Lisbon – East Timor, one of the world's poorest countries, on Monday called on rich nations to boost international aid and reduce their trade barriers in order to help lift developing countries out of poverty.

"We believe there is a clear need for rich nations to redefine their aid policies," East Timorese President Xanana Gusmao said after receiving a peace prize at a ceremony held in Portugal's parliament.

Rich nations should raise their international aid contributions to at least 0.7 percent of their gross domestic product and should implement more debt forgiveness progams for the most heavily endebted nations, he said.

"Lastly, greater access to the markets of rich nations should be given by lowering customs duties which are sometimes excessive and by simplifying trade procedures," said Gusmao. Farm subsidies in rich nations should be lowered as they "put poorer nations at a great disadvantage and help maintain poverty levels," he said.

Gusmao said poverty prevented many nations from consolidating their fragile democracies – and he singled out regional neighbours the Philipines and former colonial ruler Indonesia as two nations which were in particular need of help. "Today these two nations, especially Indonesia, face gigantic challenges to be able to proceed towards democracy," he said.

The pan-European rights watchdog Council of Europe awards each year to defenders of human rights, democracy and the partnership between rich and poor nations. The ceremony was presided over by Portuguese President Jorge Sampaio.

Gusmao said that while the establishment of education and health services was an important goal for poor nations, development plans must also focus on boosting growth. "If not there is a risk of building thousands of educational establishments but children do not go to school because their parents can not afford to pay the fees," he said.

Upon independence from Indonesia just over a year ago, East Timor was the poorest country in Asia. The economy in the former Portuguese colony is contracting and is still greatly reliant on foreign assistance. Forty percent of the population lives below the poverty line of about 55 cents a day.

Speaking at a press conference after receiving the award, Gusmao said the Timorese people were "aware of the long road they still have to walk" in order to become a fully functional state. Gusmao received two other peace prizes last week. On Thursday he was awarded the "Path to Peace Foundation" prize in New York after having received UNESCO's "Felix Houphouet-Boigny" Peace Prize two days earlier in Paris.

Former recipients of the United Nations Educational, Scientific and Cutlural Organisation prize included Jimmy Carter and Nelson Mandela.

Gusmao, who returns to Dili on Wednesday, led the guerrilla resistance to Indonesian troops for 11 years until he was captured in 1992. He spent seven years as a prisoner of Jakarta but has worked for reconciliation since assuming the presidency of the new nation in May last year.

Pro-Jakarta militias, backed by the Indonesian military, waged a campaign of intimidation before East Timorese voted in August 1999 for independence, and a scorched-earth revenge campaign afterwards. At least 1,000 people are estimated to have died and whole towns were burnt to the ground.