Regions and Countries

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p. 3 of 5 BACK | NEXT I. Country Strategy II. Current Development Trends and Issues III. Implementation of the Country Strategy and Program IV. Portfolio Management Issues V. Country Performance and Assistance Levels

Country Strategy and Program Update 2006-2008: Democratic Republic of Timor-Leste

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III. Implementation of the Country Strategy and Program

A. Progress in Poverty Reduction

14. The Government and ADB signed a poverty reduction partnership in October 2003, agreeing that ADB assistance would be based on careful analysis and consideration of priority activities to address poverty and the Millennium Development Goals (MDGs). The NDP incorporates a poverty reduction strategy centering on

1. promoting opportunities for the poor;
2. improving their access to basic social services;
3. enhancing security, including reducing vulnerability to shocks, and improving food security; and
4. empowering the poor.

The objectives of the NDP overlap with most of the MDGs; the Government subscribed to the MDGs and submitted an MDG report to the United Nations in February 2004. Baseline poverty data for the NDP, the MDG report, and the first National Human Development Report (2002) came mostly from 2001 national household and suco (village) surveys conducted for the Poverty Assessment Project.⁵

15. The 2001 data remains the most recent comprehensive poverty data available.⁶ However, the pattern, extent, and nature of poverty in Timor-Leste are probably little different to 2001 and as described in the 2005-2006 CSPU. Timor-Leste’s human development index value of 0.421 in 2001 ranked it between Rwanda and Benin. The draft second National Human Development Report assesses poverty against the MDGs as follows:

1. 4% per annum economic growth is the minimum required to achieve targets on eradicating extreme poverty, and stronger policies on food security and more support for mothers are required to achieve targets for underweight children;
2. achieving 100% primary school enrollment by 2015 will require significant additional investment;
3. gender equity targets in primary and junior secondary school enrolments are likely to be achieved but achievement will be difficult for senior secondary school;
4. reducing child mortality to 96 per 1,000 by 2015 is realistically achievable in Timor-Leste;
5. achieving maternal mortality targets and attended births targets will require significant acceleration of current trends;
6. human immunodeficiency virus (HIV) prevalence is low in Timor-Leste, whereas malaria, dengue, and other diseases remain prevalent;
7. measures are not in place to reverse environmental degradation, and the Government must contribute more to achieve water supply and sanitation targets; and
8. annual per capita aid flows to Timor-Leste are decreasing.

B. Progress in the Country Strategy and Program Focus Areas

16. Improved Public Infrastructure to Support Private Sector Growth and Basic Social Services. The country strategy and program’s primary strategic focus has been on rehabilitating key infrastructure, including roads, water supply and sanitation, and rural electrification and other rural infrastructure. Improving institutional development was a complementary focus. Significant infrastructure assets were rehabilitated under five of the six Trust Fund for East Timor (TFET) projects administered by ADB⁷, but progress with achieving expected development results was mixed. The project performance audit report for the two TFET-funded water supply and sanitation rehabilitation projects rated the projects partly successful, citing less than likely sustainability of community-managed water supply systems. The project completion mission for the first TFET-funded Emergency Infrastructure Rehabilitation Project reported that only approximately 15% of constructed rural power stations were operating regularly and that government maintenance has been insufficient to sustain road improvements. On the other hand, the Dili port rehabilitation was assessed as sustainable and exceeded expected benefits. Implementation of the second Emergency Infrastructure Rehabilitation Project was delayed but is now proceeding rapidly. ADB support developed capabilities in infrastructure service departments and agencies, notably the Water and Sanitation Service and the Roads, Bridges, and Flood Control Directorate, but they still struggle with low skills base and inadequate budgets. ADB support for power sector financial management under the first Emergency Infrastructure Rehabilitation Project was partially implemented. TFET experience yielded valuable lessons about achieving development results and leveraging ADB’s limited resources in Timor-Leste. Critical issues include

1. how to configure and deliver a small program to achieve sector results and impacts, and
2. how to achieve minimum necessary levels of institutional capacity.

The new CSPU addresses these questions.

17. Local Capacity Building for Economic and Financial Management. A second strategic focus comprised

1. enhancing economic and financial management and implementation capacities, and
2. improving financial accountability and governance in key sectors.

ADB support was funded through technical assistance (TA) grants⁸, which among other things helped Timor-Leste manage its petroleum wealth and helped prepare and develop capacity in sector investment programs/programming. Timor-Leste has installed high-quality processes and systems that are consistent with global good practice for both petroleum wealth management and program budgeting. But internal capacity needs to be stronger. Meanwhile, the Government relies heavily on international advisers. Progress in local government capacity building has been good, and ADB support was particularly notable for having delivered training to district administrators and staff, and not just to Dili-based agencies and staff.

18. Income Generation for Communities. Significant progress was achieved in the third strategic focus, which is ensuring access to microfinance for poor people. The TFET-funded Microfinance Development Project⁹ and ADB TA achieved Timor-Leste’s only self-sufficient and potentially sustainable microfinance bank.

C. Highlights in Coordination of External Funding and Partnership Arrangements

19. Coordination of external funding is more difficult than might be expected in Timor-Leste’s relatively small development context because of the plethora of external support agencies and development agendas, the limited capacity of the Government, and the lingering emergency nature of some development needs and responses. But coordination is improving as the Government gains confidence and development partner programs mature. For instance, several development partners are working with the Government to prepare a comprehensive multiministry/multidonor planning and financial management capacity-building program. The Government’s Capacity Development Coordination Unit in the Office of the Prime Minister released a whole-of-government capacity development needs analysis to development partners in April 2005.

20. The Government agreed that ADB would help the Government coordinate capacity development and investment programming across infrastructure sectors. This role, together with mobilizing resources to finance infrastructure investment programs, underpins ADB’s strategy and program for 2006-2008. ADB already plays this role in the roads subsector, where the ongoing Transport Sector Improvement Project preparatory TA¹⁰ has produced a 5-year road strategy and program that the Government will require all external and government investments to follow. ADB works closely with the Government of Japan and Japan International Cooperation Agency on investment and capacity development coordination, particularly in the road subsector and potentially for urban water supply and sanitation.

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