President Xanana Gusmao has distanced himself from comments made by Dili's prime minister, Mari Alkatiri, on the non-payment of compensation to Indonesians whose property was destroyed or appropriated after they left East Timor.

In an interview published Friday in the Portuguese weekly "O Independente", Gusmao said that the question was a delicate one that "involves material loss, and more seriously, loss of human life".

"It is better for the two parties to sit down together to discuss the problem", said Gusmao, rather than isolated statements being made that "could cause major damage to relations between the two countries".

Gusmao said that earlier comments by Alkatiri that he would reject any compensation requests from Indonesians who left goods and property in Timor were "remarks that must be avoided". Dili's head of state also commented on the 40,000 East Timorese refugees still in Indonesian West Timor, telling Independente that "the problem was more about technical and logistical questions than political ones".

Gusmao said a further 10,000 of these exiles would return home by the end of August, although it was not an easy process and the Timorese authorities would have to work closely with the UN refugee agency and the Indonesian authorities.