East Timor is one of the world's newest countries and also one of the poorest.

The tiny territory became independent in 2002 after centuries of Portuguese colonial rule and 24 years of brutal occupation by Indonesia.

Since then it has been heavily reliant on foreign aid. About 40 percent of the population lives below the national poverty line, with the vast majority of the labour force working in agriculture.

Health care is sketchy and education poor. Barely half the adult population is literate.

But there is hope for a better future. In early 2006, East Timor and Australia signed a deal to share revenues from vast offshore oil and gas fields. The U.N. Development Programme (UNDP) says it's crucial these funds go towards alleviating rural poverty.

East Timor, which is slightly smaller than Hawaii, lies in the Indonesian archipelago.

Portugal occupied the island of Timor in the 16th century but later ceded the western part to the Dutch. In 1975 the Portuguese administration moved from the capital Dili to the island of Atauro after promising to decolonise the territory.

A leading East Timor political party unilaterally declared independence on Nov. 28, 1975. But nine days later Indonesia invaded and annexed the territory - a move never recognised by the United Nations but condoned by the United States and Australia.

Indonesia's occupation was marked by atrocities. Up to 183,000 people died through massacres, torture and starvation, according to an independent report by the Commission for Reception, Truth and Reconciliation.

Many were civilians accused by Indonesia of supporting the Fretilin resistance movement, now one of the country's major political parties.

The report said Indonesian forces used napalm and chemical weapons to poison food and water, which Jakarta denies. It also described cases of torture, sexual mutilation and rape of pro-independence supporters.

The report, which was handed to the U.N. Secretary-General, accused several countries, including the United States, France and Britain, of providing direct and indirect political and military support to Indonesia's invasion and occupation.

East Timor's president at the time, Xanana Gusmao, opposed demanding international trials or reparations from Jakarta, as recommended by the report.

Dili and Jakarta set up a truth and friendship commission in late 2005 with the aim of burying the hatchet once and for all.

The fall of Indonesian dictator Suharto in 1998 paved the way for East Timor to hold a U.N. supervised referendum on its future in August 1999. The country voted overwhelmingly for independence.

But as pro-Jakarta militia withdrew from the territory they exacted terrible revenge, destroying virtually everything in their path in a scorched-earth campaign backed by elements of the Indonesian army.

It's estimated that 1,000 people were killed and half a million uprooted. Towns and villages were set on fire and infrastructure destroyed.

Around 250,000 people fled into West Timor and a similar number sought refuge in the forests and mountains of East Timor. A U.N. peacekeeping force, led by Australia, was sent in at the end of September that year.

Susan Nicolai, an education adviser formerly with the International Rescue Committee who arrived shortly afterwards, told AlertNet about the appalling devastation.

"I had never been to a place where the destruction was so total. I believe around 90 percent of the schools had been destroyed - burned or completely stripped," she said.

"There were still fires smouldering when I arrived and dead bodies around. A lot of streets were empty because people had fled to West Timor, Australia or were hiding in the bush."

The Asian Development Bank says agricultural output fell by 50 percent in 1999 after the violence destroyed farm animals and machinery. Food and seed stocks were looted. The transport system collapsed, education and healthcare systems crumbled, electricity and water supplies were disrupted and telephone lines damaged.

East Timor was administered by the United Nations for two and a half years until full independence in May 2002. At its helm was former guerrilla leader Xanana Gusmao, who won the country's first presidential elections by a landslide.

Gusmao was previously the head of the armed wing of the Fretilin resistance movement, now one of the country's major political parties. He was jailed by Indonesia in the 1990s.

The international community spent around $1 billion rebuilding the territory between 1999 and 2005.

During the same period, the U.N. refugee agency, UNHCR, helped more than 220,000 refugees return to East Timor. Another 28,000 opted to remain in West Timor with Indonesian citizenship.

The U.N. mission, which once numbered 11,000 troops and civilians, was scaled back to 130 administrators, police and military advisers.

UNHCR wound up its operation in July 2007 because of a lack of money.
Freedom from foreign occupation has not alleviated widespread poverty.

The country is the poorest in Southeast Asia with a per capita income of under $400 a year.

Despite depressing levels of hardship, the U.N. Development Programme says it's still possible for East Timor to meet poverty reduction targets under the United Nations' Millennium Development Goals given the billions of dollars in potential revenue from oil and gas fields in the Timor Sea.

But it stresses this money must be channelled into rural development along with education, health care and job training. Agriculture employs around three-quarters of the labour force.

The government has promised to use its anticipated wealth wisely. It set up a Petroleum Fund in 2005 - all petroleum revenue will be deposited into the account and all development funds will come out of it.

Tourism and coffee are other areas that could create economic growth and jobs.

Former Prime Minister Jose Ramos-Horta, who replaced Gusmao after winning the 2007 presidential election, has pledged to accelerate economic development, bring in foreign investors and work to eradicate poverty.

Ramos-Horta spearheaded an overseas campaign for independence during Indonesia's occupation and was awarded the Nobel Peace Prize in 1996.

East Timor's security remains fragile. Deadly riots broke out in Dili in late April 2006 after the government dismissed about 600 troops for mutiny when they protested about alleged discrimination against soldiers from the west of the country.

An international peacekeeping force led by Australia arrived in May following a wave of fighting, arson and looting. Nearly 40 people were killed and 150,000 fled. Some 6,000 homes were destroyed in Dili alone, according to U.N. estimates.

Much of the violence was blamed on east and west youth gangs, a divide that surfaced during the 1999 independence referendum. Although ethnically and linguistically identical, westerners were seen as more pro-Indonesian and easterners as more pro-independence.

Some of the sacked soldiers joined a renegade former military-police commander, Alfredo Reinado, who escaped from prison in 2006 after being charged with murder during the riots.

Violence also broke out in August 2007 after Ramos-Horta appointed a coalition headed by Gusmao as prime minister following inconclusive parliamentary elections.

In February 2008, Ramos-Horta was shot at his home in an attempted assassination by Reinado and some of his supporters.

Gusmao was targeted the same day in an apparently co-ordinated attack but escaped injury. Reinado was killed in a shoot-out at Ramos-Horta's home.

Australia immediately pledged to send more troops to the country amid fears the attempt on Ramos-Horta's life could spark further turmoil.

More than 2,000 international police and troops are already in East Timor, providing a temporary safety net.

A report by think tank International Crisis Group published shortly before the attack warned that East Timor must rapidly reform its police and army to head off the risk of renewed violence.

About 100,000 people - roughly a tenth of the population - were still displaced by the 2006 violence as of early 2008, including 30,000 scattered in camps throughout Dili. Some are living with their goats, pigs and chickens in the national hospital.

The camps have become a magnet for criminal activity but police don't venture inside, according to a Crisis Group analyst.

The government and the United Nations have started a programme to relocate people in the camps. Food rations have been reduced by half to encourage people to leave.

Under a $15 million programme, the government says it will give $4,500 to each family whose home was destroyed plus a two-month food ration and transport stipend.

Houses will be built in suburbs for people unable to return to their former dwellings for security reasons.

Fear of violence and confusion over land ownership is making it difficult for some people to go home. A U.N. official said it was very difficult for those who had become dislocated to establish legally that they have land.

East Timor has chronic and widespread food insecurity. Over a third of the population regularly experience food shortages and almost half of young children are malnourished.

The is partly due to civil unrest, displacement, unemployment and poverty. But natural disasters - including droughts, floods and landslides - have compounded the problem.

The country is also prone to heavy winds which often damage crops. And in 2007 it was hit by a locust infestation.

The government says it is establishing an information centre to help prepare residents for disasters and reduce crop and food destruction.