Jenny Grant, Dili – Tension rose in the East Timorese capital of Dili yesterday as students entered their third day of protests against Indonesian rule. Two thousand students marched from the University of East Timor to the parliament building where they met legislature officers and demanded a referendum.

Most shops in Dili were shut until late afternoon for fear trouble would break out. Government offices closed early in response to the demonstrations, which have brought around a tenth of Dili's 100,000 population on to the streets this week.

Ethnic Chinese and Javanese shopkeepers say they are taking a wait-and-see approach to the protests. "We are not sure about this referendum," said Heru, a Javanese trader whose shop was closed for business. "We just want to do our business, but the line between us and them is getting wider."

Non-East Timorese are nervous after scores of angry mourners rampaged through Dili General Hospital on Wednesday night targeting patients who were not locals. The mourners were carrying the body of a murdered youth, Herman dos Reis Soares, to the hospital to demand an immediate autopsy.

Soares was shot dead by a soldier outside the town of Manatuto on Tuesday night while gathering firewood. Sources said that when doctors asked the crowd to leave, they ran through the wards ripping out intravenous drips from patients who were not East Timorese. Some patients fled with their families.

Despite the shooting incident and the unprecedented protests that have followed, the usually highly visible military has opted to stay in its barracks. "The military is keeping a very low profile because they are scared that a heavy presence could cause all hell [to break loose]," one source said. However, students said there was an increased number of intelligence officers wearing plain clothes on campus.

Unfounded rumours that two East Timorese students being held in police detention in Jakarta had been murdered were also fuelling anger. The birthday today of jailed resistance leader Xanana Gusmao may also serve to heighten tension this weekend.