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Viewing cable 08DILI94, TIMOR-LESTE EAGER TO BEGIN WORK ON MCC COMPACT AND

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Reference ID Created Released Classification Origin
08DILI94 2008-03-21 08:57 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Dili
VZCZCXRO1177
OO RUEHDT RUEHLMC
DE RUEHDT #0094/01 0810857
ZNR UUUUU ZZH
O R 210857Z MAR 08
FM AMEMBASSY DILI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3948
RUEHLMC/MILLENNIUM CHALLENGE CORP IMMEDIATE
INFO RUEHDT/AMEMBASSY DILI 3377
UNCLAS SECTION 01 OF 02 DILI 000094 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR MCC CEO JOHN J. DANILOVICH FROM AMBASSADOR KLEMM 
 
E.O. 12958: N/A 
TAGS: KMCA TT
SUBJECT: TIMOR-LESTE EAGER TO BEGIN WORK ON MCC COMPACT AND 
REMEDIATION 
 
 
1. (SBU) Embassy Dili welcomes and is ready to support the 
initiation on March 25 of discussions between MCC Vice President 
John Hewko and his team, and senior members of the government of 
Timor-Leste (GOTL) on a potential MCC Compact as well as Timor's 
remediation process.   The March 25 teleconference will launch a 
series of meetings that will hopefully include a reintroduction 
trip by an MCC team to Dili in April 2008. 
 
2. (SBU) Since delivering your December 21, 2007, letter 
regarding Timor-Leste's reselection as a MCC compact eligible 
country to Prime Minister Xanana Gusmao, I have had many 
meetings with senior GOTL officials regarding a possible MCC 
Compact.  My interlocutors have included President Jose Ramos 
Horta, Interim President Lasama de Araujo, Vice Prime Minister 
Guterres, Foreign Minister Da Costa and, repeatedly, Finance 
Minister Pires, Infrastructure Minister Lay and MCC Compact 
Negotiator Saldanha.  All have told me - ceaselessly and 
uniformly - that they are grateful that Timor remains compact 
eligible because the MCC will help them both achieve urgent 
policy reform and boost Timor's economic and social development. 
 Finance Minister Pires, responsible for Timor-Leste's 
remediation program, has expressed nothing but eagerness to 
begin discussions with MCC staff in order to use those 
consultations to speed needed reforms and quicken the 
improvement in Timor's policy performance.  Indeed, she shared 
with me weeks ago her disappointment that mutual scheduling 
conflicts have delayed the opening round of discussions until 
late-March. 
 
3. (SBU) The tragic events of February 11 did nothing to shake 
this resolve.  In contrast to previous political crises in 
Timor, most notably the 2006 upheaval that saw the collapse of 
its security services and most of the central government, 
Timor-Leste's governing institutions performed remarkably well 
after 2/11.  The Prime Minister, demonstrating great personal 
courage, and his ministers quickly convened the appropriate 
government councils, consulted with parliament, spoke to the 
public, and implemented proportionate measures.  With few 
exceptions, actions taken since 2/11 have been meticulous in 
their adherence to the constitution and law.  Instead of openly 
and fatally feuding as in 2006, the military and police 
established a joint command to bring the perpetrators to 
justice.  There has been a strong consensus across the political 
spectrum in support of the government's actions to date.  Dili 
and the remainder of the country have remained remarkably calm, 
business quickly returned to normal and crime fell to record 
lows. 
 
4. (SBU) Similarly, the government never hesitated after 2/11 in 
pursuing its development agenda or tackling other priorities.  I 
met with the Finance Minister just days after the 2/11 attacks 
and she was wholly focused on her work - including preparing for 
discussions with the MCC.  A major conference hosted by the 
government for its multi- and bilateral development partners 
will take place as scheduled on March 27-29 in Dili.  The 
government is using the event to define its policy priorities 
for 2008 and seek donor support.  A draft policy matrix 
identifies priority areas that resemble the MCC's policy 
categories: ruling justly (for Timor, "clean and effective 
government" and "public safety and security"), investing in 
people ("improving social service delivery," and "addressing the 
needs of the youth") and economic freedom ("employment and 
income generation").  The policy matrix also highlights the 
government's intent to effectively resolve two other major 
issues stemming from the 2006 crisis: reintegration of thousands 
of families from IDP camps back into society, and dealing with 
some 600 former members of the military that seek redress for 
past grievances. 
 
5. (SBU) Instead of grinding to a halt as the result of February 
11, Timor's leaders recognize that their efforts to improve 
public services, fully realize the rule of law and boost 
investment in education, health and social infrastructure must 
if anything accelerate.  February 11 was a reminder not only of 
serious unresolved political conflicts dating from 2006 and 
earlier, but also of the dire social and economic conditions in 
Timor - its extreme poverty and lack of development - that 
helped generate those political conflicts.  Consequently, the 
GOTL's council of ministers since 2/11 has without delay 
approved and sent to parliament a sweeping tax reform package to 
boost Timor's business environment, reviewed laws and 
regulations governing the media and telecommunications sector, 
and passed laws to finally give full legal standing to a number 
of ministries and departments.  Its policy priorities for 2008 
include the submission to parliament of a land law and the 
creation of a property registry toward the full extension of 
property rights; investment in the prosecutor general's office 
to reduce a debilitating case backlog and improve access to the 
formal justice sector; and steps to improve budgeting, budget 
 
DILI 00000094  002 OF 002 
 
 
execution and accountability, including the rationalization of 
the government's three agencies charged with combating 
corruption. 
 
6. (SBU) At this moment of Timor-Leste's heightened 
vulnerability, it is my view and that of my mission that the 
U.S. also should maintain -- if not accelerate -- our extensions 
of concrete support.  We just launched two major USAID programs, 
one to extend property rights and another to provide job skills 
and employment to youth in the districts, to boost the prospects 
of economic development and support MCC goals.  We will be 
applying for DOD 1210 funding to fill a major financial and 
activity gap in the GOTL's plan to provide housing for IDPs. 
Accordingly, we strongly encourage the Millennium Challenge 
Corporation to engage as expeditiously as possible with the GOTL 
to remediate its policy performance and negotiate a compact. 
Minister Pires and her team have suggested they are seriously 
looking at using MCC support - if they are able to qualify for a 
compact - to build out a national road network.  If undertaken, 
such a project would have enormous economic and social benefits, 
none the least enabling Timorese farmers to bring their surplus 
production to market and creating much needed employment. 
 
7. (SBU) Ambassador Danilovich, Embassy Dili eagerly waits to 
support you and your Timor-Leste team.  Please do not hesitate 
to let me know how I can personally assist. 
 
 
 
 
RECTOR 
KLEMM