It was a colony of Portugal until 1975, when Portugal pulled out. Then, with the (still largely unacknowledged) encouragement of Australia's Labor Government at the time, it was annexed by Indonesia.

The Indonesians raped, pillaged and squandered the country for the next 25 years until Indonesia became a democracy. With the inevitable freer press and self examination which comes with democracy, support for the continued occupation dropped, and after some military posturing and international tantrums, they gave up the territory in 2000 - after stealing everything which they could take with them and destroying as much infrastructure as they could.

For several years it was in the custodial control of the UN, with the obligatory puppet government, and it was granted independence in 2002.

It has been on the international welfare tit ever since, and will stay that way indefinitely.

In an effort to keep control in the hands of the elites, the custodial government made the official language Portuguese - which is only spoken by the elites - not by the majority of the population. As a result the mechanism of making laws is unwieldy to the point of dysfunction.

The most important requirement for prosperity is secure private property rights - which requires a properly functioning legal system. By sabotaging this to retain power they have destined their people to poverty.

This works in the interests of Australia because they can afford to prop up the government, which in turn will keep the East Timorese both poor and under control. Australia thus avoids the political and diplomatic uncertainties of having a powerful neighbor.