The main challenge facing East Timor, ishow to reconcile a simultaneous existence of acute povertyand severe shortage of human management skills, with solidprospects of future flows from the country's naturalresource wealth. Policies to meet these two priorities -sustained poverty and sound management of natural resources- are the focus of this report. It looks at the pressingconcerns of managing the economic transition from the UnitedNationals Transitional Administration in East Timor (UNTAET)within the next two years; at the issue of wealth creationand the need to enhance the private investment climate; atthe need to devise a framework for saving the oil and gasrevenues; at the importance of raising human developmentstandards; at the limited number of qualified personnel ableto formulate high priority development objectives,compounded by the need to build effective governance; and,at the overwhelming incidence of poverty in rural areas, andthe strong correlation between consumption poverty, and lowlevels of education. In setting a strategy for growth andpoverty reduction, the report highlights the importance ofmaintaining the prevailing efforts at raising farm incomes,and productivity, while improving the quality of ruraleducation, and health facilities, including a tax policyvision that can play a role to avoid exacerbating urbanbias. On improving the business environment, there is needfor capacity building, and micro-finance programs, butwithin an adequate legal framework, and prudentialregulations. The administrative priorities would requireenhanced citizen monitoring on government performance, withan input in public services to improve transparency - whichwould emerge from an assessment of cost, effectiveness, and capacity.
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