Cablegate: Scenesetter for Presidential Delegation to Independence

DE RUEHDT #0223/01 2370556
R 250556Z AUG 09



E.O. 12958: N/A

DILI 00000223 001.2 OF 004

1. SUMMARY: Embassy Dili warmly welcomes the August 29-31,
2009, visit of a Presidential Delegation led by The Honorable
Nancy Soderberg and The Honorable Harriet Babbitt on the
occasion of the 10th anniversary of Timor's independence
referendum. The delegation 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 immense
demographic challenges. 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. 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 systematically 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).
The former ruling party, FRETILIN, is now 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

DILI 00000223 002.2 OF 004

the World Bank and other donors. FRETILIN has also mounted
court challenges, successful in a few instances, against AMP
measures it saw as illegal.

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
2008 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 seemingly 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, the latter 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.
Timor-Leste's crime levels are very low by international
standards, with murder rates and assault rates less than half of
regional averages. 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

DILI 00000223 003.2 OF 004

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

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 has begun to 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 2009,
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. The
U.S. Air Force's Pacific Angel operation provided medical care
to more than 4,000 patients in July 2009. 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.

Relations with Indonesia

10. Despite the violence and destruction that followed the 1999
referendum and the legacy of 24 years of occupation, domestic
politics evolved in both Timor-Leste and Indonesia to create an
atmosphere conducive to reconciliation. Indonesia redefined
itself in the post-Suharto era and Timor-Leste acknowledged the
unavoidable imperative of repairing relations with its much
larger neighbor. The positive state of the relationship between
Timor-Leste and Indonesia today is a considerable accomplishment
in which both sides can justifiably take great pride.
Representative of the current warm state of bilateral relations,
Timor-Leste recently invited the commander of Indonesia's armed
forces to visit. Likely to take place in September 2009, the
Indonesian general's sojourn to Dili would be the first since
the events of 1999.

11. The referendum anniversary will, however, serve as a
reminder of the Indonesian period. Despite the suffering that
took place in 1975-99, the desire to hold Indonesia accountable
for the crimes committed during its occupation is not a pressing
issue for most Timorese. Timor-Leste views itself as the
victorious party, having won its independence. The Timorese
leadership has not prioritized the pursuit of criminal cases
against Indonesians, although the arrest in Timor-Leste of a
former militia leader in early August 2009 and the resulting
protest from the Indonesian Government demonstrated how
sensitive accountability issues still can be.

Anniversary Celebration

DILI 00000223 004.2 OF 004

12. The Government of Timor-Leste is hosting a series of events
to mark the referendum anniversary. A center piece is the Tour
of Timor bicycle race, a multi-stage contest involving
approximately 300 cyclists taking place from August 24 to 28.
On the anniversary weekend itself, the Timorese Government
expects senior leaders to attend from Southeast Asia as well as
from the Lusophone community. Confirmed attendees include the
Speaker of the Portuguese National Parliament, the Portuguese
Foreign Minister, the Governor-General of Australia, and the
retired commander of the New Zealand armed forces. The UN will
be represented by Ian Martin, the first Special Representative
of the Secretary-General for Timor-Leste.

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