Downer, who was accompanied by Australian Industry Minister Nick Minchin, will sign the agreement with U.N. administrators and East Timorese political leaders Thursday.

"It's a great historic moment in Australian-East Timor relations," Downer said after arriving in Dili. "It's a very good deal for East Timor. It's a good deal for Australia. It's a win-win for both."

The deal will replace a previous agreement between Australia and Indonesia, which was dropped when East Timor broke away from Indonesia in 1999. Over the past few months, Australia and East Timor have been locked in protracted negotiations to finalize the agreement. East Timor has insisted on receiving 90% of the revenues from oil and gas drilling in the Timor Sea, which divides Timor Island with northern Australia. Under that arrangement Australia would receive the remaining 10%.

Final details of the deal haven't yet been released. But a member of the East Timorese negotiating team, Nobel Peace Laureate Jose Ramos-Horta, said earlier this week that the deal provided East Timor with the best possible outcome.The U.N. is currently administering East Timor until it gains full independence later this year or next. Before coming into force, the agreement must be approved by East Timor's first democratically elected government.

Indeed, Australia stands to gain most of the economic benefits from energy production in the area, he said.

Galbraith was one of the chief negotiators for East Timor in the protracted negotiations that ended last week, along with Transitional Cabinet Member for Economic Affairs Mari Alkatiri and Cabinet Member for Foreign Affairs Jose Ramos-Horta.

The framework agreement was unveiled Tuesday and is scheduled to be signed in Dili Thursday by Australian and East Timorese representatives. The terms of the arrangement will be incorporated into a new treaty upon East Timor's independence, expected by early 2002.

Galbraith rejected repeated assertions by Australia's Foreign Minister Alexander Downer that Australia wanted to be and was generous in striking the agreement.The agreement isn't about generosity, he said.

"The Australians did what we did, which is they bargained very hard on behalf of their own national interest," he said in an interview on Australian Broadcasting Corp. Radio.

The negotiations, which began formally in October 2000, were "surprisingly difficult," he said. "But I guess that's what happens when people start arguing about money," he said.

The agreement covers a 75,000-square-kilometer area known as the Timor Gap between the two countries, now known as the Joint Petroleum Development Area. Energy production in the area formerly was covered by the 1989 Timor Gap Treaty between Australia and Indonesia, in which royalties were split 50/50.

This treaty lapsed when Indonesia withdrew after East Timor's August 1999 vote for independence from Indonesia.

Asked about A$13.7 billion proposed to be spent developing industry in and around Darwin to produce and use Timor Sea gas, Galbraith said these figures illustrate that "the greater economic benefit from this arrangement will go to Australia."

The figure of A$13.7 billion for infrastructure and project development was put forward in June by Daryl Manzie, the Northern Territory's Minister for Resource Development.

Projects proposed include oil and natural gas production facilities and undersea gas pipelines in the Timor Sea, gas processing projects in Darwin city, including separate liquefied natural gas and methanol plants, and pipelines south from Darwin.No such projects are proposed for East Timor.

A key element of the arrangement is that East Timor gets 90 per cent of the royalties from energy developments in the area, with Australia getting the 10 per cent balance. This is estimated to yield East Timor more than A$7 billion and Australia about A$1 billion in the 20 years from 2004.

The 90/10 split is accurate so far as sharing of royalties is concerned, Galbraith said.

"But in terms of the overall economic benefit, in fact the greater economic benefit goes to Australia," he said.

Overall, the agreement is a "very good deal for Australia," Galbraith said, as it will receive the benefits of the downstream activities that will take place in the Northern Territory.

"Those activities probably will be worth between 5 and 10 times the amount of money...that will go to East Timor," he said.

"Australia would get in the Northern Territory, perhaps A$50 billion in increased economic activity, which in turn would generate about A$15 billion in taxes," he said.

And barely a building had been left untouched by rampaging pro-Jakarta militia fighters seeking to overturn the result of the August 30, 1999 referendum result in favour of independence. Schools were gutted, homes destroyed, churches desecrated and the all-important coffee crop, which was the territory's primary source of income, lay rotting.

The Catholic Church operated medical clinics, manned by western volunteers, aid agencies such as Caritas, and nuns armed with little but courage and precious little medical training.

The agreement between Australia and East Timor via which the world's newest independent state will receive more than A$7-billion over two decades in royalties from Timor Sea oil and natural gas projects amounts to an economic lifeline, aid agencies say.

Or the difference between economic independence and perpetual dependence on foreign aid from key donors such as Australia, former colonial power Portugal and the United Nations.

East Timor's Nobel peace prize winner, Jose Ramos-Horta, suffered no illusions about how to meet the challenges faced by unemployed youths roaming Dili and the countryside: they need jobs.

"It will bring about 400 million Australian dollars to East Timor by 2004, and this is extremely important to help the economy, to stabilise the situation politically," Ramos-Horta told ABC Radio here.

"Without this kind of money we would not be able to generate employment. Obviously in the first few years of independence it's very important that there will be jobs to stabilise the situation."

Australian aid agencies cited the agreement as a means of breaking the cycle of poverty and aid dependence that still afflict countries such as Cambodia, long after UN peacekeepers have departed.

"This treaty gives the East Timorese an important independent revenue source for about ten years as they work towards self-reliance, Australian council for Overseas Aid (ACFOA) spokesman Jim Redden said.

"An over-reliance on foreign aid and loans can all to often lead to a developing country becoming trapped in the debt-poverty cycle, whereby the government ends up spending more on interest repayments than on schools, health and jobs."

The man who authorised the deployment of Australian troops to East Timor, Prime Minister John Howard, acknowledged Wednesday that Australian concessions granting East Timor 90 percent of royalties from the Timor Sea were aimed ensuring the UN-administered territory did not become an economic basket case on Australia's doorstep.

"It will be a way of giving some revenue to the new country, which is going to be a very poor country and will need a lot of assistance," Howard said.

VICTORIA, Australia -- Possession, it has been said, is nine-tenths of the law, although this dictum has rarely applied in East Timor under its successive administrations. More common has been incompetence, chicanery and corruption, which has applied in the case of the Favaro family and the Hotel Dili. The Dili District Court has just ruled that Gino and Ernesto Favaro do not legally own the Hotel Dili, which their family owned and ran from 1971 until December 1975, and they have owned and run again since 1998. Now District Judge Rui Dos Santos has ruled in favor of ownership by Helene Baros, who occupied the hotel for a few weeks in 1999. This decision comes after a string of competing claims to ownership of property that have been complicated by appeals to Portuguese and Indonesian law.

Under the United Nations Transitional Administration in East Timor (UNTAET), property legally owned under Indonesian law is still legally owned, except in cases where it has been abandoned and subsequent claims have been made. Frank Favaro had bought the Hotel Dili in 1971, and relocated his family to what was then Portuguese Timor. The family abandoned the hotel in the face of Indonesia's military invasion of December1975. As with so much other property, the hotel was confiscated by the Indonesian authorities and sold to supporters of the new regime.

Pinto Soares, sister of a pro-Indonesian East Timorese governor, bought the Hotel Dili. However, with no visitors, it quickly went broke. When I visited in 1995, the hotel was closed and shuttered, with rubbish blowing in its courtyard. Given the bleak environment of oppression and suspicion in East Timor at that time, this was not a surprising outcome.

When Frank Favaro's sons, Gino and Ernesto, attempted to claim legal title of the hotel soon after, there was little real opposition although, given the change of legal statute, a sale was proposed instead of simple return. The purchase price reflected the lack of business and the Favaro's continuing claim to ownership. The purchase was legal under Indonesian law, as had been their family's original ownership under Portuguese law. Gino and Ernesto Favaro returned to Dili in 1998 and re-opened for business.

The Hotel Dili did a roaring trade with UN workers, journalists and aid workers during the lead-up to the independence ballot of Aug. 30 1999. But Gino and Ernesto Favaro were marked for retribution by Eurico Guterres and the violent Aitarak militia, who were headquartered immediately behind the hotel. It was obvious that after the announcement of the vote that all hell would break loose and, like many others, the staunchly pro-independence Favaro brothers were in genuine fear of their lives.

On Sept. 4, 1999 the shooting and destruction started in earnest. The Favaro's scrambled from their hotel to a refugee ship, fleeing first to Kupang in West Timor and then to Jakarta and Darwin. Anyone who stayed in Dili for the following two black weeks in September 1999, or who was quick to return, as was Helene Baros, could have claimed virtually the whole town, after it was abandoned in the face of terror, violence and forced expulsion. Yet this period has only been regarded transitional for the purposes of law.

In this context, the Favaro brothers returned to Dili after the arrival of the international troops (Interfet) to reclaim and rebuild their hotel, which again became a thriving business.

Now, without being allowed the opportunity of appearing in defense, the Favaro's ownership of the hotel has been stripped from them by the local court, in favor of Helene Baros.

It is not clear on what legal grounds the Dili District Court overturned UNTAET's own ruling on legal possession, although it could not have been under Indonesian or Portuguese law. It is true that some East Timorese don't like the Favaro's somewhat brash style and the brothers are certainly not apologetic about being enthusiastic small capitalists. But these are not legal matters.

The ruling therefore raises serious doubts about the legal administration in East Timor, which is already under question over competence and external influence in judicial outcomes. Such legally doubtful decisions will certainly deter outside investment in East Timor, and will seriously hamper local development.

There are, of course, continuing practical difficulties in creating a new state, and in bringing up to speed a largely untrained local administration. But the Hotel Dili decision shows that East Timor is still a long way from attaining the goals of proper administration and judicial impartiality its people aspired to when they voted for independence almost two years ago.

(Dr Damien Kingsbury is senior lecturer in international development at Deakin University, who edited 'Guns and Ballot Boxes: East Timor's Vote for Independence'.)

Head of the province's Ministry of Manpower and Transmigration office, Yoseph Setyohadi, identified the provinces as South Kalimantan, East Kalimantan, Central Kalimantan, Irian Jaya and Maluku.

"The East Nusa Tenggara government will follow up the offer as soon as possible and send the refugees to the new settlement areas," Yoseph said.

He gave no details about when the refugees would depart for their new homes and how many people each province could accommodate.

Separately, former pro-Jakarta East Timor leader Eurico Guterres demanded that the government act consistently in handling the refugees. He was commenting on certain government officials who expressed doubts over Jakarta's capability to host all of the East Timorese who had opted to remain in Indonesia.

Over 98 percent of the 105,800 registrants voted for Indonesian citizenship last month. Of some 250,000 refugees who flocked to West Timor following a rampage of violence in 1999, only adults were eligible for registration.

Eurico insisted that the central government immediately proceed with the resettlement program and repatriate those who wished to return to East Timor.

During his visit to Kupang last week, Coordinating Minister for Social, Political and Security Affairs Agum Gumelar said the government was determined to take immediate steps toward settling the issue of East Timorese refugees in West Timor.

"Their living conditions are very unfavorable. The government will adopt better measures to relieve their suffering," said Agum after inspecting refugee camps in Haliwen-Atambua, Belu regency.

They said seven of the suspects turned themselves in to authorities Monday, in response to appeals by local leaders. Two others were arrested last month.

The rioting erupted as a fight between two bands of youths from rival villages but took on political traits, given tensions between parties competing for support in the eastern zone in the run-up to elections in August.