Tim Johnston – East Timor used to be the poster child for international intervention, but a report published this week by a group of United Nations investigators illustrates just how shallow the veneer of success was and just how difficult getting the country back on track is going to be.

The report investigates the spasm of violence that rocked the country in April and May this year: the police and army fought pitched gun battles with each other, and the civilians they illegally gave guns attacked ordinary people, and in one case burned down a house with six people inside, four of them children.

By the time Australian troops had flown in and imposed a semblance of law and order, at least 38 people were dead, 69 injured, 1650 houses burned and almost 150,000 people driven from their homes. And all this in a country with a population two thirds the size of Brisbane.

It is a murky story of rampant political opportunism, the settling of old scores and the sullen anger of a disappointed and frustrated population. And the result is a schism that has split society down the middle and will be extremely difficult to heal.

But Jaoquim Fonseca, the human rights adviser to the new Prime Minister, Jose Ramos Horta, remains optimistic. "This provided a big political lesson to the people," he says, and not one they are going to forget in a hurry. "The consequences of this crisis are very real for ordinary people." He says that in future East Timorese will take a more cynical view of politicians and politics.

The UN report, by an international commission of experts, is scathing about almost every one of Timor's small political elite. It recommends that the then interior minister, Rogerio Lobato, and the head of the army, Taur Matan Ruak, be prosecuted for handing out weapons to civilians, and that the former prime minister, Mari Alkatiri, be further investigated.

East Timor has weathered problems before, but it has relied on President Xanana Gusmao and the influential Catholic Church to be mediators, and this time they are both seen as having taken sides.

It wasn't supposed to be this way. After the trauma of escaping from Indonesia in 1999, the international community – with a huge contribution from Australia – nurtured the infant nation, providing millions of dollars worth of aid, training and assistance. But it was only a matter of months after the bulk of the international advisers left that the country all but collapsed.

The immediate tension was a split between eastern residents and those from the west, but Fonseca says that was merely the way much deeper problems bubbled to the surface. "The systems were not strong enough, so that when the people were confronted by these issues, their national identity as Timorese was not strong enough to overcome the division," he says.

A recent report by the International Crisis Group (ICG), headed by former foreign minister Gareth Evans finds slightly different roots in the clashes of personality and politics among Timor's elite, many of whom have disliked each other since the 1970s.

But many East Timorese say that although these provided the friction that finally ignited the conflagration, the real fuel was much more basic: East Timor is still one of the poorest countries in Asia. It will take generations to build the economy, and after this week's report it seems they are going to have to do it without much of the political elite, almost all of whom have been tarnished.

Both the UN and ICG reports are scathing about Lobato. The ICG says he had been building up the police force into a personal militia, trying to divide society to create a personal power base regardless of the risk to the country's fragile democracy.

His contribution after a demonstration outside Government House was particularly unhelpful. He arrived at police headquarters wearing body armour, yelling "kill them all". The police then issued him with a machinegun and 2000 rounds of ammunition, although there is no indication he used it.

Lobato is under arrest and being prosecuted. Ramos Horta says the head of the army has accepted the findings of the commission, but one of the most violent rebels is still hiding out in the hills, heavily armed and trying to dictate terms.

The UN special envoy to East Timor has said the country is not a failed state but a democracy trying to find its feet, and Fonseca agrees, saying that although the upcoming trial process will be difficult, it is something the young nation has to go through in its search for a mature identity.