PhD Candidate to resign and reapply; Asking recommendation from thesis advisor I am a PhD candidate in a nationally prestigious university in a developing country. The university is mainly of engineering departments but also has a rather new economics department. It is my 7th year there and prospects for graduating are unclear. No one has ever graduated from our school (1 in her 10th year, 4 of us in 7th year). The are problems with the program I don't want to discuss that. But in short: asking for international level quality work + 1 paper accepted in an ABS rated journal before PhD thesis defense. There is no funding and we all have to work full-time somewhere else if we want to survive!

I have decided to apply for some public policy PhD programs in US, and resign from my current program if I get an admission.

All of my professional experience are research oriented, half of which I have under direct or indirect supervision of my current PhD thesis adviser. I have written one paper and in the middle of a second one with him in my PhD program. To sum up, he knows me the most, and potentially the most important reference for me. 

The question he posed me when I asked for recommendation is this: how could a thesis adviser give you recommendations if you want to leave the program. What is the norm when people resign and reapply? Is it better to have him as my reference or not? And would people in admission committees think that I am low on perseverance? (I am not really, I am not of the type to quit something easily).
[1]. No funding.
[2]. Work for 7 - 10+ years in PhD.

Combining [1] &amp; [2] gives an unrealistic expectation from the supervisor for you to stay. 

I had to assume you are doing your PhD part-time. Getting a reference letter does not immediately require resigning or quitting. Even if you apply now, you will mostly wait till the next academic year before you quit. That is almost another year. 

Your work so far may not even be wasted. When you join the US school, you may still collaborate with your local school, and even have more joint publications. With funding, your focus will be higher anyway, as a full time student.

There is nothing that should prevent a fair supervisor from writing such a recommendation letter. You may even convince him that you are not quitting - but, rather halting. Given that you are in your 7th year, it might be just months away for your graduation.

Hope your supervisor will understand and provide you with the letter. I have a friend who got a recommendation letter from his ex-PhD supervisor and successfully joined this another funded program in a foreign country. What you are encountering is not really a rare case.