ANALYSIS-Free Timor must build economy from rubble 10.55 p.m. ET (0355 GMT) March 13, 1999 DILI, East Timor, March 14 — East Timor, according to Indonesian President B.J. Habibie, is "nothing but rocks.'' And if this impoverished region chooses independence, it faces the daunting task of building an economy from rubble.

Most of its 800,000 people are subsistence farmers. The landscape is mountainous and infertile. And 23 years of often brutal Indonesian rule has done little to foster an educated workforce. Most important jobs are taken by Indonesians.

The economy is deteriorating, shaken by the uncertainty hanging over the region. Indonesia has said it will have the chance to vote on an autonomy package being drawn up by Jakarta. If it rejects this, Habibie says it will be given independence.

The prospect of independence has widened divisions.

Several pro-Indonesia militias have sprung up, sparking clashes that have caused thousands to flee their villages, traumatising the rural economy. In the towns, the Indonesians who controlled the bureaucracy, health and education systems as well as trade are leaving, citing intimidation and uncertainty.

Shop inventories are running down, and many shops have closed altogether. Food and spare parts are scarce.

In recent years Indonesia, which invaded the former Portuguese colony in 1975 and annexed it the following year, has pumped more than $100 million a year into East Timor -- although some say much is siphoned off through corruption.

Analysts put the annual budget of an independent East Timor at around $120 million a year. Even optimists accept that in the early years, much of this would have to be provided by foreign aid infusions to keep the economy from collapsing.

Pro-independence activists insist the tiny country could eventually build a viable economy.

"We will not be rich, but to live, to provide food for our people, we have enough,'' says David Dias Ximinez, leading member of the presidential secretariat of East Timor's government-in-waiting, the National Political Commission (CPN).

Most discussions of Timor's future centre on oil. An independent East Timor would take Indonesia's place in the Timor Gap treaty with Australia, which shares out the oil and gas wealth in the Timor sea. But for the forseeable future, the prospect of significant oil earnings will remain a dream.

In 1998, Indonesia and Australia received just $1.1 million in royalties from the Timor Gap.

In the meantime, East Timor's best hope is coffee. The country produces an average of 6,000 to 7,000 tonnes of coffee a year, much of which is marketed as high-quality organic coffee, says Anthony Marsh, coffee expert at the National Co-operatives Business Association (NCBA) in Dili.

The NCBA handles around a quarter of East Timor's annual coffee crop. The main player is PT Denok, run by the Indonesian army, which handles about two-thirds of the crop.

Marsh said total coffee exports were currently worth about $15 million a year. Over five to 10 years, with improved techniques and more planting, this amount could be doubled.

"Even $50 million one day is not impossible,'' he said.

But while coffee is likely to be the main plank of the Timorese economy, it cannot be the sole foundation. Other exports that have been mooted include marble -- the territory has an impressive supply -- and sandalwood, although much of this resource has already been plundered over the centuries.

Tourism is an alternative, and some have even suggested turning East Timor into a gambling haven for visitors from Indonesia, where gambling is banned. But East Timor lacks even basic tourist infrastructure at present.

Sceptics say independence would mean deepening poverty.

"People might argue that we have potential here, like the Timor Gap and also sandalwood, coffee,'' said Filomeno De Jesus Hornay, head of Dili's College of Economics and founder member of the pro-integration Forum for Unity, Democracy and Justice.

"But the problem with those things is that although East Timor has potential, we need capital, money. We need skilled manpower. We would have to ask other countries to help us.

"If we have to rely on people to help us, if we have to ask for everything, isn't it another form of colonisation?''

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