The Government of the Democratic Republic of Timor-Leste was today given high praise by development partners, the United Nations, International Financial Institutions, President Xanana Gusmao, and the co-host of the Timor-Leste and Development Partners Meeting (TLDPM), the World Bank. According to the East Asia Pacific Vice President of the World Bank, Jemal-ud-din Kassum, the Government of Timor-Leste has made considerable progress against plans and objectives, especially in the past six months.

At this week’s TLDPM, held in Dili, the Government of Timor-Leste requested the continued financial support of development partners for the Transition Support Program (TSP). This request for continued budget support was fully endorsed by the World Bank based on: 1) significant uncertainties in oil and gas revenue; 2) the need to finance increased recurrent budget costs and 3) the fact that the TSP process has worked as a “spinal chord” for donor coordination in Timor-Leste.

The TLDPM meeting was themed: Facing Challenges and Making Progress. Prime Minister Mari Bim Amude Alkatiri, told delegates: “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.”

Together, the Government and development partners reviewed progress since the last meeting in December 2003. They also analysed the budget “financing gap” of $30 million, and the Government’s rationale for their request for development partner assistance of $60 million. In addition, conference delegates and observers heard that the Sector Investment Programs (SIPs) will be ready for discussion in August and will be the focus of the next TLDPM. The continued need for capacity building support was another key area of discussion, especially now as UNMISET winds down its mission.

Government requests extension of TSP

Delegates at the meeting heard that the government had significantly reduced the medium-term budget financing gap that was presented at the last TLDPM. In December 2003, the estimate of the medium-term financing gap was $126 million. It is now $30 million. This reduced medium-term financing gap resulted from the Government’s concerted efforts in the areas of better tax collection and administration, reduced Government expenditure ($42 million); and increased oil and gas revenue projections ($54 million). It is important to note, however, that oil and gas revenues are hugely uncertain and even a small fluctuation in world price of oil and gas can impact significantly on the budget projections. The Government therefore requested an extension of the TSP program to FY05/06 and FY06/07 at levels similar to current contributions. This would accommodate oil price fluctuations and the many other uncertainties that this new nation faces.

Timor-Leste’s President, Xanana Gusmao, used his speech to highlight his support for the Government’s efforts, saying, “The Government deserves congratulations for the initiatives taken to reduce the deficit projected for the fiscal years 2005-2007...The efforts dispensed in the good administration of taxes and in the efficient control of customs contributed towards a galloping increase in domestic revenue, thereby demonstrating a commitment from the Government for good management of resources...It is very good that there is this spirit of restraint of public expenditure and that it be a ‘pro-poor oriented budget,” he said.

The Minister for Planning and Finance, Madalena Brites Boavida encouraged development partners to extend their support through fiscal year 2007 reminding them that the support was needed to: “...maintain our already significant achievements... to increase them even further, a degree of fiscal certainty is required.”

Minister Boavida presented a clear strategy for Government to manage the risks associated with oil and gas revenues, based on development partners’ continued support.

Clear achievements

In reviewing progress since the last TLDPM in December 2003, development partners applauded the Government’s progress on the following: installation of pre-paid electricity meters resulting in improved cost recovery in the power sector; tightening of compliance procedures and reduced overhead spending associated with government vehicle use, fuel consumption and overseas travel; freeing up resources for service delivery in rural communities; discussion of policy and strategic framework for agriculture, fisheries, and forestry; adoption of critical pieces of legislation for the health sector; improvement in health service delivery systems with improved immunization rates and an increase in attended births; progress in the development of a national education policy; and completion of the national registration process for veterans and ex-combatants.

The Asian Development Bank made special mention of the progress made by the Government in seeking to stimulate the economy. Amarnath Hinduja, Resident Representative Special Office in Timor-Leste Asian Development Bank, said: “The ongoing efforts to create a conducive environment for private sector development are to be commended. This includes the Parliamentary approval of a commercial code and company law. Public consultation on private investment is a major step forward towards encouraging domestic and foreign investment.”

Good governance

Delegates agreed that the Government of the Democratic Republic of Timor-Leste had also taken important steps to complete the governance architecture set out in the Constitution. It now faces the critical task of transforming this architecture into well functioning, adequately resourced, autonomous institutions, such as the Provedor dos Direitos Humanos e Justiça, that can effectively provide the checks and balances that underpin this new democracy.

The Prime Minister said: “ 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 supplying electricity. Above all, it is creating the enabling conditions for the people to work hard and lift themselves out of poverty.”

Sector Investment Programs (SIPs)

The Government is preparing Sector Investment Programs (SIPs) for 14 sectors. Six of these are already completed, and all 14 are expected to be finalized by August 2004. The SIPs, which cover activities like a sustainable program for road maintenance and private sector development, will form the basis for creating a comprehensive Combined Sources Budget and Medium Term Expenditure Framework for each sector. They will all be aligned with the National Development Plan. This detailed and comprehensive framework will provide clear guidance for future funding requirements.

Capacity building challenges

There are still significant challenges facing the Government in terms of capacity building, delegates heard. Some substantial success has been realised, but new capacity building efforts need to be guided by a long-term vision for each sector and allow Government more control.

The three crucial areas that all development partners and the Government agreed that they need to focus on in terms of fostering more efficient and effective use of human resources are: 1) the justice sector; 2) public expenditure management, including both the Ministry of Planning and Finance and financial functions in line agencies; and 3) security, where assistance is already encouraging.

According to Mr Sukehiro Hasegawa, UN Resident Coordinator of United Nations System’s Operational Activities for Development: “In the next phase of capacity development efforts, emphasis will shift from individual to institutional capacity development incorporating the key lessons learned to date. We commend the Government’s Capacity Development Coordination Unit (CDCU) for taking the lead on the current efforts to ensure the development of the Capacity Development Action Plans for all state institutions. These plans define how state institutions will reduce their dependence on international advisors over the next three years and identify required training both and outside the country.”

Commenting upon the Government’s progress to date, the Prime Minister said: “We will continue with pragmatic policies and actions that are adequate to our emerging democracy...We seek perfection and excellence, but in the context of the real world – the one we live in – we develop our capacities step-by-step...”

Minister Boavida reinforced the Prime Minster’s sentiments when she concluded her statement with a quote from Sir Winston Churchill: “Every day you may make progress. You know you will never get to the end of the journey. But this is far from being discouraging, it only adds to the joy and glory of the climb.”

In his closing remarks, Mr Kassum summed up the sentiments of development partners: “Your progress has been impressive, though the remaining challenges are equally formidable. The World Bank and development partners are dedicated to supporting the Government and the people of Timor-Leste, as together we strive for a world free of poverty.”

For further information or referral to a media spokesperson, please contact Jose Filipe at the World Bank on +670 723-0554; or Naldo Rei on +670 723 6162 or Zoe Cottew on +670 723 4156, in the Prime Minister’s media office.