Subject: TLGOV: Food Security – The Facts

[please note the attachments referred to were not received. - JMM]

REPÚBLICA DEMOCRÁTICA DE TIMOR-LESTE GABINETE DO PRIMEIRO-MINISTRO

Press Conference

Food Security – The Facts

9 July 2008

Preamble

It is general knowledge that the issue of food security is neither new nor recent. In financial year 2006/07 the previous government spent around US$ 11,089 million on the importing of food products, especially rice.

In addition to this, the current government has spent around US$ 6.6 million from the Transitional Budget on the purchase of rice.

As it appears no one is questioning the wisdom behind these purchases, since it is held as a universal truth that presently Timor-Leste does not produce enough quantities of rice to meet internal demand on the other hand the prices of the free market are beyond the purchasing power of most Timorese, particularly in these times of scarcity.

Hence the need for Government to monitor and intervene, when and as required to ensure an adequate response in terms of both price and quantity in the supply of rice which is a staple food for the Timorese

The recent purchase of 16,000 metric tons of rice has caused a great deal of discussion in the last few days. I will be addressing this issue shortly, but before that I have something to say:

More than many of those who speak ‘in loud voice’, I know what it is to want for food. I want to make it very clear that I did not fight for the best part of my life just to free the country from foreign oppression – I have also fought for my people’s right to a dignified life, a life without hunger. The first goal has been achieved; the second is my current challenge.

I am sorry that certain people feel compelled to distort the truth. It seems that no one remembers that for the last few months, we have been facing an international crisis with a global shortage in rice, increased prices and market instability.

Regardless of the international and national opinions, especially the opinion of those who have done very little to combat hunger and to improve human rights, I shall do all that I can under the laws of this country in order for the population to have access to that which is their right.

AND NOW THE FACTS:

1. The Budget for 2008 included a sum of US$ 4,080 million for food security.

2. In late January 2008 it became evident that the rice reserves were below what is considered an acceptable level. Also, there were restrictions in the world market regarding the sale of rice by countries that normally export this product.

3. The estimated stock on hand was 7,900 metric tons – we need 24,000 to ensure food security for a three month period.

4. In light of this situation, the Minister of Tourism, Trade and Industry took the initiative to test the market and so arranged for a meeting with the suppliers/importers of rice

5. This meeting took place on 29 January 2008. According to the attendance record, the following importers participated:

Julio Alfaro, Director of the People Food Company

Lay Siu Hing, Director of the Star King Company

Gerry Koul, Director of the Nabilan Food Company

Germano da Silva, Director of the Oriental Food and Três Amigos Companies

Julio Lo, Director of the Juxibel Company

Frederico da S. Sam, Director of the Timorese Company

James Jong, Director of the Timor Food Company

The meeting minutes are attached (attachment 1)

6. On February 1st, the Minister of Tourism, Trade and Industry and I met with the rice and cement importing community, so as to verify the availability and readiness of the importers. The importers who participated were:

Kathleen Gonçalves, Director of the People Food Company Julio Alfaro, Director of the People Food Company Mr Amir, Manager of the Kuda Ulun Company James Jong, Director of the Timor Food Company Mr Marsidi, Director of the Victoria Lda Company Mr Rully, Manager of the Nabilan Food Company Frans Holiwono, Director of the Holiwono Company (BTK) Mr Charles, Vice-Director of the Lay Shop Company Germano da Silva, Director of the Oriental Food and Três Amigos Companies Julio Lo, Director of the Juxibel Company Lay Siu Hing, Director of the Star King Company Frederico da S. Sam, Director of the Timorese Company

(see the respective minute in attachment 2)

7. At this meeting I highlighted the following essential aspects: capacity to import rice immediately and capacity to store it

8. Few had capacity to store rice, except for Mr. Germano da Silva, no one was ready to import immediately the quantity the government required – 16,000 tons.

9. I took the opportunity to remind all those in attendance that it was government policy to set up mechanisms to facilitate a sharing scheme for the import of rice, an all inclusive and collective effort for food security

10. Following these meetings, the Três Amigos Company, represented by Mr. Germano da Silva, presented a bid to the government for the supply of 16,000 metric tons of rice imported from Vietnam, at a price of US$ 510.00 per ton. The bid also included the option to divide the payment into two parts. The first part would be paid by June 2008 and the second part would be paid around August, after the approval of the mid year review (MYR) budget

11. I want to stress that Mr Germano da Silva is not Vice-President of the CNRT.

12. The Government decided to accept this bid on three deciding factors: 1.)The market search by way of the meetings held with the suppliers of rice indicated lack of ability to import; 2) the bid from Mr. Da Silva was reasonable, represented value for money and offered favourable payment conditions, 3) the country’s need for rice stocks was becoming an urgent issue,

13. As a consequence on February 29th the Government signed a contract with the Três Amigos Company regarding the purchase of 8,000 tons of rice, at a price of US$ 510.00 per ton, totalling US$ 4,080 million (Attachment 3). The balance of 8,000 tons would be bought at the contractor’s risk and paid only after the mid year review (MYR) budget

14. In early April, the price of rice in the international market increased considerably, reaching as much as US$ 1,150 per ton in Thailand. It was within this environment of global scarcity and constant fluctuation of prices that the contracting company was informed by the Vietnamese supplier that it could no longer supply rice at the price of US$ 510.00, as previously agreed.

15. The supplier requested a new price of $800.00 at origin, with the Três Amigos Company adding US$ 100.00 more for transportation costs (adjustments considering rising fuel prices), insurance, operational costs and profit. Therefore the price for the government became US$ 900.00 per ton. (Attachment 4)

16. In view of the economic situation at the time, the government decided to be prudent and not to risk losing the secured rice shipment. The agreement for the purchase of 16,000 tons of rice was rectified to an overall cost of $14,400 million.

17. Given the risk of considerable food shortages and its impact on the most underprivileged sectors of our society, the government took the view that in this circumstance, price would have to be a factor of secondary importance.

18. All negotiations with the contracting company were open, transparent and within the terms of the law.

In view of the recent accusations by the opposition, the government decided to undertake a review of previous government’s purchase of rice and food products.

The results are as follows:

* In the financial year 2006/2007 the previous government spent US$ 11,089 million on purchasing rice and food products.

* The table below show that 76% of the purchases of the former Government’ were single source contracts

Supplying Company Type of market consultation Amount Timor Global Direct adjustment (single source) US$ 550,982.00 Landmark Trading Direct adjustment (single source) US$ 2,816,000.00 Tropical Hotel Direct adjustment (single source) US$ 1,387,000.00 Monte Viado Lda Direct adjustment (single source) US$ 3,538,663.00 Various Direct adjustment US$ 136,419.00 Subtotal

US$ 8,429,064.00 Nabilan Food Corporation Invitation to tender US$ 940,000.00 *Nadira Supplier Invitation to tender US$ 1,720,000.00 Total

US$ 11,089,065.00

* To date Nadira Supplier is yet to supply 700 tons of rice.

* An agreement for the supply of rice between the Timor Global company and Mr Arsénio Bano, then Minister of Labour and Community Reinsertion, dated 13 June 2006, has attached a note by the then Minister of Finance, in which she states: “this was an emergency purchase, i.e. based on a contract signed by Minister Bano and myself, the supplier offered to provide rice on the understanding that payment would be made at a later stage”. Signed 01 September 2006. How is this agreement any different from the one that has been causing such polemic over the past few weeks? At least the present government will settle the accounts at the end of the fiscal year in which the expenses were incurred, unlike what happened with the previous government. It should be noted that in this case we are talking about expenses of US$ 849,188.00 not accounted for in the fiscal year in which they took place. This means that expenses in the 2005/06 annual report are wrong by at least this amount - US$ 849,188.00 (Attachment 5).

* But I understand, the previous government was not used to recording its debts, and the present government is getting used to paying those debts. In addition, there seems to be some question as to the quantities imported.

* A payment of $500,000 was charged to the Contingency Reserve in excess of the amount charged to the Solidarity Fund for a major acquisition of rice by the previous Government. A contract with a value of $960,000 was entered into by the Ministry of Labour and Community Reinsertion, Ministry of Finance and Timor Global (TL) Pte Ltd for 2,000 Metric tons of rice. Although the request to use the Contingency Reserve was authorized by the Prime Minister, there was no shipping documentation attached to the payment order.

* The auditor’s report states “One very poor photocopy of a cargo manifest was found attached to a separate payment voucher made out to the stevedore company handling the same rice acquisition for $35,200. However this shipping mandate was for a different quantity of rice (3,000 Metric ton) and annotated as “donated by P. R. China” inconsistent with the Timor Global contract. Further, the costs charged to the Timor Government for the transport and warehousing of the rice shipment were charged for an amount of 3,000 Metric tons rather than the 2,000 Metric ton in the contract”

* When this Government took office it was found that the bank account for revenues from the sale of rice by the State only held US$ 830,000. Considering that around US$ 11.9 million were spent in purchases, these revenues seem extremely low. Is this a good example of good administration and governance? Furthermore, even though the State started its purchases within the first few months of 2006, the bank account statement does not have entries prior to February 2007. Why is that?

* I will tell you that this appears consistent with the overall financial management of the country by the former Government. Shortly after taking office it was discovered that Fifty Four percent (54%) of the value of all government expenditure for the 2006/2007 financial year under the previous government was coded to a supplier called “no vendor”. This means we will never know where more than half our public State budget went or how it was spent because there is no documentation. The audit team stated: “There was essentially no reporting or review process in place within the Procurement Services. A large number of payments in the general ledger are incomplete. This has resulted in a situation where there is a very poor audit trail and retrospective investigations of malpractice or fraud would be very difficult.”

* And let us not forget, the largest contract awarded by the previous government was to Tafu Oil Company Ltd for the supply of fuel, owned and operated by Djafar Bim Amude Alkatiri, the brother of the former Prime Minister Mari Alkatiri, which on average exceeded over $1.2 million USD per month. It was noted by recent auditors that, “Despite the size of this contract, which covers the major source of fuel supply for the country, no performance bond appears to have been set.” And as for the contract there was a 1. Failure to follow open tender processes, 2. Breaches of delegation authorities in the letting of the contract, 3. Lack of authority to extend the contract, 4. Failure to properly inform the Finance Minister of certain aspects of the contract 5. Failure to validate payment requests and 6. Failure to identify and recover significant over payments to the vendor.”

Sometimes you want so badly to score a goal that you end up scoring in your own goal post ……

Lastly, I wish to respond to former Minister Arsénio Bano, who claimed that I was guilty of poor administration in the Presidency, simply because I had to pay State expenses from my own money.

1. As a member of Government, Mr Arsénio Bano will recall that in 2002, I invited him every Friday for meetings with the needy. He stopped coming on his own accord, because he could not respond to the requests made to him.

2. I then chose to call Mr Arsénio Bano and his directors, after having been denied, as President of the Republic, the reimbursement of expenses of some zinc sheets, wood planks, nails, etc. for persons who requested assistance in late 2002. I had instructed the finance division of the President’s Office to recover these costs; however the Ministry of Finance returned the request to me, saying that the President of the Republic should not carry out such activities. This is why I had to use money from my own pocket to pay the State. From that moment on I started summoning Mr Arsénio Bano, who said that “ he could not respond to everything.”

3. In early 2003 former Prime Minister Mari Alkatiri informed me that he had appointed the Taibessi veterans’ garage as the only garage for maintaining State vehicles. Many months later former Prime Minister Mari Alkatiri complained to me that the Taibessi veterans garage had proved unworthy of his trust, as it ruined the cars sent to it for repairs.

4. The former Prime Minister also informed me that there was corruption in that garage, namely that a Pajero would leave the garage as a Tata and a Tata would leave as a Pajero. I thanked the former Prime Minister for the information and told him that I would be sending the vehicles of the Presidency to more professional garages, also because the Presidency of the Republic did not have much money.

5. The former Prime Minister concurred with my decision, and from then on, whenever a vehicle of the Presidency required maintenance I would send it to the Beimori garage. However, during fiscal year 2003/2004, when the time for paying invoices came, the then Minister of Planning and Finance or the Ministry of Planning and Finance returned my invoices saying that they would not pay them because the veterans’ garage had been given a contract for the exclusive repairing of State vehicles.

6. I paid these expenses from my own pocket. Although I knew that the veterans’ garage was no longer in operation and that the Government policy had changed enabling government fleet to be sent to any garage in Dili.. This policy remains to this day. But just to open people’s eyes, I inform you here that I called Brigadier Taur Matan Ruak to express my disappointment with the working conditions, the irresponsibility and the poor management in the veterans’ garage. The Brigadier told me that he asked the Government more than 3 times to have the garage inspected, but that this never happened. The truth is that a nephew of the former Prime Minister, together with a Malaysian, had been making up false invoices and exchanging car parts, all this without the veterans being able to do anything.

7. Another example used to demonstrate poor administration in the President’s Office derives from the following fact: Very late after taking office, I received a Taruna vehicle, which is used by common traders in Indonesia. It so happens that this type of vehicle is not suitable to make trips to the interior. Therefore, whenever that I had to travel to the interior I used my private car, and because I was going on official business I filled the tank with Government fuel. The invoices sent to the Government for the fuel used only for my official trips to the interior were returned because Government fuel could not be used in private cars.

8. With deep regret, I stopped visiting the populations in the interior, and I take this opportunity to say that even the current President of the Republic stated in an interview to Australian newspapers that I never visited the interior. The reason for this is simple: I went for two years, paying the trips from my own pocket, and then I stopped because I did not have the money to do so.

9. Since November 1999 I have also gone abroad several times in order to request the assistance of the international community to Timor-Leste. As President of the Republic, I also visited countries and participated in international state meetings. In each of these visits I always sought financial support for the Government of Timor-Leste. As Head of State I wanted to take with me gifts for the hosting nation as per international protocol, therefore I ordered State gifts that I ended up paying from my own pocket, because I did not acquire them following the tender processes.

In closing, I have always served my nation with transparency, in good faith, and in accordance with the law. The continual allegations of corruption against me and my Ministers are unsubstantiated and part of an overall aggressive political plan by a small few who put the need for power before the good of the nation and will pursue this power at any cost to any individual.

It saddens me to see that those who are expected to serve the people choose to serve themselves instead. I will also say that when the AMP Government took office we made the decision to govern with dignity, void of political squabbling which is not conducive to nation building or in the best interest of the people of our nation but the Opposition has led this systematic campaign to destabilize the country with misinformation.

What is equally disappointing is that the media, both national and international reports misinformation as fact, without due diligence for the truth. So what I ask for you today, is to strive to discern the truth from propaganda so as to provide the people of this nation, and the wider international community, with an honest assessment of Governments activities.

Thank you.


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