's independent ombudsman, and continues to assist the
Provedor in training staff in investigation procedures and
anti-corruption; setting up financial and administrative
systems; developing a complaints management process to address
citizens' concerns; providing public education on human rights,
good governance, and corruption prevention; and monitoring the
human rights situation and investigating violations.

8. (U) USAID is the leading donor supporting the development of
an independent media sector in Timor-Leste. USAID aims to
improve the ability of Timorese journalists to produce and
disseminate high quality news and expand the reach of media
information products available to all citizens of Timor-Leste.
This includes providing specialized journalism training on
particular topics, including business and the economy, as well
as efforts to further develop a culture of investigative
journalism in Timor-Leste.

9. (U) USAID also recently launched a program that will help
develop Timorese professional quantitative research skills to
conduct quality research, including public opinion surveys,
project evaluations, community or sectoral assessments, and
field testing public information materials, with particular
emphasis on local governance and decentralization pilot
projects. For example, the project will help carry out a
corruption perceptions survey and could be utilized to undertake
public expenditure tracking surveys if the Government of
Timor-Leste begins to decentralize budget authority.

Assistance from Donor Countries and Multilateral Institutions
--------------------------------------------- ----------------

10. (U) The Asian Development Bank (ADB), Australia, and the
World Bank are the leading actors providing support to the
Government of Timor-Leste to improve its rate of budget
execution. The ADB and Australia have placed international
advisors in key ministries with sizable capital development
budgets to assist with Government procurement. The World Bank
manages the multi-donor Planning and Financial Management
Capacity Building Program, which aims to build Government
capacity in budgeting, public expenditure management, and
revenue administration. The International Monetary Fund
provides technical assistance to the Banking and Payments
Authority (BPA) and advises on tax policy while Norway provides
a number of advisors that assist with the management of the
Petroleum Fund.

11. (U) Timor-Leste has not volunteered for the IMF to report on
the country's compliance with standards and codes covering
fiscal transparency.
KLEMM

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