Subject: TLGOV: Prime Minister’s Remarks at Openingof TLDPM May 20

REPÚBLICA DEMOCRÁTICA DE TIMOR-LESTE TIMOR-LESTE AND DEVELOPMENT PARTNERS MEETING Prime Minister, Dr. Mari Alkatiri’s Remarks at Opening Session at 10:00 AM on Tuesday, 18 May 2004

Excellency, President of the Republic, Kay Rala Xanana Gusmão Excellency, President of the Parliament, Francisco Guterres (Lu’Olo) Excellency, Special Representative of the Secretary General of UN, Ambassador Kamalesh Sharma Excellencies, Ambassadors and Heads of Diplomatic Missions Excellency, Vice President of the World Bank, Mr. Jamil Kassum Excellencies, Representatives of our development partners Ladies and Gentlemen

Allow me to welcome you once again to Timor-Leste and to this meeting which was organised so as to coincide with the second birthday of the Restoration of the Democratic Republic of Timor-Leste and the end of another successful Mission by the United Nations in our country.

It is always a pleasure to have you here with us, to participate in the Timor-Leste and Development Partners Meeting, the first independent State of the XXI century, warm greetings to you all. Allow me to give a special greeting to the Kuwait Delegation, that is participating in this forum for the first time, bringing the will and the generosity of a small and prosperous middle-eastern country that has come here to extend its solidarity, assistance and openness for mutually advantageous cooperation with Timor-Leste.

Our first meeting with the Development Partners here in Dili took place around two years ago, at a time when the transfer of sovereign and administrative powers from UNTAET to the democratically elected Government was imminent. In May 2002 we inherited the embryonic structures of State administration, with a substantial number of Timorese recruited to work in the civil service but without the necessary skills to immediately assume the administrative responsibilities. Further, we also inherited an Administration created with the assistance of people hailing from different backgrounds, origins and institutional cultures. Many of these people met for the first time in Timor-Leste. It was also often the case that it was the first time that they set foot in this country, not knowing its history, its people or its challenges. Of those that came to this country, all, or at least the overwhelming majority had never faced a similar challenge, the challenge of setting up the administrative bases for an independent and democratic State.

So, even with the efforts that were made, the created structures contained huge gaps, as they were based on the administrative philosophies of multilateral institutions, which resulted in an excess of departmentalism, methods and execution methodologies, lack of organic flow in communications and interdepartmental relationships. This was made worse by the void in the natural institutions of the State of institutional memory, life and culture.

Although, we do recognise that UNTAET did what was within its reach and within the scope of its mandate, in accordance with the guiding principles of a United Nations Mission, and in two and a half years it was able to re-establish peace and stability in the nation, it left services that were more or less functional, yet they were frail and unsustainable institutions still greatly dependant on expatriates. For that very same reason, UNMISET was born, so that it could assist us in the enormous task of developing our institutional capacities. Your Excellencies, our development partners, you have stayed with us during the challenging and exciting voyage of building a State. With your assistance and our determination we were able to overcome many of the obstacles which faced us.

However, the challenges of specific themes increase at the same time that the general obstacles are being surmounted.

For example, we inherited from UNTAET some companies, such as Electricity of Timor-Leste, or EDTL; the transport, communications and public works sectors; district and sub district administrations, as well as systems that were transferred to us, just like the Justice system, are unsustainable. We have mostly been able to manage, by ourselves, a nation with serious physical, economical, social, political, and security challenges. We have faced the greater challenge of managing a Democratic State with the Rule of Law and a clear Constitutional framework but without a structured and defined legal framework. UNMISET and other development partners have helped us in this endeavour yet we have had to make and implement complex decisions, and to resist influences which were out of context when we were executing the programmes. We always act with deep respect for the Constitution of the Republic and the universal values established in record time in our judicial order, and we are ever guided by the most sacred of objectives, serving our people and upholding our sovereignty in the context of globalisation. There was much counselling and we have had many advisors. Timor-Leste is a story of success for the International Community. This is an acknowledgment that carries an enormous weight and immeasurable responsibility upon our shoulders. We have to continue to meet this high international expectation if we want to continue to deserve your support. We must continue to meet the expectations of Your Excellencies to continue to deserve your trust. However, we also have another expectation that of our people - those men, women, children and elderly that continue to live in extremely difficult conditions of poverty. They do not ask much of us, they ask for what they are entitled to: greater access to education, health, water and sanitation, and maybe even electricity. They ask of us a market to sell their products, which includes better roads and bridges, more accessible means of transportation and better prices for their products. They subsist, albeit with many difficulties. They want a market but cannot understand this neo-liberal rhetoric of a market economy and the need to compete in this market. For them to compete is to know how to survive on a daily basis, resisting malnutrition, malaria, tuberculoses, avitaminosis of every kind, unable to consider what tomorrow will bring. They know but one thing, that they are poor, very poor. Although they do assimilate our messages, and quickly too, they have already learned that the purpose of the National Development Plan is twofold: i. Economic growth, and ii. The reduction of, and ultimately the eradication of poverty. All of that is to say that we are between these two great expectations that of the rich world that aids us and wants us to be diligent and obedient boys and that of our people, living in extreme poverty waiting for results from the government and to reap the benefits of Independence.

We have made great progress since the meeting in May 2002, we faced the challenges and we have made progress. Many institutions in the public administration have been built. The four sovereign bodies of the State and other institutions are working, albeit with different levels of capacity, however it is necessary to strengthen the Parliament, the Office of the President and the Courts. Several laws and regulations have been adopted, while others are being drafted. Efforts are also being made to establish and render some oversight institutions operational, like the Office of the Provedor, but also to improve the performance of some existing services such as the Office of the Inspector General, the Adviser to Human Rights and the Adviser to the Promotion of Equality, all under the Office of the Prime Minister. This will establish the legal and regulatory frameworks and also the verification mechanisms that are necessary to promote an open and sustainable economy, where the rights of the people and citizens, both male and female, are respected, and that economic growth is not an objective in itself but is a means to reduce and eradicate poverty. Only then, will we have a system of integrity, a participative democracy, with a wide scope and that is socially just.

Recent Developments in the Governance Area

After preliminary contacts with the World Bank, it was agreed that it would prepare a draft document on country governance issues to be submitted to the Government for consideration and comment, so that the conclusions could then be used as a basis to discuss the TSP. But the World Bank presented this draft during the TSP III, and only then could it receive comments from the Government. With the document the World Bank intended to help the government and the development partners in assessing the progresses made in the area of governance in such a short period of time, and also to ascertain what remains to be done. We have indeed made remarkable progress! But we have also identified weaknesses and insufficiencies in the system. We would say that the factual confirmation is not only new but also quite obvious. The most important is to identify the source of the weaknesses and insufficiencies and find the resources and the means, as well as the methods and the manner that will be used to overcome them.

Establishing the legal and regulatory framework is just the beginning. The systems are built but in order for them to work they need policies, legal and regulatory frameworks, physical, material and logistical conditions, financial resources, plans and programmes and also adequate human resources.

We are particularly concerned with the low level in service delivery and with the pre-institutional state of many institutions in the justice sector. It will be necessary to have sustained support for a period of five to ten years in order to institutionalise the sector, to moralise professions, to give credibility to the services, thus dignifying the institutions so that Justice in latu sensu, and not only reduced to the Courts, can with competence and credibility contribute as a guarantee of the reinforcement of a State which enshrines the principles of a democratic rule of law. But, in order to do that we must understand how to follow the dynamics of its growth. Never will there be somersaults into the void, or fairytale leaps that pretend to reach with one single bound the highest peaks.

We will continue with pragmatic policies and actions that are appropriate to our emerging democracy, with the purpose of improving good governance. We seek perfection and excellence, but in the context of the real world that we live in. We will develop our capacities step-by-step, reinforcing the transition mechanisms to guarantee healthy growth. It is our understanding that it is unavoidable and needs to be possible that the growth of the Public Administration happens in two ways, co-occurring, from top to bottom and from the bottom to the top. The Justice sector however, will only be able to make an institutional stand if it grows from the bottom to the top. The only defendable option is to reinforce the First Instance Courts as the base upon which the whole system will be built. So we thank you for your continued support in this vital area, but we ask that the support be adapted to our circumstances and to the development phase in which the sector is in.

Although we made considerable progresses in the governance area, we cannot rest on our laurels, since our people are still suffering from poverty and deprivation. Together, we must continue in our efforts so that we can improve the welfare of our people, they have already suffered so much and sacrificed so much in order to achieve independence.

As was mentioned last June, my Government is moving forward with the preparations for the elections of the Suco Chiefs and Councils, which will begin in the second quarter of FY2004-05. This will legitimate the structures at the Suco level and increase democracy at the grassroots. An Independent Electoral Committee was established, with members representing different groups, with the goal of ensuring that the elections are free and fair. We intend to continue to examine the decentralisation options that are most appropriate to our conditions, drawing from experiences in other developing countries. This will allow us to build a consensus around the decentralisation process. Before a global administrative decentralisation occurs which will take time, we understand that we can and should embark in de-concentration and decentralisation tests in some of the more developed sectors in our administration. But, even here, there is some need for caution regarding the development of the resources management system in order to prevent the inappropriate use of those very same resources and the risk of public assets being privately appropriated.

You may recall the International Conference on Transparency and Accountability last November, where experts from several countries and international organisations and many of our Ministers and the Inspector General made presentations. As a follow-up to the Conference, a national workshop on Transparency and Accountability took place two weeks ago. Several Ministers presented concrete activities that are being implemented by their Ministries to promote transparency and accountability in the public service. The Workshop was extremely useful in helping to establish the concepts and approaches discussed in the November Conference. We were told by some experts with experience in more than seventy countries, not including Timor-Leste that in two years there has been a significant advance in the establishment of transparency and accountability, and more than what has occurred in many countries with more resources and over a period of seven to ten years.

Security

The security situation in the country has remained largely stable during the past five months. A few peaceful political demonstrations focussing on both internal and external concerns occurred during this period which I consider to be a good sign of the healthy state of our budding democracy.

The handover of the policing functions from the UN Police to the PNTL has largely been completed. The PNTL continues to make progress in strengthening itself and improving service delivery in liaison with other institutions. The proposed modest support from the UN to the PNTL during the next 12 months will need to be complemented by continued assistance from other development partners. Plans are at an advanced stage for significantly expanded bilateral support programs. It is crucial to continue to closely coordinate the various inputs to enhance synergies and achieve maximum impact. We seek the cooperation of our partners involved including the UN in this regard.

Relations with Neighbours

Open communications with Indonesia continue, with a commitment at the highest political level on both sides to maintain and develop good relations between our two countries. However, progress has been slow on resolving a number of pending bilateral issues. We are well past the target date of 30 November 2003 for the two governments to finalize a provisional border demarcation line. We hope that this will be completed before 31 December 2004.

The first round of negotiations with Australia on the maritime boundaries concluded on 22 April 2004, with little progress. The talks are likely to resume in September 2004. A fair delineation of our maritime boundaries and the just distribution of the Timor Sea mineral resources would strengthen our relations with Australia and contribute to the improvement of the development of this sub region.

UNMISET

As Ambassador Sharma mentioned this morning, the UN Security Council has approved the continuation of UNMISET for a further 12 months to May 2005, at a substantially reduced level. This is a welcome development. We are grateful to the SRSG, the Secretary General, the Security Council and the member countries of the United Nations for their continued support to Timor-Leste.

Capacity Development

A few significant activities have been undertaken as a follow-up to the discussion on capacity development at the December 2003 meeting with development partners. In preparation for the request to the UN for continued assistance for a further 12-month period, the Government organised jointly with UNMISET and UNDP, a workshop on Institutional Capacity Development in mid-February. Key Government Ministers and heads of Agencies presented their preliminary plans of action for institutional capacity development, with the ultimate focus on exit strategies for international advisers. They covered not only topics such as the transfer of technical and managerial skills but also the institutional culture of bureaucracy and red tape, work ethics and integrity for efficient delivery of public services. The workshop was a good start to the formulation of a medium-term strategy for capacity development. Further work is planned to be undertaken in the coming months.

Let me now turn to the Transition Support Program or TSP

As indicated in the meeting with development partners in June 2003, we are determined to pursue actions in the three broad areas of good governance, service delivery for poverty reduction and job creation, to cater to the immediate needs of our people. This was the thrust of the Stability Program formulated in the first quarter of calendar year 2003. We are very thankful to see that you, our development partners, agreed with this approach and accepted these themes in the Action Matrix under TSPs II and III.

Beginning with FY2003-04, which is the second year of the TSP, government actions agreed to under TSP II are being drawn from the Annual Action Plans or AAPs of the Ministries and Agencies. They form a small but important subset of the activities in the AAPs. Progress on the TSP actions is monitored and reported as a part of the quarterly reports on implementation of all activities in the AAPs. Actions under TSPs I and II have been rather ambitious, given the fledgling state of the Government institutions and the limited capacities of the civil service. However, progress in implementation of the TSP actions has been improving over time.

Notable achievements under TSP II so far include the following:

Under the first focus areas of good governance, the Parliament have enacted the Organic Laws for the Office of the President and the Provedor of Human Rights, and the Civil Service Statute, the Suco Elections law and the Law on Political Parties; while the Council of Ministers have approved the decree laws on the Notary and Civil Identification, as well as on the Organization of the F-FDTL, PNTL, various Ministries and others.

In the management of public expenditures, significant progress has been made in expenditure control and disciplining the budget formulation process, and some progress has been made in strengthening the procurement system. Also, the bases for the monitoring and strengthening of the execution were set, in view of a better service delivery starting next fiscal year. In the power sector, the management contract was signed in November 2003 and the management team took over the assets and management of the power utility by the end of March 2004. Although the installation of 10,000 pre-paid meters initially met considerable resistance, the pace of installation has accelerated in recent months, with more than 7,000 meters having been installed by the end of April 2004. These measures, together with those aimed at reducing costs through load shedding, are expected to lead to significant improvement in the sector’s financial position before the end of FY2003-04. However, we must acknowledge the weakness in this sector, which besides continuing to need subsidies to deliver its services, has had some Districts being left without power for some months now. With the support of the World Bank, the Asian Development, Norway, and other initiatives, we are trying to identify alternative power sources, so as to deliver better services to consumers.

In the second focus area of service delivery for poverty reduction, the Ministry of Health has made good progress in the development of micro-policies and in achieving quarterly performance targets for service delivery. Hospital expenditures are broadly in line with the TSP limit of 40 percent of recurrent spending. Framework legislation for the Autonomous Medical Supply System has been approved.

As a complement to the Government initiatives, the National Congress for Education was held in November 2003. Following it, the Ministry of Education, Culture, Youth and Sports finalized an education sector policy framework, and preparation of the legal framework for the sector is well advanced. Also, some progress has been made on the development of a model for decentralised financial management by schools and school committees or parent-teacher associations, with the pilot program expected to be launched by the end of the current fiscal year. So as to achieve more discipline in the civil service and a better delivery of services, I have visited several secondary and pre-secondary schools in Dili. I can verify that some are in a precarious condition of decay, in the areas of water and sanitation, bad management, lack of teaching conditions and lack of the most basic equipment. An extraordinary effort must be made to improve these conditions as soon as possible. More efforts should be made in order to have a more effective service delivery to the people in all sectors of administration so that we can respond with more urgency to some of their expectations. To achieve that, it is important to finalise the documents on the Sector Investment Programmes (SIP) which will be the guiding document and a mobilisation and coordination instrument for support and technical and financial assistance for the programmes to implement the National Development Plan. A coordination mechanism should be created and it can have as a basis, the annual action plans, which will be reflected in a management document that can take the form or formula of a Supplementary Budget.

The registration of veterans was largely completed by the end of March 2004. Drawing upon inputs from public debates in each district in February 2004, the commissions are in the process of finalizing the draft criteria for recognition of veterans. The lists of ex-combatants and veterans are being compiled and a final report is being prepared for submission to the President of the Republic next month.

In the third TSP focus area of job creation, progress across most of the private sector development actions has been good, notably in the preparation of enabling legislation, such as the Law for Commercial Companies, Investments, Bankruptcy, Insurance and Banking Payments. Speaking of Banks, this is a sector that has had gradual but solid development. The Asian crisis has taught us several lessons, the most important one being, without a shadow of a doubt, the major role that the banking institutions have in the development process of the economy. Related to this, another lesson has also been taught, id est, the need for public powers (even in the more liberal regimes) to ensure an adequate oversight of the banking sectors to avoid any implosions in these institutions. So, in order for a well functioning economy we need the banks, but we also need to capacity build the public powers to supervise them. Hence we need to reinforce the Banking and Payments Authority, and start thinking about transforming it into a Central Bank so that it can better execute its oversight competencies. Particularly now that the banking Sector in Timor-Leste is undergoing a solid growth. The total of its assets grew from US$78.5 million to US$97 million, between August 2003 and March 2004. More important still, there was an increase of 262% in credit for the same period, i.e. from US$11.9 million to US$43.1 million.

Ladies and Gentlemen. Your Excellencies.

Execution of the community-based road maintenance program has improved and the preparatory actions to send labour abroad have progressed. Here, the objective is not only the promotion of the emigration of Timorese labour, but above all, development of professional qualifications and the establishment of new approaches to the issue of work.

Due to recent heavy rains, incalculable damage has been done. Extreme efforts have been, and still are being demanded of the Government to repair and maintain roads and bridges. Efforts have been made and should continue to be made, to ensure that with the existing limited budgetary resources, we can start to meet these demands imposed by nature. Knowing that from the 20th of May we will no longer have the support of the UNMISET military engineering, I think that the time has come to make clear, here and now, that the sectors of communication and transport should henceforth deserve from all of us the greatest attention. Without roads and bridges and functional transport and communications, the asymmetry between the urban and the rural world will grow larger, and the reduction and ultimate eradication of poverty will not take place.

The Ministry of Agriculture, Forestry and Fisheries (MAFF) have made good progress in the development of sectorial policy and strategy. The fisheries decree law has been approved by the Council of Ministers, paving the way for licensing for offshore fishing.

Overall, significant progress has been made in the implementation of the actions under TSP II. Some of the details on these issues will be covered in the presentations by the Minister of Planning and Finance this afternoon and some others by the Vice Minister tomorrow morning.

The actions related to the management of public resources include the following:

Based on the estimates available in the last quarter of calendar year 2003, we took some drastic measures to reduce expenditures. We have been gratified by the significant positive results from the expenditure control and other disciplinary measures introduced and implemented over the past eight months. I want to emphasize that my Government is committed to a continued prudent management of public resources, we recognise that budget execution needs improvement particularly in some key sectors such as Education. The Ministry of Planning and Finance has begun to provide technical assistance to these entities to improve their fiscal performance. Last month, I set up a unit in my Office to monitor budget execution, drawing in the financial officers from the line Ministries. We intend to monitor and promote accelerated spending of the scarce CFET resources on priority activities that deliver quality services to our people. We shall strive to track closely the execution of the TFET, so as to help recover the delay in the implementation of some projects financed through the Trust Fund for Timor-Leste and to prepare the drafting of a new management mechanism for bilateral support, to be coordinated by the Government following the TFET.

The presentations at the Meeting with Development Partners last December and my letter to you at the start of this year on the short and medium term CFET resource situation were based on the Timor Sea revenue projections available in the last quarter of calendar year 2003. However, recent Timor Sea revenue projections show somewhat improved revenue flows in the next three years as compared to those presented last December. All of us recognise the large swings in the Timor Sea revenue projections in the past 12 to 15 months, and should expect similar changes in the coming year. Also, the projections are subject to several major risks including technical factors and fluctuations in world market prices of oil. Thus, all of us need to understand the significant uncertainties associated with the medium-term Timor Sea revenue projections. It is wise to protect the budget and the economy from these fluctuations.

Taking into account the recent more favourable revenue projections together with the carry over of sizeable CFET balances and allowing for adequate safety margins, we feel that we can manage the CFET revenue situation for FY2004-05 with the already planned support from development partners under TSP III.

Looking ahead, it would be necessary to mobilize continued budgetary support from our development partners at about the current annual level for two more years that is FYs 2005-06 and 2006-07. This is particularly critical, as a number of relatively large recurrent expenditures hitherto funded directly by development partners including the UN would have to be provided for in the CFET budget from FY2005-06 onwards. Examples include the repairs to roads and bridges undertaken by the PKF and those under TFET projects; and purchase and provision of pharmaceuticals and health supplies currently funded by the European Union. Many of these expenditures have not been reflected in the CFET budget projections so far.

Beyond FY2006-07, we intend to rely on domestic revenues and Timor Sea revenues to cover the CFET resource requirements.

We know our development partners were impressed with the capacity we have shown in reducing the budget gap. But this was something extraordinary, since through the use of integrated control mechanisms we managed to increase our domestic collection capacity, reducing the space for fiscal evasion, surprising the faulty taxpayers and collecting more efficiently, including many sums in arrears. Thus, despite the efficiency, there is little left to collect in what concerns taxes in arrears, which means the revenues from now on should be stable.

We plan to establish the Petroleum Fund during the course of FY2004-05. The objective is to ensure the prudent, transparent and rule-based management of the Timor Sea revenues. We should derive maximum returns from the savings consistent with careful management of risks. We should utilise the resources on a sustainable basis to benefit not only present but also future generations of the people of Timor-Leste. We will solicit ample consultation during the process of establishing the Fund. As it has been our practice, the extensive consultation and the feasibility study shall precede our decisions on fundamental issues for the nation. Our institutional options regarding the management of these resources are already reflected in the transparent fashion with which we manage the meagre revenues from the Timor Sea. We are happy that they are consistent with the Blair initiative. Knowing the merits and benefits of the formal subscription of the Extractive Industries Transparency Initiative promoted by Prime Minister Blair, our eventual adherence should be preceded by an in depth study on the costs and benefits of formally subscribing to the initiative. We will not do anything that brings us more costs than benefits. And this can only take place after the Fund has been established.

Regarding the establishment of the Fund, we pleasantly noticed that the suggestions made by the IMF have alerted us to the need of making it more flexible.

Now, let me focus on the performance of our economy and the situation of our people.

At the meeting in Dili in May 2002, we launched our first National Development Plan, which highlighted the vision of our people for themselves and their children. Poverty reduction and economic growth are the centrepieces of the Plan. It projected accelerated economic growth with a dip in the first year and a rapid recovery thereafter. It visualised a decline in poverty, in its various dimensions. Unfortunately, the Plan projections have proven to be optimistic! The economy continued to contract during the past two years and is projected to do so next year. The continued reductions in foreign presence including the UN and other multilateral and bilateral programs have contributed to the decline of the economy. Some dynamics have been evident in new Timorese businesses, especially in retail trade and private construction. However, their effect has not been adequate to compensate for the impact of the said reductions in foreign presence. Within the next three years we hope to be able to improve the performance of the economy. With a more dynamic banking sector, a better defined patrimonial securities system and, perhaps the start of a credible insurance system and of a banking payments system in conformity with international standards, plus the regulating framework for private investment, we hope to attract national and foreign enterprising will and capacities, so as to give a new dynamic to the development of our economy. But we do not expect any miracles in this sector.

The agricultural sector has suffered due to the late arrival of rains last year, forcing the Government to appeal for food aid to ameliorate hunger and tide over the lean months of November to February. The outlook for agricultural production is positive this year due to more favourable rains. It is one thing to increase production, but completely another to bring it to the markets in urban centres at reasonable cost.

As in past years, the heavy rains since December have damaged our roads and bridges, impeding access to several areas of the country. Since 2000, the engineering battalions of the UN Peace Keeping Force or PKF and contractors financed and supervised by TFET projects carried out much of the periodic maintenance and rehabilitation work. During the current year, the PKF has been scaled-down and most of the remainder will depart in a few days. Also, the road maintenance operations have tailed off and road conditions deteriorated due to the winding down of TFET projects, and the tight CFET budget allocations in the current fiscal year. These are adversely affecting access to markets, off-farm employment in rural areas and overall rural development.

So far, the bulk of the international assistance has been centred in Dili and other urban centres with only a fraction reaching the grassroots. The resource flows to rural areas have declined considerably during FY2003-04 with the conclusion or scaling down of many bilateral and multilateral programmes including those under TFET. The impact of these developments has been negative on the rural economy and the people in the countryside. The Government is exploring options including the piloting of a Local or Community Development Fund with UNDP assistance that would channel block grants to local entities. However, this will be a very small initiative to address a large issue. More substantial resources need to be directed to the rural areas in the coming years. We look forward to your full support in this regard.

The recovery of the economy in the final two years of the Plan period, that is FYs 2005-06 and 2006-07, is expected to be modest. The net effect is that the economy would be largely stagnant during the five-year Plan period. At the same time, our population has been growing at about 3% per year or by about 16% during the Plan period. The virtual stagnation of the economy and the growth in population would result in a significant increase in the incidence of poverty and the number of poor people. This is a serious concern for all of us.

Employment in the formal sector has declined due to the decline in public expenditure, both through CFET and off-CFET in the combined sources budget. At the same time, about 15,000 youth are joining the labour force each year, swelling the ranks of the unemployed. Neither the public sector nor the formal private sector is creating enough new jobs to absorb the growing labour force. Some 800 enterprising Timorese are leaving the country each year to seek their fortunes in other lands. We are exploring the means to send labour abroad to neighbouring countries including Malaysia and South Korea.

To rejuvenate the economy and expand employment opportunities, we have been working on medium-term Sector Investment Programs or SIPs, with technical assistance from a number of development partners. Some 14 SIPs are currently under preparation. Our staff made a presentation to representatives of development partners residing in Dili on some of the draft SIPs in March followed by a briefing on the current status in the first week of May. The Vice Minister’s presentation tomorrow will provide further details on the SIPs. I must emphasise that the SIP exercise is a joint effort of the Government and our development partners to rejuvenate our economy, expand employment and reduce poverty.

I wish to reiterate that the ultimate test of good governance is meeting the needs of our people. It is the provision of education that is relevant, delivering quality health services, supplying clean water and safe sanitation and reducing the burden on women and children, the construction and maintenance of access roads and the supply of electricity. Above all, it is creating the enabling conditions for the people to work hard and lift themselves out of poverty. We believe that these are the paramount objectives of good governance for Timor-Leste at the present time. I welcome your continued partnership in our journey of meeting these challenges and making progress to help our people.

Millennium Development Goals Report

Before closing, let me remind you that poverty reduction and economic growth are the central objectives of our National Development Plan. Reducing poverty in its various dimensions is also the overriding theme underlying the Millennium Development Goals or MDGs. We have prepared the country’s first MDG Report jointly with the UN Country Team led by Mr. Hasegawa, the UN Resident Coordinator. The Report takes stock of the situation of Timor-Leste in relation to the MDGs and sets preliminary pro-rata national targets and indicators. Further work to adapt the MDG targets to the country’s situation, explore policies and strategies and resources required to achieve the national targets is continuing in conjunction with the preparation of the 2004 National Human Development Report of Timor-Leste.

The MDG Report has been sent to the United Nations last week. We take great pleasure in releasing the first MDG Report at this auspicious Forum.

Thank you.


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