Lindsay Murdoch – Dan Murphy says he used to "stack the bodies" in his clinic in Dili in 1999 when he was one of only a few doctors in then Indonesian controlled East Timor.

Four years after the tiny territory gained its independence, the American doctor says he has not seen much change in the health of the Timorese.

"I still see malnourished children. I still see tuberculosis, malaria, and the spread of HIV is unimaginable," he says. "I'd like to say that the health of the people has improved, but in some areas it actually got worse."

The sick start queueing to see the tall, bearded man they call "Dr Dan" in Dili's misty pre-dawn outside a cluster of ramshackle buildings that serve as his clinic. By nightfall, 61-year-old Dr Murphy and several volunteer doctors will have seen up to 500 people.

"Are people happier now? Yes. In the Indonesian time people were frightened ... numb with fright," Dr Murphy says. "Now people go to the drinking wells and talk.

Even though they don't have a lot and life is a struggle they are not under anybody's boot. But the problems continue despite people gaining their freedom."

Dr Murphy says one of the biggest concerns is a population explosion – 5 per cent last year.

"More and more people are sleeping in little houses with poor ventilation and hygiene – these are perfect conditions for the spread of infectious diseases," he says. "Not much has changed in the mountain villages. And in Dili and the towns, people still can't find jobs. Only an elite few get to work for the foreign companies."

United Nations statistics show that freedom has not alleviated widespread poverty in the world's newest nation and, in fact, it might be worsening.

The UN Development Program's National Human Development Report 2006 reveals that half the population lacks safe drinking water, 60 of 1000 infants born alive die before their first birthday. Life expectancy is only 55 years of age and per capita income – at $US1 ($A1.40) a day – is declining.

But the report says that East Timor can still achieve its goal of reducing poverty by one-third, largely by raising production in agricultural areas where most of the population still lives.

The country's poverty is not deepening because of a lack of money. Existing oil and gas projects in Timor Sea will deliver an estimated $US8 billion by 2030.

But the problem is that government departments, built from ashes since 1999, do not have the human or institutional capacity to spend the money on desperately needed services.

This will be the main focus of representatives of donor countries, including Australia, who meet in Dili next week.

Dr Murphy says that health services are improving. "There are doctors in rural areas where they never have been before," he says. "But the problems are so immense."

Government ministers, diplomats and business people interviewed by The Age in Dili this week were adamant that despite growing tension and sporadic violence in the capital since last weekend, the country is not entering a period of prolong instability.

The trouble was linked to the recent sacking of 591 soldiers – more than one-third of the fledgling army. "The glamour that came with independence is gone," a diplomat said.

"The pillars of democracy are in place but now it's down to the hard grind. The false economic boom that came with the huge influx of United Nations personnel and aid workers has troughed as they have gradually left."

In the mountains and valleys outside Dili, people struggle to find enough food, just as their ancestors did during 400 years of rule by the Portuguese and 25 years under Indonesia's often brutal occupation.

Antonio Soares, 45, collects wood along the road that hugs the coast east of Dili. "Life is just as hard as it was during the Indonesian time," says Mr Soares.

"The difference between now and the Indonesian time is that I have the freedom to do whatever I want whenever I want to ... that is important to me."

East Timor four years on

• Life expectancy 55 - not improving.
• Half the population do not have enough access to safe drinking water.
• 60 per cent do not have adequate sanitation.
• 60 out of every 1000 babies die before their first birthday.
• 56 per cent of men and 43 per cent of women are illiterate.
• Between 10 and 30 per cent of primary school age children do not go to school.
• Per capita income – at $1.40 a day – is declining.

[Source: United Nations Development Program's Timor Leste Union Development Report 2006]