A. The Planning Process: Progress Thus Far

Prior to independence on 20 May 2002, Timor-Leste’s Second Transitional Government began to formulate the country’s first National Development Plan (NDP). Eight Ministerial Working Groups in areas such as poverty reduction and rural and regional development, human development, agriculture and infrastructure prepared the Plan. They drew upon the results of the Countrywide Consultation, in which more than 38,000 citizens from all walks of life spread in all parts of the country were asked to express their vision for the country to the year 2020 and identify their priorities and development needs. The Working Groups recognized that the people of Timor-Leste needed virtually everything and incorporated a wide range of strategies, policies, programs and actions to address their needs during the five-year Plan period (2002/03 to 2006/07) within a twenty-year perspective.

The Plan incorporates the vision (see Box 1) and set of inter-related development goals and priorities of the people of Timor-Leste, and specified a number of strategies, policies, laws, regulations, programs, projects and activities. It also highlights the key constraints on the attainment of these goals and vision, and provides performance indicators through which progress can be assessed. The Plan was finalized in early May 2002 and adopted by the Parliament after independence.

Since its formulation, the NDP has become the basis for the country’s national development and budgeting process. At the recent semi-annual Meetings with Development Partners, in May and December 2002, representatives of all external Partners (bilateral and multilateral donors, UN agencies and others) commented favourably on the NDP as the basis for Timor-Leste’s development.

The Plan gave hope to the people about their future as well as that of their children and raised expectations. It recognized the likely direct and indirect adverse impacts of the reduction of the international presence due to the scale-down of the UN operations in mid-2002 on the demand for goods and services and employment. The unemployment rate was estimated to be of the order of about 17%. The economy was estimated to contract by about 4.8% in 2002 and 6.8% in 2003 and recover somewhat (by 3.5%) in 2004.²

As the next step in the planning process, the Council of Ministers requested that all ministries prepare and submit Annual Action Plans (AAPs) and Quarterly Reporting Matrices (QRMs) for their Programs and Projects, for the first year of Plan implementation. The aim of this exercise was to link the programs in the Annual Budget for FY03³ with the goals and objectives of the NDP.

To prepare the ministries for drafting their AAPs and QRMs, staff from the Planning and External Assistance Management Division (PEAMD) and the Budget Division (BD) of MPF, together with external facilitators and trainers provided workshop sessions in July and August 2002.⁴ These workshops introduced the formats for AAPs and QRMs, and advised lead officials and focal persons in the ministries on the provision of the necessary material and data required for their completion.

During August and September 2002, PEAMD consultants and staff worked intensively with Ministry focal persons on their AAPs and QRMs, providing written recommendations for improvements. Individual assistance was given to ministries, with consultants spending time on areas such as performance targets. Additional workshops were held in September, focusing in particular on outputs, benchmarks and indicators. Reports from these sessions indicated a high degree of involvement by Ministry officials, and progress in building capacity within ministries for the drafting of future programs.

Following this training, ministries submitted completed AAPs and QRMs to PEAMD. Staff in PEAMD, working with international consultants, then assessed these documents. Comments and recommendations were provided to Ministry focal persons, who then undertook revisions, which were finalized and submitted to the Council of Ministers.

B. Preliminary Results of Plan Monitoring

Based on the reporting system developed through the use of AAPs and QRMs, the Government, through PEAMD, MPF and individual ministries, has been able to monitor plan implementation during the first six months of the first year of NDP. Some 742 activities were monitored of which 44 actions were included in the Transition Support Program⁵. The results of the first five months of this monitoring were presented to the December 2002 Meeting with Development Partners.

In summary, monitoring indicated that there had been some early successes in a number of sectors. In education, for example, primary school enrolments increased, particularly for girls, and for the poorest groups in the villages. In health, targets for restoring the public health network and drafting a national health policy framework were met. In agriculture, programs were set in place to increase crop cultivation, and to meet the particular needs of the poorer upland areas, especially in the center of the country. In infrastructure, a comprehensive set of programs was initiated, in areas such as water supply and sanitation, roads, bridges, and flood control. Additionally, the Government developed a range of new programs, notably for improved governance.

Given Timor-Leste’s conditions, however, it rapidly became apparent that there were crucial constraints on development. For example, the Government inherited a power sector that was technologically inadequate, with no serious means for cost recovery. A judicial system had to be built, virtually from nothing. Capacity building through the funding of advisers to provide expertise to crucial posts in government and public service developed very slowly⁶. In several areas, budgets were under-spent due to limited capacity and the somewhat complex procurement and other regulations.

These developments should be seen in the context of the transfer of governance from the United Nations Transitional Administration in East Timor (UNTAET) to the National Government in May 2002, and the withdrawal of the substantial administrative, technical and other support provided by UNTAET to the Government. Recruitment of international advisers for the 100 stability positions and the 200 development positions to augment the capacity of the Timorese staff was slow at best. Thus, by 01 July 2002, only about a third of the 100 stability positions were filled largely through continuation of some international advisers that served under UNTAET. The progress was less encouraging on securing the resources and filling the 200 development positions.

Assisted by the Brettonwoods institutions (IMF and World Bank), Timor-Leste adopted a Twenty-first Century fiscal system with checks and controls that would ensure transparency and accountability, especially in such areas as procurement. While this is commendable, the system has been beyond the capacity of the Timorese officials and required the retention of international advisers in some line management positions in MPF. Support to line ministries and agencies in such areas as procurement (e.g. explaining the procurement guidelines, assistance including providing necessary information on ‘specifications” for such items as equipment and supplies and in tendering and tender evaluation) proved inadequate, although some international advisers were provided in these areas.

Notwithstanding, the Timorese officials, most of whom lacked any experience in governance, did manage to get the government machinery moving and began to implement the Plan. The performance during the first eight months of FY03, measured in terms of budget execution, albeit lower than the pro-rata target, is encouraging. In fact, budget execution during FY01 and FY02 under UNTAET was also lower than expected. Overall budget execution by the National Government in the first eight months was about 56% as compared to a pro-rata target of 67%. This is commendable for a nascent Government facing significant capacity problems and other constraints.

C. Lessons from Plan Implementation: Planning Gaps and the Need to Prioritise

Government ministries and agencies drew up their Annual Action Plans (AAPs) for the first year of implementation of the Plan. During the preparation of the AAPs, it became clear that some activities specified in the NDP either did not indicate or there was some ambiguity about which division or agency was to be responsible for implementing the activities (e.g. regional development, rural development, job creation, developing Tetun and introducing Portuguese language), while in other cases, some divisions and agencies established did not have activities specified for them in the NDP (e.g. for some Divisions in the Ministry of Justice and the Timor Sea Office). In mid-January 2003, the Council of Ministers reviewed the sector chapters of the NDP in general and the chapters on “Political Development, Foreign Relations, Defence and Security” and “Poverty Reduction and Rural and Regional Development” in particular, and assigned responsibility for implementation of the activities to specific ministries and agencies.

Implementing the NDP during the first six months also made it clear that there were important gaps in programs and activities, notably in areas such as water resources, infrastructure development, literacy, and technical and vocational education. While capacity building including the establishment and/or strengthening of government institutions and civil servants received considerable attention, delivery of services to the people was lagging.

Also, employment, especially in the urban areas and among youth, declined precipitously in the latter half of 2002 after withdrawal of a significant proportion of the UN personnel. The country is facing difficulties in attracting foreign direct investment, and in rapidly creating an enabling environment for private sector development. Also, the Government has not yet been able to address adequately the provision of social services for vulnerable groups. In general, delivery of services has not expanded to meet the high expectations of the people due to various factors that included (i) capacity limitations and technical difficulties in putting in place the necessary legislation and regulations supporting good governance, (ii) time absorbed in setting up the administrative and service delivery systems, and (iii) lack of prioritization and sequencing of the activities in the NDP.

Early on, the Government realized some of the constraints and began in October 2002 to see the need to refocus the development efforts on a limited number of priority activities. The events of 4 December 2002 added urgency to address the immediate needs of the people through tangible delivery of goods and services that are visible to the people.

D. Immediate Priorities and Stability program

In the semi-annual meeting with Development Partners in December 2002, the Prime Minister alluded to the need to address the urgent needs of the people and indicated the types of priorities around which the Government intended to focus its efforts in the short-term. In January 2003, the Council of Ministers refined the immediate priorities taking into account the feedback from the people in both the urban and rural areas. A tentative list of immediate priorities was shared with Development Partners in a meeting on 21 January 2002. The suggestions emerging from the Partners were taken into account in finalizing the immediate priorities, which were approved by the Council of Ministers on 22 January 2003.

Elaborating on the immediate priorities, and in consultation with key Ministers and other stakeholders, the Stability Program was developed and presented in a document accompanying the Road Map, focusing on specific areas to be taken into account in program prioritisation. This was intended to ensure focus by the ministries on immediate improvements in service delivery to the people for poverty reduction and rejuvenation of the economy. The specific immediate priority areas include:

a. The Governance area where the Government aims to:

• ? Strengthen the administrative structures of the State and legitimise the local authorities beginning with the election of Chefes de Suco so as to enable them to address local priorities;

• ? Strengthen the justice system including both formal and customary systems aiming at improving the provision of judicial services, through increasing the number of jurists, and enhancing the quality and delivery of services including provision of adequate legal assistance;

• ? Strengthen the capacities of security involving support to the Timor-Leste Police Force (PNTL) and Defence Force (FDTL) as well as mobilising and organising the local communities for self-defence;

b. In the Stability area, the Government aims to:

• ? Encourage job creation - especially for youth and veterans. This would include expansion of vocational training in general and in particular to promote integration of the disabled people in the development process. Further, it would involve formulating a national policy on employment linking relevant ministries and public and private investments;

c. In the Development area, the Government aims to:

• ? Support the development of the agriculture sector, ensuring food security and enhancing access to markets through the

  • Family (farming) sector

  • Cooperative sector

  • Private sector, and in particular small and medium enterprises

  • Private sector with the state’s participation such as through joint ventures;

• ? Develop trade through cooperatives and private sector via

  • Promotion of domestic trade

  • Import of basic products, and

  • Export of local products such as cumin and copra;

• ? Improve educational access, particularly to primary education, in both public and other schools as well as requiring higher quality in all levels of education; and

• ? Promote health through extension of the mobile clinics and delivery of services to the remote areas through the implementation of the public health system.

In prioritization and sequencing, ministries had been asked to take into account the immediate priorities approved by the Council of Ministers on 22 January 2003. Further, in assessing their programs, ministries were requested to ensure that criteria for incorporation of the programs included:

• ? Addressing at least one of the immediate priority areas in governance, stability and/or development; and

• ? Generating tangible benefits through improved delivery of services.

Additionally, ministries were reminded of their continuing overall objectives to:

• ? Justify their programs in relation to medium and long-term NDP priorities;

• ? Promote sustainability - both fiscally and in development terms; and

• ? Pursue strategies for poverty reduction and economic growth.

E. Prioritization and Sequencing

During the first quarter of calendar 2003, the Government has embarked on a process of readjustment in NDP implementation. The process drew upon the experiences in implementing programs in the first half of the first year of the NDP. Also, it took into account the imperatives to deliver urgently needed services to the people as indicated by the immediate priorities. The process entailed prioritization and sequencing of the development programs for the remaining four years of the Plan period (FY04 to FY07). This has involved both the Council of Ministers and individual ministries. It included ranking of the programs in order of priority, and planning the sequenced introduction and implementation of these programs. Ministries have examined their programs and identified actions that could contribute tangible results, in terms of meeting requirements of the immediate priorities, and filling gaps in existing service provision.

In the prioritisation of their programs for the remaining four years of the Plan, ministries were made aware of the financial resources likely to be made available from the CFET budget, TFET,⁷ and Bilateral and Multilateral sources, for the remaining years of the Plan period (i.e. FY04 to FY07). The latter were outlined in assessments of forward estimates of allocations for the ministries provided by the Budget Division in MPF.

Prioritisation was influenced by the experiences during the first half of the first year of NDP implementation and the need to address the immediate priorities approved by the Council of Ministers on 22 January 2003. Programs to meet the immediate priorities are articulated in detail in the Stability Program, which will be implemented within the next eighteen months. The Stability Program is presented in Annex 2.

F. Process Dimensions of Prioritisation and Sequencing

In prioritisation and sequencing, ministries were assisted by some Development Partners (UNDP, UNICEF, World Bank, AusAid and USAID) mobilising technical specialists and facilitators to support key ministries in the prioritization and sequencing process. An international consultant (or in the case of larger ministries, two consultants) was assigned to work with senior staff and focal persons in each ministry to advise and oversee the process. This was accompanied by a series of workshops, held during February 2003. The workshop presentations outlined the proposals for prioritisation and sequencing of programs. The trainers familiarised the participants with the criteria and formats for prioritisation, and helped the latter to relate these to budget submissions for FY04.

The prioritization and sequencing of activities was guided by several criteria. They included such aspects as (i) importance of the activity for improved service delivery and the demand for the service by the people (clients), (ii) when the service is needed (e.g. now, next year or four years from now), (iii) capacity of the ministry or agency to deliver the service and need for technical assistance, if any, (iv) sustainability of the activity or facility, (v) linkages with and involvement of other ministries, civil society organizations, communities and the private sector, (vi) whether Government involvement would encourage or discourage similar activities by other actors, and (vii) whether deferring the implementation of the activity to future years would improve the benefit streams. The ministries and agencies took these criteria seriously and applied them as much as possible in the prioritisation and sequencing of their programs. Some ministries achieved outstanding results; some others produced average outcomes, while a few encountered difficulties in applying the criteria. Overall, the criteria helped the Government officials to begin to think in strategic terms in assessing their programs.

Additional workshops were held on Annual Action Plans and Quarterly Reporting Matrices, followed by sessions on devising appropriate indicators for monitoring program implementation.

The prioritisation and sequencing exercise, lasting from mid-January to late-March 2003, resulted in the ministries developing a definite set of priority programs for the remaining four years of the NDP. These program priorities were then used as the basis for formulation of AAPs for FY04, feeding into the budget preparation. The final step in the process was the refining of the indicators developed for assessing progress on implementation of the AAPs, and the devising of a set of key development indicators to measure overall Plan implementation in the remaining years of the NDP.

G. Structural Constraints

Prioritisation and Sequencing was carried out with an awareness of the key structural economic problems currently facing Timor-Leste that include (i) widespread poverty, unemployment and underemployment, (ii) dependence on external grant finance, due to substantial trade and budget deficits, (iii) relatively high price levels that are incommensurate with the nation’s level of development, (iv) low levels of skills and productivity, and (v) high levels of illiteracy.

H. Financial Constraints: Budget Parameters

Prioritisation and sequencing was undertaken with also an awareness of the financial constraints imposed by budget parameters. The Council of Ministers has stressed the need to formulate the prioritisation and sequencing based upon a sustainable medium-term fiscal framework that is intended to ameliorate future funding shortages.

Table 1 (see Annex at end of Part One) provides mid-year budget update (MYBU) estimates of CFET⁸ revenue for the six-year period FY02 to FY07, and compares it to MYBU forward estimates of CFET expenditures. Revenues excluding those from First Tranche Petroleum (FTP) but including external budgetary support under the three-year TSP (covering FY03, FY04 and FY05), are indicated to range between $70.6 million and $75.0 million during the first three years, decline there after to $57.5 million in FY06, and recover moderately to $60.3 million in FY07. Revenues with FTP are projected to increase from $71.6 million in FY03 to 96.6 million in FY05, decline to 83.0 million in FY06 and increase slightly to $86.5 million in FY07. CFET expenditures are projected to increase from $74.2 million in FY03 to $80.0 million in FY04, $92.9 million in FY05, $102.4 million in FY06 and reach $105.0 million in FY07. The data indicate an anticipated funding gap between revenues (excluding those from FTP) and expenditures ranging from $5.0 million in FY04, $20.2 million in FY05, $45.1 million in FY06 and $44.7 million in FY07. However, including the FTP revenues, funding gaps of $19.4 million and $18.5 million emerge only in FY06 and FY07 respectively.

It will be necessary to develop a credible strategy for addressing the funding gaps. In pursuit of this aim, ministries were asked by the Council of Ministers to keep their CFET budgets within the limits of two scenarios presented by the Council of Ministers. The Budget Division in MPF developed these scenarios, on the basis both of forward revenue estimates and on the results of discussions with some Development Partners. Ministries were asked, if possible, to keep within the lower scenario (Scenario 2). The two scenarios are summarized in Table 2 (see Annex 1).

Scenario 1 in Table 2 follows existing CFET forward estimates, and includes an increased subsidy for the Power Authority, allowing for the limited progress made so far in revenue collection in FY03. This scenario is not affordable within CFET, given the latest revenue estimates. Scenario 2 is based on a significantly reduced growth in expenditures as compared to Scenario 1, with the expenditure indicated to decline from $74.2 million in FY03 to 72.0 million in FY04 and $73.9 million in FY05, but increase to $80.4 million and $85.0 million respectively in FY06 and FY07.

For the prioritisation and sequencing of their programs, ministries were also requested to consider the CFET allocations given to them, based upon the two scenarios, in providing their cost estimates for the programs. CFET allocations for the ministries, based on the two scenarios, are presented in Tables 3 and 4 (see Annex 1).

Taking these two CFET allocations into the Combined Sources⁹ Budget for the remaining years of the Plan period, ministries were then provided with overall indicative Combined Sources funding envelopes for each of the remaining years of the NDP, highlighting the two scenarios, as outlined in Table 5 (see Annex 1). They were requested to prioritize and sequence their programs with reference to these overall Combined Sources funding envelopes, and to the two alternative CFET scenarios (tables 3 and 4) within these envelopes. The Combined Sources Budget Funding Envelopes are outlined in Table 5 (see Annex 1), together with the high and low case CFET expenditures scenario limits italicized.

Bilateral and Multilateral Funding: Ministries were also asked to refer to current forward estimates for bilateral and multilateral expenditure, since some of these allocations may not match either the immediate priorities of the Stability Program or the medium and long-term development priorities. Current Bilateral and Multilateral allocations are outlined in Table 6 (see Annex 1).

I. The Millennium Development Goals

Recently, the Government has also commenced a process of internalising the Millennium Development Goals (MDGs), to provide a means to assess the nation’s development against that of other countries in the region and elsewhere, and disseminate information on this. This exercise was facilitated by the fact that the goals and objectives of the National Development Plan already overlap to a large extent with those covered by the MDGs.

As is well known, the MDGs comprise eight goals, most of them to be achieved by 2015. Each of the MDGs addresses some key dimensions of poverty and/or sustainable development and the enabling environments at the national and global levels for helping the countries to achieve the goals. The targets and indicators under many of the goals are quantifiable, and provide a global blueprint that can be tailored to specific national conditions. Commensurate with their circumstances, countries and their development partners can develop strategies for both achieving goals and measuring progress in reaching them.

Ministries currently are engaged in the process of assessing their sectoral objectives and aims, in relation to the long-term achievement of the MDGs. This also influenced their process of program prioritisation, by providing comparative human development criteria - particularly in relation to the East Asia and Pacific region - through which the relevance of programs could be assessed further.

J. The Road Map

The Road Map summarises the results of the Prioritisation and sequencing exercise undertaken by the ministries during the first quarter of calendar 2003. It presents the programs that the Government of Timor-Leste has prioritised as most crucial for the development of the country.

The Road Map describes the main development issues faced by each ministry, and outlines the programs they have prioritised to address these issues. It shows the way forward for implementation of the NDP over the next four years (FY04 to FY07).

Within the Road Map document, each ministry has prioritised a set of programs, and has sequenced their implementation for the remaining years of the NDP. It provides estimates of total funding required to implement the programs annually over the four-year period. Expenditure estimates are provided by Ministry for each individual program, and for each year of its implementation in Annex 3.

The Government will utilise the Road Map as a basis for its Policy Dialogue with the Development Partners and expects the latter to use the Road Map in their funding decisions and the devising of their country assistance strategies for Timor-Leste.

In particular, the programs and their estimated costs specified in the Road Map will be extremely useful in the discussions between the Government and Development Partners and in the decisions on which programs the Development Partners wish to support during the next four years (FY04 to FY07).

K. NDP, Stability Program and Road Map

The links and overlaps between the National Development Plan, the Stability Program and the Road Map are illustrated in Figures 1 to 3.

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Illustration of NDP and Gaps

Citation: IMF Staff Country Reports 2005, 247; 10.5089/9781451837315.002.A004

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Illustration of Overlaps between NDP, Gaps and Road Map

Citation: IMF Staff Country Reports 2005, 247; 10.5089/9781451837315.002.A004

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Illustration of Overlaps between NDP, Gaps, Road Map and Stability Program

Citation: IMF Staff Country Reports 2005, 247; 10.5089/9781451837315.002.A004

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A. Ministry of Agriculture, Forestry and Fisheries

The agricultural sector dominates Timor-Leste’s economy. It contributes 21% of GDP, and is the main source of income in 94% of villages. It provides 80% of the food and subsistence requirements of rural households.

The goals of the Ministry of Agriculture, Forestry and Fisheries (MAFF) are intrinsically linked with NDP priorities, to achieve food security, poverty reduction, rural employment and agricultural diversification. These are also essential elements of the Stability Program. Additionally, the Ministry’s programs have significant linkages with programs in other sectors including infrastructure, education, natural resources management, and commerce and industry.

It is important to recall that the CFET allocations to the agricultural sector (i.e. MAFF) are modest as compared to those provided through TFET and bilateral and multilateral sources. For example, for FY03, MAFF’s Combined Resources Budget was $25.3 million, of which CFET allocation comprised only $1.4 million. MAFF prioritised its programs in relation to the requirements of the prioritisation and sequencing exercise, but also added to this programs and projects based on community needs as well as programs (to be) funded under TFET and other bilateral and multilateral sources in the agricultural sector.

MAFF has prioritised and ranked its programs in a systematic manner adhering to the criteria specified for prioritization and sequencing. The programs are presented in Annex 3. They are sequenced over the remaining four years of the Plan period, with estimated costs for each program for each year. The priority programs of MAFF fall in the broad areas of (i) policy development, (ii) development of irrigation including community irrigation and water user associations, (iii) construction of feeder roads, (iv) development of research and extension capabilities, (v) inputs supply and support for food crops production, (vi) improving storage, processing and marketing of food crops including better utilisation of coconut for, among others, edible oil extraction, (vii) development of commercial and industrial crops including replanting of coffee and coconut and encouraging private sector to establish oil palm as appropriate, (viii) fisheries legislation and licensing and promoting off-shore fisheries through foreign investments, (ix) forestry regulation and development including forest replanting and protection of watersheds, (x) establishing and implementing revolving credit systems and training youth for managing co-operatives in sucos and postos, (xi) Promoting cattle rearing and co-operative dairying, and (xii) examining trade and tariff issues affecting rice and other important crops. Many of the activities will be carried out in cooperation and/or coordination with civil society organisations including the Church and development partners.

The Ministry requires $38.8 million to implement its programs during the remaining four years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	25.3	12.4	13.2	8.9	8.3	42.8
Proposed P and S Expenditure		17.7	9.5	6.6	5.0	38.8
CFET Expenditure (scenario2)	1.4	1.3	1.5	1.5	1.6	5.9
External Financing sought		16.4	8	5.1	3.4	32.9

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	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	25.3	12.4	13.2	8.9	8.3	42.8
Proposed P and S Expenditure		17.7	9.5	6.6	5.0	38.8
CFET Expenditure (scenario2)	1.4	1.3	1.5	1.5	1.6	5.9
External Financing sought		16.4	8	5.1	3.4	32.9

B. Ministry of Development and Environment

Within the Ministry of Development and Environment (MDE), the prioritisation and sequencing exercise resulted in several changes, both to existing programs and to their sequencing. Individual matrices were prepared for the Divisions of Tourism, Investment and Environment and for the Directorate of Natural and Mineral Resources.

In addition to prioritisation of the programs, the Ministry also discussed a series of possible future actions, which could improve the enabling environment for the private sector. These helped them to develop a framework for establishing priorities. The actions include (i) enactment of company and investment laws, after appropriate public consultation, (ii) increased donor assistance to advise on economic policy and private sector development, (iii) establishment of an internationally staffed business promotion centre, and (iv) exploration of opportunities for backward linkages to offshore investments from companies investing in oil and gas operations.

The Ministry’s main priority programs/projects by Divisions are as follows:

In the Division of Tourism:

• ? Website development for Tourism Promotion; and

• ? Legal and Regulatory Framework for Tourism.

In the Division of Investment:

• ? Production of Investment Literature including an Investor Information Kit;

• ? Organisation of Investment Forums; and

• ? Feasibility Studies for Investment Sectors.

In the Environment Division:

• ? Establishment of Environmental Impact Assessment (EIA) Regulations and Pollution monitoring and control regulations; and

• ? Formulation of a National Environment Policy.

In the Directorate of Natural and Mineral Resources:

• ? Develop a core of 20 Highly-Skilled Oil and Gas Professionals; and

• ? Formulation of Mining and Petroleum Laws.

Details of the Ministry’s programs and their sequencing are outlined in Annex 3, together with estimated costs for each program, for each of the remaining four years of NDP implementation.

The Ministry requires $ 3,210,682 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	7.9	2.4	1.5	1.5	1.5	6.9
Proposed P and S Expenditure		1.5	0.5	0.5	0.4	3.2
CFET Expenditure(scenario2)	0.5	0.4	0.4	0.4	0.5	1.7
External Financing sought		1.1	0.1	0.1	-0.1	1.5

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	7.9	2.4	1.5	1.5	1.5	6.9
Proposed P and S Expenditure		1.5	0.5	0.5	0.4	3.2
CFET Expenditure(scenario2)	0.5	0.4	0.4	0.4	0.5	1.7
External Financing sought		1.1	0.1	0.1	-0.1	1.5

C. Ministry of Education, Youth, Culture and Sport

The programs implemented by the Ministry of Education, Youth, Culture and Sport (MECYS) are crucial in meeting the aims of the NDP, particularly in the promotion of poverty reduction. In the Countrywide Consultation, a majority Timor-Leste’s population consulted ranked education as its number one priority among the top three priorities for the country.

The Combined Sources budget allocations for the Ministry are the highest of any of the ministries, for each of the remaining years of NDP implementation. About a quarter of the CFET budget is allocated to MECYS for education. Similarly, more than a fifth of the projected bilateral aid from FY02 to FY06 is for education, as are one-fifth of the TFET resources.

The Ministry’s current general priority requirements are to (i) build more primary and secondary schools to achieve universal basic education, (ii) improve the quality of education through teacher development and curriculum and textbook development, and (iii) strengthen the Ministry’s capacity to plan and manage the provision of education.

Thorough rigorous prioritisation and sequencing, the Ministry identified the most important gaps in the strategies and programs presented in the NDP. Building on this, they decided on program activities to be commenced during FY04 and subsequent years of the Plan period.

The Ministry was concerned particularly with the mechanisms of service delivery for the main levels of education–at pe-primary, primary, junior and senior secondary levels, and technical and vocational education. It has also become concerned in recent months, at the low levels of execution of the Ministry’s FY03 budget, particularly in the goods & services and capital development areas.

In discussions with staff through workshops and meetings, Department Directors in MECYS produced a sequencing of their priority programs with estimated costs. They indicated the level of priority for each of the activities in their area, the year they should commence, and an indicative cost for the activity in the medium-term.

The Ministry’s proposed expenditures of $53.5 million for FY04 are somewhat above the Combined Sources Indicative Envelope of $45.8 million, but are below the latter for subsequent years, notably in FY07. This reflects the aim of the Ministry to focus expenditures on improving service delivery in the next two years. The Ministry’s priority programs for the remaining Plan period cover the broad areas of (i) managing and delivering education including at early childhood, primary, junior secondary and secondary levels as well as technical and vocational education, (ii) managing and delivering teacher training, (iii) managing and administering the Ministry’s functions at the central and district levels, (iv) developing an Education Management Information System (EMIS), (v) implementing the literacy program, (vi) development of textbooks and teaching materials, and (vii) implementation of cultural, youth and sports programs.

The Ministry has selected a number of programs within the above areas on which it intends to focus in FY04. This emphasis in sequencing reflects the Ministry’s concern to improve educational delivery in the short-term. The programs include (i) design and introduction of an information campaign on the importance of schooling, (ii) implementation of measures to reduce school drop-out and repetition rates, (iii) introduction of a Teaching Diploma and teacher, headmaster and educational manager training, (iv) language of instruction development (Tetun and Portuguese), (v) curriculum review and development including rehabilitation of the Institute of Continuing Education and strengthening its capacity, (vi) building the capacity of the Ministry for policy formulation, planning and project development, (vii) improving school quality through the Fundamental School Quality program, (viii) literacy campaign, (ix) training and structural support for youth employment, and (x) structuring and capacity building for sports institutions.

Church, other private and community schools, which account for more than a fifth of all schools in the country, play an important role in the provision of primary and secondary education. In spite of the significant expansion of public schools visualised, it would be difficult for MECYS to meet the exponentially increasing demand for schooling brought about by the population dynamics.¹¹ Church, other private and community schools will continue to be important in delivery of education for the foreseeable future. Accordingly, the Ministry’s programs incorporate continued support to Church, other private and community schools.

Details of the Ministry’s programs and their sequencing are outlined in Annex 3, together with estimated costs for each program, for each of the remaining years of NDP implementation.

The Ministry requires $194.9 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	45.8	39.4	33.9	33.7	33.2	186
Proposed P and S Expenditure		53.5	49.3	46.7	45.4	194.9
CFET Expenditure (scenario2)	18.3	16.2	17.9	18.8	19.5	96.4
External Financing sought		37.3	31.4	27.9	25.9	98.5

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	45.8	39.4	33.9	33.7	33.2	186
Proposed P and S Expenditure		53.5	49.3	46.7	45.4	194.9
CFET Expenditure (scenario2)	18.3	16.2	17.9	18.8	19.5	96.4
External Financing sought		37.3	31.4	27.9	25.9	98.5

D. Ministry of Foreign Affairs and Cooperation

The Ministry of Foreign Affairs and Cooperation (MFAC) has identified nine sub-programs, corresponding to its nine organisational divisions. Within these, areas are prioritised and sequenced for implementation in the remaining years of the NDP. The main areas/activities are (i) establishing the Office of the Director General, (ii) provision of policy advice to the Minster’s Office, (iii) management of the Ministry, (iv) establishing three Embassies with appropriate support facilities, (v) support for participation in international events, (vi) regional capacity building, (vii) development of Protocol Guidelines, (viii) completion of international treaties and national legislation ratifying these treaties, (ix) finalising country agreements with Development Partners, (x) strengthening the capacity of the Ministry, and (xi) finance, administration and human resources management.

Details of these areas are presented in Annex 3, where the Ministry’s programs are sequenced over the remaining Plan years, together with sources of funding.

Much of the Ministry’s work will be funded from grants from external Partners including international organisations, for particular activities fundamental to the Ministry’s work, such as attendance at international events and Embassy support.

The Ministry requires $US 11.6 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	1.2	1.1	1.1	1.1	1.1	4.4
Proposed P and S Expenditure		4.1	3.8	1.8	1.9	11.6
CFET Expenditure(scenario2)	1.2	1.1.	1.0	1.0	1.1	4.2
External Financing sought		3	2.8	0.8	0.8	7.4

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	1.2	1.1	1.1	1.1	1.1	4.4
Proposed P and S Expenditure		4.1	3.8	1.8	1.9	11.6
CFET Expenditure(scenario2)	1.2	1.1.	1.0	1.0	1.1	4.2
External Financing sought		3	2.8	0.8	0.8	7.4

E. Ministry of Health

Health provision is crucial for poverty reduction. Health was ranked second only to education in importance by the people of Timor-Leste in the Countrywide Consultation. In its implementation of NDP, the Ministry of Health has pursued several key strategies. Most notable among these are (i) emphasis on preventive and promotive health care, provided close to the community, with an additional aim of limiting expenditure on health care, (ii) adoption of primary health care policies that enable increased accessibility and coverage, and (iii) adoption of policies for integrating the health care system with other sectors. The strategies have been defined and further elaborated in East Timor’s Health Policy Framework, published by the Ministry in June 2002.

In particular, the Framework defines a basic package of services for delivery within the districts. It outlines policies to decentralise the health service through more effective participation by local health workers and communities in the development and implementation of health programs. These two policy aims have been important for the Ministry in assessing its programs for prioritisation and sequencing. Monitoring of the activities in the FY03 AAPs including those covered under the Transition Support Program has also highlighted the importance of extending health care including through mobile clinics, particularly in poorer and more remote areas.

In prioritisation of its programs, the Ministry has paid attention particularly to the objective of bringing health services closer to the population. It has also included proposals for improving both basic training for community health workers and the mobility of health personnel to facilitate service delivery to remote areas, which is one of the immediate priorities. Additionally, the Ministry has focused on identifying gaps in its programs within the framework of the NDP.

In its prioritisation for the next four years, the Ministry will be implementing programs on (i) child health including immunisation, nutrition, growth monitoring, micronutrient distribution, breast-feeding and nutritional education, (ii) maternal health including antenatal care and safe motherhood, (iii) reproductive health, (iv) health promotion, with particular attention to schools, (v) control of communicable diseases including malaria and treatment of tuberculosis and diarrhoea, (vi) environmental health promotion, (vii) drugs and medical supplies, (vi) laboratory services, (vii) rehabilitative services, (viii) establishment of a Health Information System, and (ix) support for logistics and finance administration. Given their importance, these programs will continue throughout the remaining four years of the Plan period.

Details of these programs and their sequencing are outlined in Annex 3, together with estimated costs for each program, for each of the remaining years of NDP implementation.

The Health Sector requires $83.8 million to implement its programs for the remaining four years of the NDP, divided into the following indicative amounts, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	30.2	16.1	10.7	15.4	15.9	58.1
Proposed P and S Expenditure		24.6	28.6	15.3	15.2	83.8
CFET Expenditure(scenario2)	7.1	8.7	9.5	15.2	15.7	49.9
External Financing sought		15.9	19.1	0.1	-0.5	33.9

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	30.2	16.1	10.7	15.4	15.9	58.1
Proposed P and S Expenditure		24.6	28.6	15.3	15.2	83.8
CFET Expenditure(scenario2)	7.1	8.7	9.5	15.2	15.7	49.9
External Financing sought		15.9	19.1	0.1	-0.5	33.9

F. Ministry of Interior and State Administration

Following a recent decision by the Council of Ministers, two new ministries have been created - the Ministry of the Interior and the Ministry of State Administration. The responsibilities and programs of the former Ministry of Internal Administration have been divided between these two new ministries.

Consequently, the priorities decided upon by the former Ministry of Internal Affairs have now become priorities in the two new ministries, depending upon which areas of the former Ministerial portfolio have become their respective responsibilities.

Prior to the Ministerial reorganisation, the former Ministry of Internal Administration (MIA) carried out a thorough assessment of its programs in relation to the requirements of the NDP. It identified gaps and focussed on the key issue of service delivery. Further, the Ministry paid attention to the immediate priorities including the need to legitimise the role of the Chefes de Suco and empower functionaries at the sub-national levels.

1. Ministry of Interior

The new Ministry of Interior will be implementing former MIA programs in the areas of (i) Civil Security, (ii) Fire Rescue and Emergency Services, and (iii) National Disaster Management.

Details of these programs and their sequencing are outlined in Annex 3, together with estimated costs for each program, for each of the remaining years of NDP implementation.

The new Ministry of Interior requires US$ 62.1 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars.

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Proposed P and S Expenditure		18.7	13.2	14.8	15.2	62.1

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Proposed P and S Expenditure		18.7	13.2	14.8	15.2	62.1

2. Ministry for State Administration

In the key area of local government administration, the ministry is concerned with improving the quality of its staff through detailed programs of training and capacity -building, and to improve the delivery of services to local communities. In this regard, the enactment of the law on local government and its implementation are considered crucial. This is rated to be a major priority for the Ministry.

Similarly, there is a strong focus on supporting and building the capacity of District Community Development Committees, and enabling local institutions and community-based groups to participate. In the local government area, the priority programs include (i) enactment of the Law on Local Government, specifying the roles and responsibilities of sub-national government administrations, (ii) strengthening the capacity of the Administration of Local Government staff in administration, management, finance and budgeting, (iii) creation and strengthening of institutional mechanisms for coordination of development activities in relatively disadvantaged regions/districts, and (iv) promotion of popular participation in economic, social and political processes, particularly by the poor and vulnerable groups.

These areas will become the main priorities in the portfolio of the new Ministry for State Administration, which will also be implementing the former MIA programs for the Civil Service Academy, Public Service, Government publications including the Gazette, and maintenance and development of the National Archives.

Details of these programs for the new ministry, and their sequencing are outlined in Annex 3, together with estimated costs for each program, for each of the remaining years of NDP implementation.

The Ministry of State Administration requires US$ 30.1 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Proposed P and S Expenditure		11.7	4.1	6.1	8.1	30.1

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Proposed P and S Expenditure		11.7	4.1	6.1	8.1	30.1

3. The Two Ministries Combined

Since neither CFET expenditures nor Combined Sources Indicative Envelopes are available as yet for the two new ministries, their combined P and S Submission, together with their original CFET and Combined Sources envelopes, are presented below.

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	11.9	5.0	4.6	5.0	5.1	19.7
Proposed P and S Expenditure		30.4	17.3	20.9	23.3	92.2
CFET Expenditure(scenario2)	4.3	3.7	4.0	4.4	4.6	16.7
External Financing sought		26.7	13.3	16.5	18.7	75.5

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	11.9	5.0	4.6	5.0	5.1	19.7
Proposed P and S Expenditure		30.4	17.3	20.9	23.3	92.2
CFET Expenditure(scenario2)	4.3	3.7	4.0	4.4	4.6	16.7
External Financing sought		26.7	13.3	16.5	18.7	75.5

The former Ministry of Internal Administration was and the present Ministry of Interior is also responsible for the Timor Leste Police Service (PNTL).

4. Timor Leste Police Service

Considerable time has been spent by Timor Leste Police Service (PNTL) Section Heads in discussing the NDP planning process, with attention particularly to gaps in the programs specified originally in the NDP.

Of particular concern has been a growing realisation of gaps within the main administrative functions of PNTL. Additionally, the Police Service is acutely aware of the need to strengthen its capacity to meet its responsibilities in ensuring security, as indicated in the immediate priorities and elaborated in the Stability Program. These centre not only on regular policing in the community, but also on PNTL’s responsibilities for border patrol and immigration. Also, they focus on the need to improve the response of the Police Force to civilian protest including management of such incidents as exemplified in the riots in Dili on 4 December 2002.

Additional funding is being sought for developing the Field Training Program and to support newly recruited graduates. Assistance is also required to develop a program of specialist training courses in areas such as criminal investigation.

PNTL proposed that its activities for implementation be presented in one program, with six components. Details of their sequencing, sources of funding, and estimated costs, are presented in Annex 3. The prioritised program components are (i) the Police College and providing field, specialist, and management training, (ii) police operations including community policing, criminal investigations and internal security, (iii) administration including human resources development, planning and finance, (iv) establishment of an effective Immigration Service, (v) development and maintenance of the Rapid Intervention Units in Dili and Baucau, and (vi) maintenance of the Border Patrol and Marine Unit.

An outline of these programs and their sequencing is presented in Annex 3, together with estimated costs for each program, for each of the remaining years of NDP implementation.

The PNTL requires US$ 59.4 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	10.0	10.5	10.0	8.7	9.0	38.2
Proposed P and S Expenditure		18.1	12.6	14.1	14.6	59.4
CFET Expenditure(scenario2)	7.8	8.0	8.0	8.2	8.4	24.6
External Financing sought		10.1	4.6	5.9	6.2	34.8

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	10.0	10.5	10.0	8.7	9.0	38.2
Proposed P and S Expenditure		18.1	12.6	14.1	14.6	59.4
CFET Expenditure(scenario2)	7.8	8.0	8.0	8.2	8.4	24.6
External Financing sought		10.1	4.6	5.9	6.2	34.8

At the time of completion and submission of the priority programs by PNTL, the Council of Ministers approved the recruitment, training and equipping of 500 cadets for the Rapid Deployment Group (RDG). The cost of this is estimated to be $5.0 million in FY04 with recurrent costs of $1.0 million per year during the next four years and is incorporated in the proposed P and S expenditure for PNTL.

G. Ministry of Justice

As noted in the Background Document prepared and circulated by the Government to the participants in the December 2002 Meeting with Development Partners, the Ministry of Justice has made some progress in establishing key institutions, notably the courts system, the offices of the Prosecutor General and Public Defender, and a framework for judicial training. Recently, the Superior Council for the Judiciary has also been established. However, severe problems remain. Service delivery is still limited, resulting in substantial delays in the presentation of cases, a large backlog of unresolved cases, inconsistent decision-making, and a limited legitimacy of legal authority.

In its assessment of its programs, the Ministry has paid attention particularly to gaps in NDP implementation, notably in capacity building via recruitment and training. Addressing these needs is also intended to meet the requirements of the immediate priority to strengthen the justice system including both formal and customary systems in order to improve the provision of judicial services, through increasing the number of jurists, and enhancing the quality and delivery of services including provision of adequate legal assistance. Further, it is to cater to improved institutional co-ordination and increased community awareness of laws and legal procedures.

The Ministry has prioritised a set of programs for implementation in the remaining four years of the Plan period. These are presented in Annex 3, with sequencing and indicative funding requirements.

The priority programs are in the following areas:

1. Service Delivery through District Courts, Public Defender’s Office, Office of the Prosecutor-General, Appeals Court, and the Superior Council for the Judiciary. This will include the recruitment of international judges, prosecutors, defence lawyers, court clerks and interpreters, promoting the use of functional registries, and improving internal reporting systems;

2. Improving the Prison system including recruitment of international trainers to train Timorese trainers of Prison Guards, and organising vocational training, work programs and literacy classes for detainees;

3. Capacity building through the Judiciary Training Centre;

4. Framework for legal Consistency through assessment and legislation;

5. Land and Property, Civil Registry, Notary, and Administration; and

6. Strengthening and providing assistance for mediation and resolution mechanisms at national, district, sub-district and community levels.

The Ministry requires $21.5 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	9.2	4.4	3.9	3.8	3.7	15.8
Proposed P and S Expenditure		8.7	4.8	4.4	3.6	21.5
CFET Expenditure(scenario2)	2.2	2.2	2.2	2.2	2.3	8.9
External Financing sought		6.5	2.6	2.2	1.3	12.6

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	9.2	4.4	3.9	3.8	3.7	15.8
Proposed P and S Expenditure		8.7	4.8	4.4	3.6	21.5
CFET Expenditure(scenario2)	2.2	2.2	2.2	2.2	2.3	8.9
External Financing sought		6.5	2.6	2.2	1.3	12.6

H. Ministry of Planning and Finance

For implementation of NDP, the Ministry of Planning and Finance (MPF) has established a framework for sustainable public sector financial management, administration and accountability. The Ministry has eight Divisions: Treasury, Budget, East Timor Revenue Service, Customs, Government Procurement Supply and Inventory, Statistics, Macroeconomic and Taxation Policies, Administration and Information Technology, and Planning and External Assistance Management. Several of these Divisions are proposing new initiatives for funding during the remaining years of the NDP, based upon their implementation experiences during FY03, and taking into consideration the immediate priorities.

In addition to its ongoing functions of budget formulation and management, the Budget Division aims to focus on substantial capacity building activities for national staff, through the provision of on-the-job training, mentoring, short courses, and targeted training in financial management and budget execution.

Similarly, in tandem with its work to oversee and report on the execution of the budget, payroll and maintenance of public accounts, the Treasury is developing systems for mentoring and on-the-job training for local staff.

In addition to its functions of overseeing tax collection and developing the Government’s taxation administration system, the East Timor Revenue Service intends to spend 25% of its budget on developing capacity for Timor Sea taxation officers through attendance at courses, workshops and in-house training.

Similarly, a substantial proportion of the expenditure of the Division of Administration and Information Technology will be devoted to designing and carrying out a needs assessment study and a human resources development plan for strengthening IT provision within the Ministry.

To improve its work in revenue policy and forecasting, the Macroeconomic and Tax Policy Program intends to devote approximately a quarter of its budget to improving local staff knowledge of international best practices.

The Procurement Unit is devoting over half of its planned expenditures for FY04 to revising procurement regulations, in an attempt to improve levels of transparency and competitiveness and increased conformity with international guidelines.

In developing a strategy for wider information gathering by agencies, and for improved coordination and dissemination, the Statistics Department is focusing on the need to develop the National Accounts required by the NDP, both sectorally and in relation to the overall measurement of economic growth and poverty reduction.

The Planning and External Assistance Management Division (PEAMD) performs a crucial role within the Ministry, overseeing and monitoring NDP implementation, mobilising support for the Plan, engaging donors, detailing donor funding, and disseminating information to stakeholders. Its priority programs/program components are particularly important for planning and mobilising resources for Plan implementation. The latter includes notably the establishment and maintenance of an effective data management system to register and facilitate monitoring of all external assistance.

The programs prioritised by the Ministry of Planning and Finance are presented in Annex 3, with sequencing, estimated costs, and indicative sources of funding, for each of the remaining years of NDP implementation.

The Ministry is requesting $ 22.4 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	13.0	20.0	16.0	6.2	6.2	48.4
Proposed P and S Expenditure		6.9	5.2	5.0	5.1	22.4
CFET Expenditure(scenario2)	5.1	3.9	4.1	4.1	4.3	16.4
External Financing sought		3.0	1.1	0.9	0.8	6.0

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	13.0	20.0	16.0	6.2	6.2	48.4
Proposed P and S Expenditure		6.9	5.2	5.0	5.1	22.4
CFET Expenditure(scenario2)	5.1	3.9	4.1	4.1	4.3	16.4
External Financing sought		3.0	1.1	0.9	0.8	6.0

I. Ministry of Transportation, Communications, and Public Works

Within the Ministry of Transportation, Communications, and Public Works (MTCPW), the Department of Water and Public Works aims to provide essential infrastructure to support the economic and social development of Timor-Leste. The Ministry’s rural water supply programs are designed to complement and build on those already included in donor programs supported by development partners, and will focus on building capacity for the sustainability of these schemes. A new initiative within the Department is the provision of models of low-cost bamboo housing, and training packages to communities to build such housing in an attempt to improve the housing/living conditions.

The Ministry’s plans for building, improving and maintaining roads during the next four years are crucial not only for maintaining transport links and communications, but also are important particularly in enhancing market access for farm households. These plans comprise the bulk of its expenditure proposals.

Equally important, however, are its programs for controlling floods and rehabilitation of public buildings for community use. All of these will provide opportunities for employment creation, managed through community involvement.

In addition, the Transport and Communications Department is putting forward larger-scale programs, which are vital both for maintaining transport and communications connections within the country including with the enclave of Oecussi, and Timor-Leste’s links to other countries. Amongst the most important of these are projects to improve postal services.

The priority programs of the Ministry span the areas including (i) rural water and sanitation, with components in institutional and capacity building, (ii) urban water supply and sanitation, (iii) flood control, (iv) road and bridge rehabilitation and improvement, (v) postal services, and (vi) land transport.

Details of these programs and their sequencing are outlined in Annex 3, together with indicative estimated costs for each program, for each of the remaining years of NDP implementation.

The Ministry requires $255.2 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	40.5	31.9	30.1	27.3	25.7	115.0
Proposed P and S Expenditure		68.9	61.7	60.6	63.9	255.2
CFET Expenditure(scenario2)	4.7	6.9	7.1	6.9	7.1	28
External Financing sought		62.0	54.6	53.7	56.8	227.2

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	40.5	31.9	30.1	27.3	25.7	115.0
Proposed P and S Expenditure		68.9	61.7	60.6	63.9	255.2
CFET Expenditure(scenario2)	4.7	6.9	7.1	6.9	7.1	28
External Financing sought		62.0	54.6	53.7	56.8	227.2

J. Secretary of State for Defence

The Secretary of State for Defence (SSD) has undertaken a thorough review of its programs, particularly in relation to the requirements of the NDP and the immediate priorities. It has put forward three programs, all of which it considers to be of equal priority. These are (i) Defence Organisation, with components covering recruitment and training, (ii) procurement of equipment and supplies, and (iii) facilities development and maintenance.

Details of these programs and their estimated sequenced costings are outlined in Annex 3. The first program, Defence Organisation, is the overarching program in the effort to improve Timor-Leste’s defence. The other two programs underpin this effort.

Sequencing is particularly important in the implementation of SSD’s programs. For example, current facilities for the Defence Force of Timor-Leste (FDTL) are inadequate, and the strategic location and training of battalions is dependent on the construction and refurbishment of buildings, planned during FY04.

Total expenditure proposed by SSD for FY04 is $10.6 million as compared to the current indicative Combined Sources Funding Envelope of $8.4 million. However, for subsequent years, proposed expenditures are within indicative envelopes.

The Secretary of State for Defence requires $29.1 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	6.6	8.4	7.8	7.9	8.0	32.1
Proposed P and S Expenditure		8.7	6.8	6.8	6.8	29.1
CFET Expenditure(scenario2)	4.4	6.0	6.1	6.1	6.3	24.5
External Financing sought		2.7	0.7	0.7	0.5	4.6

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	6.6	8.4	7.8	7.9	8.0	32.1
Proposed P and S Expenditure		8.7	6.8	6.8	6.8	29.1
CFET Expenditure(scenario2)	4.4	6.0	6.1	6.1	6.3	24.5
External Financing sought		2.7	0.7	0.7	0.5	4.6

K. Secretary of State for Labour and Solidarity

The Secretary of State for Labour and Solidarity (SSLS) has undertaken a detailed review of its programs implemented within the NDP, noting in particular gaps in its provision, and the requirements of the immediate priorities. The latter is particularly important, in that Labour and Solidarity has been developing programs in important areas such as vocational training including the setting up and strengthening of training centers, the development of a labour market database, and the dissemination of information on employment opportunities.

In other crucial areas such as the provision of social services for children and the disabled, programs have been redefined to improve service delivery. The women’s unit is placing greater emphasis in its programs on the provision of skills training to women for setting up small businesses.

The Secretary of State’s prioritised and sequenced programs reflect the results of its program review, with a strong emphasis on the funding requirements for assisting the veterans. In each of the remaining years of NDP implementation, almost one-half of the expenditures will be devoted to veterans’ programs.

The priority programs fall in the areas of (i) Veterans’ Affairs, (ii) employment and skills development, (iii) worker protection and industrial relations, (iv) staff training and skills development, (v) provision of social services for children, (vi) development of the Women’s Unit, (vii) provision of social services for the disabled, and (viii) development of the Emergency and Humanitarian Assistance Unit.

An outline of the programs put forward by the Secretary of State for Labour and Solidarity, together with sources of funding and the expenditure required in each year of NDP implementation are provided in Annex 3.

The Secretariat requires $25.9 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

^*The Combined Sources indicative envelope figures presented in this table contain significant bilateral funds, of approximately US$ 9.5 million annually, provided to the Secretary of State for emergency food distribution.

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope*	10.9	10.3	10.0	10.0	9.2	39.5
Proposed P and S Expenditure		17.2	2.8	2.8	3.0	25.9
CFET Expenditure(scenario2)	0.5	0.4	0.4	0.5	0.5	1.8
External Financing sought		16.8	2.4	2.3	2.5	24.1

^*The Combined Sources indicative envelope figures presented in this table contain significant bilateral funds, of approximately US$ 9.5 million annually, provided to the Secretary of State for emergency food distribution.

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope*	10.9	10.3	10.0	10.0	9.2	39.5
Proposed P and S Expenditure		17.2	2.8	2.8	3.0	25.9
CFET Expenditure(scenario2)	0.5	0.4	0.4	0.5	0.5	1.8
External Financing sought		16.8	2.4	2.3	2.5	24.1

^*The Combined Sources indicative envelope figures presented in this table contain significant bilateral funds, of approximately US$ 9.5 million annually, provided to the Secretary of State for emergency food distribution.

CFET allocations for the Secretary of State are limited, at a projected average of less than $0.5 million for the remaining years of the NDP. Hence, substantial bilateral funding will be required for the implementation of its prioritised programs.

L. Secretary of State for Commerce and Industry

The Secretary of State for Commerce and Industry comprises two Divisions–Industry and Trade. The priorities for each of the Divisions are:

In the Division of Industry:

• ? Regulatory Requirements for Industrial and Economic Zones;

• ? Development Policy Framework for Micro-Finance/Credit for small and medium size enterprises.

In the Division of Trade:

• ? Support for Export-related Industry Inclusion in an Industrial Zone;

• ? Domestic Trade Promotion and Domestic Market Linkages.

An outline of the programs put forward by the Secretary of State for Commerce and Industry, together with sources of funding and the expenditure required in each year of NDP implementation are provided in Annex 3.

The Secretariat requires $ 1,154 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY02-03	FY03-04	FY04-05	FY05-06	FY06-07	Total FYs 04 to 07
Combined Sources Envelope		0.19	0.14	0.17	0.17	0.66
Proposed P and S Expenditure		0.27	0.27	0.29	0.31	1.15
CFET Expenditure(scenario2)		0.1	0.1	0.1	0.2	0.5
External Financing sought		0.17	0.17	0.19	0.11	0.65

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	FY02-03	FY03-04	FY04-05	FY05-06	FY06-07	Total FYs 04 to 07
Combined Sources Envelope		0.19	0.14	0.17	0.17	0.66
Proposed P and S Expenditure		0.27	0.27	0.29	0.31	1.15
CFET Expenditure(scenario2)		0.1	0.1	0.1	0.2	0.5
External Financing sought		0.17	0.17	0.19	0.11	0.65

M. The Office of the President

Following independence, the Government established the President’s Office, funded with resources from the CFET budget. The Office will be implementing two programs for the remaining years of the NDP, centring on the further development of its Secretariat, and on the provision of support for Presidential duties.

In both these areas, a major focus will be on capacity-building. In the Secretariat, there will be a prioritisation of the areas of protocol, the provision of advisers, and information technology support. Details of the programs put forward by the President’s Office, and their sequencing are outlined in Annex 3.

Programs will be funded from CFET and bilateral and multilateral sources. The President’s Office is requesting $ 0.8 million from the CFET budget and additional resources from bilateral and multilateral sources to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	0.4	0.3	0.3	0.3	0.3	1.2
CFET Expenditure(scenario2)	0.4	0.2	0.2	0.2	0.2	0.8
External Financing sought		0.1	0.1	0.1	0.1	0.4

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	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	0.4	0.3	0.3	0.3	0.3	1.2
CFET Expenditure(scenario2)	0.4	0.2	0.2	0.2	0.2	0.8
External Financing sought		0.1	0.1	0.1	0.1	0.4

N. The National Parliament

Resources for the National Parliament cover remuneration of Members of Parliament and funding for the Parliament’s Secretariat. In the programs for the remaining years of NDP implementation, funding is focused primarily on capacity building for improved communication with Government, and for dissemination of Parliamentary activities and decisions.

Outlines of the proposed programs of the Parliament are given in Annex 3, together with indicative estimated costs for each program, for each of the remaining years of NDP implementation. Programs will be funded from CFET and bilateral and multilateral sources.

The Parliament is requesting $9.4 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	3.4	1.0	1.0	1.0	1.0	4.0
Proposed P and S Expenditure		1.2	6.2	1.0	1.0	9.4
CFET Expenditure(scenario2)	0.9	0.8	0.8	0.8	0.8	3.2
External Financing sought		0.4	5.4	0.2	0.2	6.2

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	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Combined Sources Envelope	3.4	1.0	1.0	1.0	1.0	4.0
Proposed P and S Expenditure		1.2	6.2	1.0	1.0	9.4
CFET Expenditure(scenario2)	0.9	0.8	0.8	0.8	0.8	3.2
External Financing sought		0.4	5.4	0.2	0.2	6.2

O. State National Security Service

The formation of the Servico Nacional de Seguranca do Estado (SNSE) was approved in September 2002 (under Organic Law 3/2002). As stated in its prioritisation and sequencing documentation, the objective of the SNSE is to provide early warning of politically motivated violence and other actions detrimental to national security.

Initial funding for the SNSE was provided from the Prime Minister’s Contingency Fund. SNSE is requesting funding for the collection and analysis of information, and for the dissemination of intelligence.

Details of SNSE’s programs and their sequencing are outlined in Annex 3, together with indicative estimated costs for each of the remaining years of NDP implementation. The SNSE requires $ 0.4 million to implement its programs for the remaining years of the NDP, divided into the following indicative amounts for each year, in millions of dollars:

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Proposed P and S Expenditure		0.1	0.1	0.1	0.1	0.4
Combined Sources Envelope
CFET Expenditure(scenario2)

View Table

	FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Proposed P and S Expenditure		0.1	0.1	0.1	0.1	0.4
Combined Sources Envelope
CFET Expenditure(scenario2)

P. Government Structures

The Government Structures Portfolio represents those organisations that are not overseen directly by a Minister or Secretary of State. Their functions are described in detail in the Combined Sources Budget Document (2002-03).

For the prioritisation and sequencing exercise, a number of changes have been made in constituent programs, in relation particularly to observed gaps in NDP implementation, and the immediate priorities. New initiatives are the creation of the Timor Sea Office to provide legal and negotiating advice to the Prime Minister and the Council of Ministers, and the moving of the Capacity Development and Co-ordination Unit into the Prime Minister’s Office. This move reflects the priority given to CDCU’s work in co-ordinating capacity building in the ministries through the appointment of focal persons to deal specifically with capacity building in each ministry and agency (Secretary of State).

The Office for the Promotion of Equality has reorganised its programs to create a more effective approach to gender mainstreaming in policy development through ongoing training in both government institutions and civil society organisations.

Details of the constituent organisations of the government structures, and their sequencing, together with sources of funding, are outlined in Annex 3, together with indicative estimated costs for each of the remaining years of NDP implementation. These are summarised in the following:

CS–Combined Sources Envelope; PS - Proposed P and S Expenditure; and CFT - CFET Expenditure (scenario2)

^*No figures are yet available for CDCU indicative envelopes or CFET expenditure.

Structure		FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Office of the Prime Minister and Council of Ministers	CS	22.3	19.0	14.8	14.8	14.8	63.4
	PS
	CFT		7.0	8.7	8.7	8.7	33.1
Capacity Development Co-ordination Unit (CDCU) *	CS
	PS		30.12	20.05	10.05	0.052	60.27
	CFT
Provedor de Direitos	PS
Humanose Justica	CS
	CFT	0.06	0.05	0.05	0.07	0.07	0.24
Office of the Inspector	CS	0.05	0.37	0.09	0.09	0.09	0.64
General	PS		0.13	0.07	0.07	0.07	0.34
	CFT	0.63	0.05	0.05	0.05	0.05	0.20
Office for the Promotion of	CS	0.29	0.12	0.04	0.04	0.04	0.24
Equality	PS		0.07	0.03	0.03	0.03	0.16
	CFT	0.04	0.04	0.04	0.04	0.04	0.16
Independent Electoral	CS	2.09	0.54	0.64	0.63	0.63	2.44
Commission	PS
	CFT	0.06	0.06	0.06	0.06	0.06	0.24
Banking and Payments	CS	2.22	1.18	0.58	0.54	0.54	2.84
Authority	PS
	CFT	1.08	0.61	0.58	0.54	0.54	2.81
Timor Sea Office	CS
	PS	0.22	0.22	0.22	0.22		0.66
	CFT	0.13		0.24	0.22		0.68

CS–Combined Sources Envelope; PS - Proposed P and S Expenditure; and CFT - CFET Expenditure (scenario2)

^*No figures are yet available for CDCU indicative envelopes or CFET expenditure.

View Table

Structure		FY03	FY04	FY05	FY06	FY07	Total FYs 04 to 07
Office of the Prime Minister and Council of Ministers	CS	22.3	19.0	14.8	14.8	14.8	63.4
	PS
	CFT		7.0	8.7	8.7	8.7	33.1
Capacity Development Co-ordination Unit (CDCU) *	CS
	PS		30.12	20.05	10.05	0.052	60.27
	CFT
Provedor de Direitos	PS
Humanose Justica	CS
	CFT	0.06	0.05	0.05	0.07	0.07	0.24
Office of the Inspector	CS	0.05	0.37	0.09	0.09	0.09	0.64
General	PS		0.13	0.07	0.07	0.07	0.34
	CFT	0.63	0.05	0.05	0.05	0.05	0.20
Office for the Promotion of	CS	0.29	0.12	0.04	0.04	0.04	0.24
Equality	PS		0.07	0.03	0.03	0.03	0.16
	CFT	0.04	0.04	0.04	0.04	0.04	0.16
Independent Electoral	CS	2.09	0.54	0.64	0.63	0.63	2.44
Commission	PS
	CFT	0.06	0.06	0.06	0.06	0.06	0.24
Banking and Payments	CS	2.22	1.18	0.58	0.54	0.54	2.84
Authority	PS
	CFT	1.08	0.61	0.58	0.54	0.54	2.81
Timor Sea Office	CS
	PS	0.22	0.22	0.22	0.22		0.66
	CFT	0.13		0.24	0.22		0.68

CS–Combined Sources Envelope; PS - Proposed P and S Expenditure; and CFT - CFET Expenditure (scenario2)

^*No figures are yet available for CDCU indicative envelopes or CFET expenditure.

Q. The Oecussi Enclave

In addition to the programs prioritised above, the Government is also requesting funding for programs to be implemented in Oecussi, due to the difficulties of its current situation. These are to be implemented during the next eighteen months. The programs are:

• ? Ferry Service;

• ? Communications;

• ? Cattle Raising;

• ? Improving Rice Yields;

• ? Small-Scale Agro-Processing, including improved rice-milling;

• ? Tourism Development;

• ? Bricks and other construction materials to supply to the local market;

• ? Furniture production for the local market;

• ? Development of small-scale industries and services;

• ? Strengthening of new Vocational Training Centre;

• ? Aquaculture;

• ? Production of Eucalyptus oil; and,

• ? Replanting of sandalwood

Total funding required for these activities is estimated at $2.4 million.

The rationale for some of programs and the cost estimates for each of these programs are provided in the Stability Program in Annex 2. These programs have not yet been allocated to the respective ministries.