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Cablegate: Timor-Leste: Leveraging Usg Efforts in Agriculture

VZCZCXRO0985
RR RUEHDT
DE RUEHDT #0079/01 0710511
ZNR UUUUU ZZH
R 110511Z MAR 08
FM AMEMBASSY DILI
TO RUEHC/SECSTATE WASHDC 3917
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
INFO RUEHJA/AMEMBASSY JAKARTA 0965
RUEHDT/AMEMBASSY DILI 3344

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

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