Just days before the UN-supervised referendum was due to take place over the future of East Timor, violent clashes erupted in the capital of Dili between pro-Indonesian militia groups and supporters of the separatist National Council for Timorese Resistance (CNRT).

At least five people died and many more were injured on Thursday after armed pro-Jakarta supporters attending a rally in the capital took to the streets, attacking their opponents and journalists. Eurico Gutteres, leader of the Aitarak militia group, told the gathering of between 8,000 and 15,000 there would be “massive fighting” if independence were declared. “If East Timor becomes independent, it will become a sea of fire,” he said.

The previous day, up to 10,000 supporters of East Timor independence rallied in Dili, in one of the few CNRT-organised demonstrations. The crowd included members of the separatist Falantil militia, which has been fighting a guerrilla war against the Indonesian authorities since Indonesia invaded the former Portuguese colony in 1975. A CNRT leader David Ximenes, who addressed the rally, has previously stated that Falantil will not disarm until Indonesian security forces leave East Timor.

After more than two decades of brutal Indonesian rule, the few available indicators point to a substantial majority voting in next Monday's ballot to sever relations with Indonesia. Whatever the outcome, however, the UN-supervised referendum will not end the bitter conflicts in East Timor, nor lead to a government capable of meeting the aspirations of workers and villagers for genuine democratic rights and improved living standards.

The vote itself is over whether to accept an autonomy package drawn up by the Indonesian regime of President B.J. Habibie, which would retain East Timor as part of Indonesia but devolve certain limited powers to a provincial government based in Dili. If the autonomy proposal is rejected, as is likely, then the granting of independence is not automatic. Habibie has pledged that Indonesia will pull out of East Timor but the issue has to be approved by the country's People's Consultative Assembly (MPR), which is not due to meet until October or November.

Powerful sections of Indonesia's ruling elite oppose any granting of independence, arguing that it will only fuel separatist movements in other provinces, including Aceh and Irian Jaya (West Papua). Habibie only agreed earlier this year to a vote in East Timor after substantial international pressure was brought to bear. Opposition leader Megawati Sukarnoputri, whose Indonesian Democratic Party-Struggle (PDI-P) won the highest vote in the June 7 national elections, has agreed to abide by the outcome of the referendum but has been sharply critical of Habibie's decision to hold the ballot.

Numerous reports from observers based in East Timor indicate that the Indonesian soldiers and police have either stood by or openly assisted pro-Jakarta militia in their campaign of intimidation against CNRT supporters. Some of the militia leaders trace their connections with the Indonesian Armed Forces (TNI) to the 1975 invasion. Both the Suharto family and army have developed substantial business interests in East Timor over the last 20 years, including in the province's lucrative coffee industry.

The ballot is due to take place in most areas of East Timor on Monday, and the outcome is expected to be known within a week. Indonesian authorities have warned that there will be a mass exodus of pro-Indonesian supporters and civil servants if the vote is to separate.

Colonel Noer Muis, recently appointed commander of the East Timor Military District, said preparations have been made to evacuate people. “The navy will prepare its warships, the air force will provide aircraft, and land transportation will be stand by to evacuate those seeking to get out of the territory,” he said. Already thousands of Indonesian civil servants, who formed the backbone of the province's administration and services such as public education and health, have left.

Major powers moving in

Even if the Indonesian MPR does allow the province to break away, East Timor will not be “independent”. Under the UN-brokered agreement reached between Indonesia and Portugal earlier this year, the United Nations would administer East Timor for a protracted period before any formal independence was granted.

The US, Australia, Portugal and other major powers are vying for position in East Timor. At stake are significant reserves of oil in the Timor Sea as well as other mineral and agricultural resources. Moreover, East Timor is strategically situated as a potential base of economic, political and military intervention within the Indonesian archipelago and more broadly in South East Asia.

Through the United Nations, considerable pressure is being brought to bear on the Indonesian government to curb the activities of the pro-Jakarta militia, and to ensure an orderly transition to UN administration. Earlier in the week, the UN Security Council issued a statement voicing strong concern at the “continuing campaign of intimidation and violence in East Timor”.

US Assistant Secretary of State for East Asia and the Pacific Stanley Roth, in Australia for talks with the Howard government, warned on Thursday that it would not be “business as usual” and Indonesia would “pay the price” if it failed to ensure a peaceful ballot in the territory. A report in the Australian Financial Review said Roth had warned Habibie that IMF funds may be withheld if Indonesia fails to ensure the ballot proceeds smoothly.

Although cautious about providing any detail, Roth indicated in his address to the National Press Club in Canberra that a so-called UN peacekeeping force was also “a conceivable outcome” for East Timor. According to leaked reports in the Australian press, Roth recently met with the head of the Australian Foreign Affairs and Trade Department, Dr Ashton Calvert to urge the early dispatch of troops, including US Marines, to the territory.

Both in Australia and the US, a number of politicians and newspaper editorials have pressed for a more direct and aggressive military intervention in East Timor, under the pretext of quelling civil violence and disarming the pro-Jakarta militia. Last weekend a US congressional delegation to East Timor called on the Clinton administration to push for the immediate dispatch of troops. “I am going to recommend to the president that he recommends to the UN Security Council that they get some peacekeeping forces down here in a hurry,” Democrat Senator Tom Harkin stated.

Last week US academic Tom Plate wrote a column in the Los Angeles Times entitled “Don't Rule Out Use of US Troops as an Option in Indonesia: American-Australian force should be ready to intervene to ensure East Timorese independence”. Plate commended the US and Australian governments for their plans for a military force for East Timor, arguing that what was good for Kosovo was also appropriate for Indonesia. “It will weigh heavily on everyone's conscience if, as happened in the past with East Timor, the UN is forced to look the other way while pro-government paramilitary forces intimidate if not slaughter East Timor's independence movement,” he wrote.

On Thursday, the Australian government announced that rapid deployment troops based in Darwin had been placed on alert to evacuate Australian nationals should violence erupt. The Canberra Times reported last week that 1,500 US troops were already in Indonesia for CARAT 99 exercises involving military from Southeast Asian countries, and that joint exercises with Australia were also due to take place in the region.

An editorial in the Australian Financial Review yesterday outlined the rationale for action against Indonesia: “Indonesia should be left in no doubt that if it fails to maintain a secure environment it will have failed to comply with the UN agreements and will have ceded any claim to sovereignty over a territory that the UN still does not officially recognise as Indonesian, anyway. And it should be left in no doubt that a country that fails to live up to important international commitments should not expect to receive large amounts of foreign aid.” The argument, of course, applies not only to financial action against Indonesia but also to military measures in East Timor.

Gusmao's plans for a cheap labour platform

Pro-independence leader Xanana Gusmao, who is still under house arrest in Jakarta, is appealing for the major powers to send troops to East Timor under the guise of a UN peacekeeping operation. In an interview with the Australian ABC News, he said the clashes this week in Dili demonstrated that the Indonesian military was unable to prevent violence.

Gusmao's call for UN military intervention goes hand-in-hand with his plans to transform East Timor—or the proposed State of Timor Lorosae—into a cheap labour platform and regional financial centre. In a policy speech on Wednesday, Gusmao not only promised an amnesty for the pro-Jakarta militia but appealed to foreign investors to make the impoverished statelet a base for their manufacturing and financial operations in the Asia Pacific region.

He pledged to “protect the right to ownership of land and goods,” and to “encourage the economic players to consolidate and expand their ongoing economic and social activities”. “[T]he State of Timor Lorosae will advocate the development of a market economy” and “encourage the building and strengthening of the private sector in all social spheres, with particular emphasis on support for private Timorese entrepreneurs,” he said.

An East Timorese government would “draw maximum benefit from the country's geo-political and economic situation, and of the confluence of the commercial route between Asia and Oceania... In pursuit of this economic policy, the State of Timor Lorosae will facilitate the creation of some special economic zones in order to stimulate employment for the East Timorese, through the development of an offshore centre consisting of a modern financial hub.”

After centuries of exploitation by the Portuguese, then by the Indonesian ruling class, East Timor is one of the most economically backward provinces of the archipelago with an estimated annual per capita GDP of about $US125, and lacking in essential social services. The thrust of Gusmao's speech makes clear that the policies of any government he heads will be directed at attracting investment, not alleviating unemployment and poverty. He pledged to expand the infrastructure and keep the “recruitment of public servants... strictly within budget limits, for a rational management of human and financial resources”.

Gusmao stressed the connections of the CNRT to East Timor's former colonial ruler, saying “the solidarity between the Peoples of Portugal and East Timor is unbreakable”. Indeed a consortium of major Portuguese companies was set up this week to exploit any commercial opportunities that may open up in East Timor.

Known as the Societdade para o Desenvolvimento de Timor Loro Sae, it includes Portugal's largest bank, the state-owned Caixa Geral de Depositos; the national energy company Electricidade de Portugal (EDP); Portugal Telecom SA (PT); airport management ANA; and the Lisbon Port Authority. The state-owned oil company Petrogal (E.PTP) is expected to announce next month whether it will join the group—a move that would strengthen any bid for a share in the Timor Gap oil.

Like national liberation leaders around the world, Gusmao has changed his army fatigues for a business suit as he seeks to drum up investors by offering them the cheapest labour and the most favourable conditions.