Development Challenge The USAID Program Other Program Elements Other Donors Program Data Sheets Summary Tables USAID Search: East Timor Previous Years' Activities 2002, 2001 Last updated: Wednesday, 29-May-2002 18:51:25 EDT

THE DEVELOPMENT CHALLENGE: In 2001, the East Timorese continued their progress toward independence by taking three crucial steps: electing a constituent assembly; progress in drafting a Constitution; and forming an all-Timorese Council of Ministers. As East Timor approaches full independence in May 2002, popular support for democracy and free-market economic development remains high. Despite this progress, significant challenges remain. East Timor, already one of the poorest areas of Southeast Asia, was ravaged by violence and destruction following its vote for independence from Indonesia in 1999. Per capita GDP-only

East Timor's adult literacy rate is below 50%. Per capita GDP was estimated at $303 in 2001.

$431 in 1996-has dropped by an estimated 40 to 50% following the destruction, and has since made only modest gains. As East Timor slowly rebuilds, it must contend not only with widespread poverty but with literacy rates well below 50%, a lack of technical skills and expertise, and little experience in self-governance. Urban unemployment is very high. Schools, hospitals, communication facilities, and power plants-all badly damaged or destroyed during the post-referendum violence-are only slowly being rehabilitated or rebuilt.

U.S. foreign policy interests in East Timor focus on this new nation's transition to a democratic government and market economy. Normalizing East Timor's relationship with Indonesia, its closest neighbor and largest trading partner, is another key priority. As one of the first and largest foreign aid providers during East Timor's transition period, the United States is recognized as a credible and efficient source of outside advice and assistance by the East Timorese. Projected funding levels through FY 2003 will enable the United States to continue its central role in East Timor.

THE USAID PROGRAM: USAID will devote $25 million in FY 2002 and is requesting $19 million in FY 2003. The USAID program in East Timor supports two key strategic objectives: promoting economic recovery and strengthening democratic institutions. FY 2002 funds will support economic recovery by expanding participation in USAID's coffee cooperative program and increasing incomes from the export of East Timor's primary cash commodity, coffee. USAID will also develop other profitable agricultural crops, fund community-level rehabilitation; strengthen democratic institutions, and contribute to the U.N.-administered consolidated trust fund for East Timor (CFET). FY 2003 funds will continue training and mentoring farmers, managers, and processors in practices to maximize productivity and profits, and to assume full management of the coffee project; expand health clinics in coffee-growing areas; establish purchasing and distribution cooperatives to reduce prices and of consumer goods; and continue to assist the country's transition to democratic governance.

Economic Revitalization and Growth. The USAID economic growth program in East Timor focuses on agricultural development and trade. USAID will continue its support for Cooperativa Café Timor (CCT), a federation of Timorese-owned organic coffee cooperatives, through a technical assistance grant to the National Cooperative Business Association (NCBA). The coffee project strongly supports USAID's goal of encouraging broad-based economic growth and agricultural development by expanding rural employment opportunities and producing coffee and other agricultural products that demand the highest prices in international markets. Forty percent of East Timor's annual coffee harvest is purchased by cooperatives established through USAID financing and technical assistance and 18,000 families-approximately 10% of the total population-benefit directly from the CCT program. In FY 2002 and FY 2003 the project will further expand the number of farmers participating in coffee cooperatives.

Through expanded training and mentoring activities, USAID will focus on developing East Timorese capacity to assume overall management of the project, a priority reflected in the Agency goal supporting education and training. The project will also continue to diversify beyond coffee into other high-value crops to increase farmers' income and reduce reliance on a single product. The project has established clinics to provide basic health services to coffee farmers and their families, which are supported through a portion of the coffee profits. These clinics, the only source of quality health care in many rural areas, employ over 70 Timorese medical personnel. The project plans to add more health clinics.

USAID's Office of Transition Initiatives (OTI) activities focus on key gaps in the economic recovery of East Timor and regions in most need of efforts to promote stability. These interventions include targeted grants that support a greater diversification of income sources and in sectors that have the greatest potential. Also, OTI is assisting the East Timorese in key policy analysis that are critical to economic revitalization and independence.

As the East Timorese government takes shape in the coming years, USAID may extend its economic revitalization activities to provide macroeconomic policy assistance. As interest in this area is high, any new activities would be closely coordinated with other donors and be responsive to specific requests from the government.

Democratic Development. USAID's assistance program for East Timor's nascent post-conflict democracy focuses on four areas: new legislative and executive bodies at the national and local level; the justice sector; local and national-level civil society; and the media. Following on assistance to the Constituent Assembly elections and constitutional drafting process, USAID anticipates providing additional assistance to the newly elected executive and legislative branches in establishing democratic institutions. To support the development of the rule of law in East Timor, USAID will focus on training and advising judges, prosecutors, investigators, defenders, and court officials. Support for NGO advocacy at local and national levels and for effective media will help ensure that mechanisms for two-way communication between Timorese leaders and the public continue, especially for the next few critical years. Through its OTI and Mission programs, USAID implements activities that support media development, rule of law, the Serious Crimes Unit, and pilot projects in community policing and civilian-military relations.

ONGOING PROGRAMS FOR WHICH NO FY 2002 OR FY 2003 FUNDING IS REQUESTED: The USAID program in East Timor includes the following objectives for which USAID is not requesting new funds, but is continuing to expend funds already appropriated.

OTHER PROGRAM ELEMENTS: A rule of law program, managed by USAID's Bureau for Democracy, Conflict, and Humanitarian Assistance, has provided support to the judiciary, particularly in regard to the establishment of the Serious Crimes Unit and training for judges and public defenders. These activities will wind down in FY 2002 and USAID will develop follow-on rule of law activities.

OTHER DONORS: Coordination among donors in East Timor is good, with all donors participating in twice-yearly coordination meetings and all resident donors participating in monthly coordination meetings. The United Nations is expected to design a successor mission to the U. N. Transitional Administration in East Timor (UNTAET) that will remain in East Timor after independence. Donors support two trust funds-a World Bank-administered trust fund (TFET), in partnership with the Asian Development Bank (ADB), and a Consolidated Fund for East Timor (CFET), administered by UNTAET for the administrative costs of government and to strengthen the capacity of the Timorese elected government. The International Monetary Fund, World Bank, and ADB are engaged in the management of economic policy as well as the development of broad strategic objectives. Major bilateral donors include Japan, Portugal, and Australia.

Program Data Sheets

• 472-001  Revitalization of the Local Economy
• 472-003  Democratic Development Strengthened

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