TractorsThe Timor-Leste government had long debated whether it made sense to increase domestic rice production, or continue to import the additional rice it needed. This deliberation rose to a high pitch in late 2010 as Prime Minister Gusmão’s leadership team worked to pull together the many strands of the Strategic Development Plan that would guide the nation’s growth for the next 20 years.

Domestic rice farmers had long faced a host of problems. For one thing, they lacked consistent and affordable access to materials (or “inputs”) like fertilizer and improved seed varieties. Many relied on the FAO and other development partners to hand out free inputs like seeds and fertilizer. Timor-Leste’s farmers had also failed to benefit noticeably from efforts to encourage agricultural mechanization. In 2008-2009, the Ministry of Agriculture and Fisheries had distributed over 2,000 hand tractors to farmers. ^[13] But many of the tractors broke down and farmers abandoned them because they had not been trained in tractor operation and maintenance, and had no funds to purchase fuel or spare parts.

Irrigation was another challenge. Timor-Leste, a narrow island with elevations up to 3,000 meters, had extremely steep terrain. Coupled with erratic rainfall, this presented the twin problems of water scarcity during the dry season and flash flooding during the wet season. This natural climate variability appeared to be becoming even more extreme as a result of recent climate changes. Droughts hit every two to three years thanks to El Nino, causing average crop production to drop by 30 percent, while in 2010, as a result of La Nina, the country had no dry period. What was missing was a master plan for comprehensive water resource management.

Then there was training. In some areas, government-hired extension workers conducted Farmer Field Schools (FFS) to teach farmers about Integrated Crop Management (ICM), specifically line-transplanting instead of broadcasting, appropriate water levels, timing and dosage of fertilizer based on leaf color charts, and harvesting techniques. These techniques, along with System of Rice Intensification (SRI), were being promoted with varying degrees of success; some farmers proved resistant to change and were slow to adopt them. ^[14]

As if these difficulties were not enough, Timor-Leste farmers typically experienced high pre- and post-harvest losses. ^[15] These were attributable in part to pests and disease, but there were other complicating factors. Persuading farmers to use improved seed varieties, for example, was a particular challenge. Many were reluctant to dispense with traditional seed varieties. As a result, more than 10 varieties were in use, some of them very low-yielding. Moreover, each variety matured at a different rate, with some shedding their grain or subject to bird damage before harvest. Post-harvest too, on-farm storage capacity was limited and outdated rice milling technology produced grain-from-paddy yield of only 50 percent, compared with the 60 percent that improved rice mills could achieve.

These combined challenges meant that Timor-Leste had never produced enough rice to feed its population. Instead, it imported the additional 60,000 MT/year that it needed. In 2011, it paid a price of $0.57 per kilogram ($570 per MT) of milled rice—or some $34 million for a year’s supply (see Exhibit 1 ). But Timorese consumers could not afford so high a price, so the government sold the imported rice to domestic consumers at only $0.34 per kilogram—meaning a subsidy of $0.23 per kilogram. ^[16] There were additional costs to store and distribute imported rice throughout the country.