Jakarta – East Timor said on Monday it wants its land border with Indonesia to be gradually de-militarised and hopes all frontier disputes with its former ruler can be solved by next year.

The tiny territory voted overwhelmingly to split from Jakarta's rule in 1997 but the vote unleashed an orgy of killing by pro-Indonesia militia gangs, some of whom still exist in the border areas.

After the vote the militia herded around 300,000 people across the border into Indonesian West Timor and although most of these have now returned, security is tight on both sides of the frontier.

"The East Timorese government attaches great importance to continuing the process of border demarcation. I would like to suggest that we agree on a line that constitutes the border by mid-next year," Foreign Minister Jose Ramos Horta said at the opening session of a two-day meeting with Indonesian officials.

"It's the common vision of President Xanana Gusmao and our government that our relations develop in such a way that we can come to a gradual downsizing of the military on both sides of our border," the minister said, in discussions that will also focus on trade and other issues.

Besides the militia threat along the 50 km land border, some East Timorese still stay in the few remaining refugee camps in West Timor due to fear of retaliation back home because of their past links with Jakarta.

East Timor, a former Portugese colony, formally celebrated its independence on May 20 and was accepted as the 191st member of the United Nations late last month.

The United Nations, which ran the territory after the 1997 vote and until formal independence, estimates around 1,000 people were killed in the mayhem surrounding the independence ballot.

Although the United Nations has now transferred power to the new government, led by independence hero Gusmao, a peacekeeping mission remains there as the country grooms its new leaders.

The half-island nation of 760,000 people is Asia's most impoverished and the 20th poorest in the world.

During his opening remarks Horta also said East Timor sought a free trade area uniting its people in the east and the Indonesians on the west side of Timor island, which lies 2,000 km east of Jakarta.