Michael Casey, Liquica – Marie Fernanda remembered hearing the voices of the approaching attackers as her family was fixing dinner three years ago.

Armed with guns and machetes, the band of 100 who opposed East Timor independence from Indonesia called out for her husband, a political activist who supported secession. They ignored her pleas and, in front of their three children, they hacked Herminho dos Santos to death.

He was the first of 50 residents of this farming village to die over two weeks in April 1999, including 40 killed as they huddled for shelter in a Roman Catholic church. The 50 were among the more than 1,000 slain that year as violence exploded across East Timor.

Now, many widows like Fernanda are angry that the killers remain free. "I saw the killers with my own eyes," she said recently. "I want them brought to justice."

As East Timor gains independence from Indonesia at midnight tonight, justice is but one of the challenges that await the world's newest nation.

It also must embrace reconciliation as refugees, some who still strongly oppose independence, return by the tens of thousands; it must try to jump-start an economy beset by a poverty level that rivals Rwanda's; and rebuild a shattered infrastructure.

The UN secretary general, Kofi Annan, will hand over power tomorrow to Jose (Xanana) Gusmao, East Timor's new president, a poet and former guerrilla leader. President Megawati Sukarnoputri of Indonesia, which once imprisoned Gusmao, and former president Bill Clinton are scheduled to attend the ceremonies.

Despite the obstacles, East Timorese seem to be optimistic about their future. "The unity of the people is strong," said Fidel Magalhaes, a 23-year-old UN worker whose father was killed in 1999 by anti-independence militiamen. "We want to rebuild our country. People are tired of war."

East Timor had expected independence in 1975, when Portugal ended a 400-year occupation. Instead, Indonesia invaded and annexed the territory, with the tacit support of the United States. The invasion began a 24-year reign of terror that is believed to have left 200,000 dead.

With the fall of President Suharto in 1998, East Timor got a second chance at independence when it voted to secede in a UN-sanctioned referendum on August 30, 1999. After the vote, pro-Indonesian militia and Indonesian security forces went on a rampage.

In addition to the killings, 250,000 people – a third of the population – were forced into squalid refugee camps in West Timor, which is still controlled by Indonesia. As much as 80 percent of the province's infrastructure – including churches, government offices, factories, and schools – was destroyed.

The turmoil eased a few weeks later when a UN multinational force arrived. And in October 1999, the UN transitional authority began running the country until independence.

After more than $2 billion in international funding, East Timor now appears ready to go solo. It has chosen a language and a currency – Portuguese and the US dollar – and an administration is in place.

Militias are no longer a threat, and human rights trials are under way in Dili, the East Timorese capital, and in Jakarta, the Indonesian capital, for suspects in the 1999 violence. (Among those charged is Armando dos Santos, a militiaman charged in connection to the Liquica church massacre.) More than 200,000 of 250,000 refugees have returned.

Dili, once a sleepy port city, is emblematic of the country's transformation. The streets are now jammed with traffic, hotels are full, and a building boom is in full swing. Nearly 80 percent of the buildings in Dili have been rebuilt, including the Parliament and the country's premier university.

Yet the country's shortcomings are hard to miss. Some Dili neighborhoods still resemble war zones, dotted with blocks of burned-out schools, offices, and homes.

The poor are conspicuous. Near the port, families live alongside goats and pigs in dirt-floor shacks with no electricity or plumbing. According to a UN report released Monday, 41 percent of East Timorese live on about 55 cents a day, and the average life expectancy is 58.

"I've got to work feed our family," said Natalina dos Santos, 17, whose father was killed in the Liquica church massacre, and who works in a general store that supports women left widows from the violence. "It's difficult to get food."

Gusmao says the poor will be his top priority, pointing to a National Development Plan that sets aside nearly 50 percent of the core budget for poverty eradication, health and education. He has brushed aside concerns from some Westerners who say he should give more attention to human rights investigations.

"If you talk about justice, you see a few people being judged," he told reporters this month in Jakarta, after a meeting with Megawati. "But if you talk about social justice, all our people will be cared for."

The new nation's short-term economic prospects look gloomy. The employment rate is 17 percent, and the economy is expected to shrink 2.7 percent in the next two fiscal years, after growing by 33 percent the previous two years – mostly because of the UN presence.

On Wednesday, the international community pledged $360 million over three years. But most of that money will help fill budget deficits and plug revenue gaps until the country can tap the first of an estimated $7 billion in oil and gas revenues from the Timor Sea in 2005 and 2006. For now, officials are calling on East Timorese to be patient as the government works to diversify the agriculture-based economy by bolstering tourism, fishing, and luring foreign investment.

In a former stockyard turned refugee transit center in Dili, 22 members of an extended family were anxious to return to their farm and the simple life they had once known. They arrived last week from a West Timor refugee camp with little more than the clothes on their backs, a few plastic chairs, and their farm animals.

But they face many obstacles. Their homes in the village of Aileu were torched in 1999, their fields are now overgrown, and one member who belonged to an anti-independence militia faces persecution. But, like other East Timorese, they were eager for a fresh start.

This is my land," said Martiuho Lopes, 60, whose nephew was killed in the 1999 fighting. "I couldn't stay in Indonesia any longer."