[East Timor's President Xanana Gusmao has made clear for the first time that former militia leaders returning from exile in West Timor will not be granted amnesty for their role in the violence surrounding the independence referendum in 1999. President Gusmao clarified his views on reconciliation during his first official state visit – to Australia – since East Timor's independence last month. President Gusmao has met Prime Minister John Howard, downplaying their differences over the crucial issue of maritime boundaries.]

Presenter/Interviewer: Finance Correspondent Karon Snowdon

Speakers: Australian Prime Minister John Howard; East Timorese President Xanana Gusmao; East Timorese Foreign Minister Jose Ramos Horta

Snowdon: East Timor's new president had intended to make his first state visit to Indonesia, the country which had jailed him for seven years as the leader of the resistance movement which fought against its brutal occupation.

But, despite President Megawatti Sukarnoputri's important symbolic attendance at East Timor's Independence celebrations last month, Jakarta cancelled Gusmao's visit at short notice.

Nevertheless, East Timor's priority is understandable. Indonesia remains the most important neighbour to the new and impoverished nation. So Australia becomes the first stop for a state visit by default.

Howard: The friendship and committment of the Australian people in so many ways to the people of East Timor is well known and I have had the opportunity this morning of reaffirming that to President Gusmao and to his Foreign Minister Mr Jose Ramos Horta.

Gusmao: It is part of our effort to start this relationship with our neighbours in the Pacific and in Asia and Australia is actually the first country that we came to visit to talk about the future.

Snowdon: Australia and East Timor signed the landmark Timor Sea Treaty on Independence Day, dividing revenues from oil and gas resourcess in the joint development area 90-10 in East Timor's favour. It will provide the lifeblood of East Timor's economy in a few years time.

But, the Treaty remains under a cloud as East Timor insists new maritime boundaries must be negotiated along with the spoils from other oil fields.

Australia decided shortly before the treaty signing that it would not participate in the international court of justice if a dispute arose, although it denied the two issues were related at the time. President Gusmao dealt diplomatically with the issue at a press conference after his meeting with John Howard.

Gusmao: The two governments will do everything to get a resolution with a mutual benefit and respecting each others sovereignty. And he was backed up by Foreign Minister Jose Ramos Horta.

Horta: Our position on maritime boundaries has been made very clear by our Prime Minister. We intend to initiate negotiations with Indonesia on maritime boundaries very soon. The Indonesian side is very determined to settle maritime boundary existing with other countries. In regard to Australia we haven't even started negotiations, we will talk with Australia to find a settlement which wil be satisfactory to both sides.

Snowdon: Australia has in the recent past put maritime boundary negotiations in the too-hard basket in part because of the necessary involvement of Indonesia.

At home in East Timor one of the nation's major concerns revolve around the repatriation of the 50,000 East Timorese remaining in West Timor where a quarter of the population fled or were forced to in 1999.

The return of the refugees and the reunification of East Timor is almost a crusade for President Gusmao. But perhaps for the first time he has made his views clear on what he meant when in the past he's insisted on reconciliation with former militia leaders.

Gusmao: They already know that when they come back to East Timor there will be a trial. It will not be reconciliation without justice, they know this. We started a new phase of reconciliation that they agree when they come back to East Timor there will be a trial, they will face trial.

Snowdon: Negotiations are underway with some militia leaders to have them return in order that the thousands they control in the refugee camps can also return home. And its likely draft legislation could soon to be put to the East Timor parliament which includes reduced jail terms for some crimes committed in 1999.