Dili – East Timor, preparing the way for eventual independence, will hold its first democratic elections on August 30, the head of the United Nations transitional authority said. Formal independence is not expected until later this year or in 2002.

"This electoral law and its provisions for the participation of political parties are surely the most open and democratic in the world," UN transitional administrator Sergio Vieira de Mello said after signing the regulation into effect on Friday. The date will mark the second anniversary of the overwhelming vote in favour of ending 23 years of often savage Jakarta rule.

That was followed by the near destruction of the tiny territory by Indonesian military-backed gangs as they fled across the border and a United Nations administration took over.

East Timor's estimated 400,000 eligible voters will elect an 88- member Constituent Assembly with each of the country's 13 districts electing by majority vote one representative. The other 75 members will be elected by proportional representation. The assembly then has 90 days to prepare and adopt a constitution.

"This is an historic moment ... all political leaders and the whole of East Timor are fully committed to this process and are well aware of the difficulties we face," said Xanana Gusmao, independence leader and the man most expect to become East Timor's first president.

Officials are already warning that the former Portuguese colony may not make formal independence as hoped by the end of this year.

"This could happen by the end of this year or, if we see that some of the conditions that are essential for the foundation of independence are not there yet, we could very well postpone until 2002," foreign minister under the UN administration, Jose Ramos-Horta, said on Friday in Tokyo.

He repeated his view that since East Timor had already waited 500 years for its freedom, a few more months did not matter that much.

There have been growing signs of violence in the impoverished territory which is still struggling to recover from the sacking by pro-Jakarta militias following the 1999 independence vote.

Earlier this week, UN riot police were called in to quell gang violence in the small town of Viqueque, a senior officer said on Tuesday. That came just one week after the worst rioting since Indonesia's military rule ended.