Despite threats to peace, ETimor president optimistic for the future

DILI, May 22, 2008 (AFP) - East Timorese President Jose Ramos-Horta is confident about his young country's future, despite lingering poverty and swirling mistrust over rebel attacks three months ago that left him near death.

In an interview following celebrations of the sixth anniversary of East Timor's independence, the 58-year-old Nobel Laureate told AFP the twin shooting attacks on him and Prime Minister Xanana Gusmao brought the country to the brink of chaos.

"I almost lost my life and the country could have gone into civil war over that," he said.

The attack on February 11 led by rebel leader Alfredo Reinado left Ramos-Horta shot and bleeding outside his Dili home. Reinado and one other rebel died in the attack.

The attacks raised fears that East Timor -- which is propped up by UN police and international troops -- could slip into violence similar to street fighting in 2006 triggered by the desertion of around 600 soldiers, including Reinado, that left at least 37 people dead and around 150,000 displaced.

But the president said he was now confident peace would prevail in the nation of one million.

"I'm much more optimistic, the situation was calm before February 11 and was even more calm after February 11. People were in a state of shock with what happened to me," he said.

"When I came back from (receiving two months of medical treatment in) Australia, tens of thousands of people were in the streets to welcome me back. I read it more as people's reaction, opposition to violence."

In the wake of the crisis, Ramos-Horta said the key challenge was to ensure development in one of the world's poorest nations.

"Well the challenges are job creation, job creation, job creation. We must invest more in infrastructure development so that we create jobs. We (must) modernise our road network," he said.

"We must bring down the cost of electricity and telecommunications and reform completely the tax system in this country, make it almost tax-free like Hong Kong to attract foreign investors," he said.

"Before the end of this year we will have an almost totally tax-free country."

Despite the high aims, East Timor faces monumental economic challenges. The country is the least developed in Southeast Asia, with around 50 percent unemployment and most of the population surviving off subsistence farming.

East Timor remains dependent on foreign assistance, with its sole significant exports being coffee and oil and gas from massive fields in the Timor Sea.

East Timor has diverted oil and gas profits into a special overseas fund, but Ramos-Horta told AFP that despite windfall profits -- around three billion dollars by the end of the year -- the country made a mistake in how it invested the money.

"We were not very wise with investing it because it was all stuck in US Treasury bonds, the interest rate is very low," he said.

"With the depreciation of the dollar and high costs of everything else our investment in US Treasury bonds has actually turned out to be negative. We should have ... diversified two, three years ago."

Despite the shortcomings, the government plans to start dipping in to the fund to finance spending on infrastructure, Ramos-Horta said.

East Timor, a former Portuguese colony, was invaded by Indonesia in 1975 as it moved towards formal independence. The resulting brutal 24-year occupation saw more than 200,000 people die as a result of fighting and preventable causes.

The country won its freedom in a 1999 UN-backed referendum that was marred by violence as Indonesian-backed militias laid waste to much of the country in a scorched earth campaign that displaced hundreds of thousands.

The country gained formal independence in 2002.