Dili – East Timor's government promised Tuesday to tackle the fledgling state's chronic youth unemployment but warned that a repeat of last week's deadly and destructive riots would only drive foreign investors away.

"The priority is now on education and health and how to help market the produce of the people ... and also open employment for the youth," said Prime Minister Mari Alkatiri after a two-day meeting of the new country's leading foreign donors.

He urged young people to halt destructive actions, otherwise "investors will leave."

Hundreds of people rampaged across the city last Wednesday, burning buildings and vehicles and looting shops in unrest that was triggered by the arrest of a student. Two people were killed and 25 injured.

Analysts have blamed widespread unemployment and unmet expectations since independence in May. But some also said that unidentified provocateurs, possibly with a political agenda, had stirred up and organised the unrest.

The donors' conference, jointly organised by the government and the World Bank, was the first since independence on May 20 and the sixth in a series since 1999, when the country was still under United Nations tutelage.

At the previous meeting on May 15 international donors pledged some 360 million dollars over three years in new aid for East Timor, Asia's poorest nation.

Alkatiri told a press conference that no new pledges were made at this meeting which he called an "evaluation" session.

World Bank vice president Jemaluddin Kassum said that despite the many challenges faced by the young nation, donors pledged continuing commitment to help it develop.

The head of the United Nations Mission of Support in East Timor, Kamalesh Sharma, had told the donors' meeting on Monday that unemployment in urban areas remained high, particularly among young poeple.

Unemployment is estimated at 43 per cent in Dili and Baucau, the second largest town.

Sharma said 41 percent of East Timor's 800,000 people are living below the poverty line. Three-quarters of the people depend on agriculture for a living

Nearly half the adult population has difficulty in reading and writing, he said.

Despite these sobering figures, Sharma said the government and people have made significant progress in economic and social terms.

He said agricultural production and gross doemstic product had recovered to pre-1999 levels and primary school enrolment has reached 95 per cent.