EAST TIMOR: Prime Minister Embroiled in Contract Scandal By Matt Crook

DILI, EAST TIMOR, Jul 2 (IPS) - Pressure to resign is mounting on East Timor's Prime Minster, Xanana Gusamo, amid claims that he misused authority when he signed-off on a multi-million dollar government contract last year to a company his daughter has ties with.

Fernanda Borges, leader of the opposition National Unity Party, has demanded that Gusmao be held accountable for his role in the awarding of a contract to import subsidised rice worth $3.5 million to Prima Food, a company his daughter Zenilda Gusmao owns a stake in.

"Did Zenilda Gusmao have a business before her father became important? No. Does Zenilda Gusmao have the right to a government contract? No," she told IPS. "That's not why Mr Gusmao was elected."

Under East Timorese parliamentary law, the prime minister is required to sign off on all government contracts above $1 million, and government tenders cannot be awarded to companies in which close family members of government officials, including the prime minister, have a stake exceeding 10%.

Money for the rice contract came from the country's Economic Stabilization Fund, which functions partly to ensure food prices are kept under control. The opposition is raising questions about whether the rice in question was even imported.

"Did the rice come in? Where is the rice? People out in the districts, a lot of them have not received any rice or had the opportunity of buying cheap rice from the government. So where did all that rice go or did it ever come in? We don't have proof," Borges said.

But the government refutes the allegation.

Deputy Prime Minister Mario Carrascalao says the contract being signed off may have simply been an oversight.

"OK, he signed that without going through and examining it," he said. "[The government] distributed money to [16] enterprises. In one of those enterprises there is the daughter of the prime minister, but she is not alone. The enterprise called Prima Food is not just her enterprise. She is one of the associated members, so I don't think the prime minister did anything wrong when he signed it."

The prime minister also has the backing of the East Timorese President Jose Ramos-Horta.

"Just because someone became president, became prime minister, became a minister, does not mean his family all have to go into unemployment, all have to sell their business and stop," he told Radio Australia.

However, the opposition isn't buying the explanation. "My worry is if he stays and he thinks that, especially with all this denial and weird interpretation of our Constitution and existing laws, that [the government] can give families contracts," Borges said. "What are we building here? A state for [their] families?"

Arsenio Bano, an opposition MP from the Fretilin party, demands that the prime minister step down.

"The rice contract is one of the biggest scandals. It is demonstrating nepotism. We will keep pushing for [Xanana Gusmao] to be accountable and even to resign as prime minister," he said. "He can't sign under the law a contract with a company that his own daughter is in."

East Timor became independent in 2002 three years after an overwhelming majority of the population voted in favour of separation from Indonesia after a brutal 24-year occupation. If opposition protests grow louder, this scandal could pose a real threat to the stability of this new democracy.

But Christopher Samson, a campaigner from Lalenok Ba Ema Hotu, a Dili-based anti-corruption watchdog, cautions that it is a bit too early to jump to conclusions.

"[The] law did not say that families of ministers or the prime minister or members of government should not participate in business," he said. "I feel there should be an investigation before we speak about this process."

(END/2009)

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