East Timor will need to tackle security sector reform to get back on track after deadly unrest earlier this year, the International Crisis Group (ICG) said in a report.
The tiny four-year-old nation descended into chaos in April and May after the government's dismissal of more than a third of its armed forces, who deserted their barracks complaining of discrimination.
Protests degenerated into battles between rival factions of the military and police and rival street gangs, killing more than 30 people according to the ICG toll. More than 3,200 peacekeepers were deployed to restore security.
"Resolving the crisis will depend on comprehensive security sector reform and better oversight of the courts," the report from the Brussels-based think tank said.
"But with elections due in May 2007, it will also depend on reform within the dominant party, Fretilin, and on the willingness of key political actors to sit down together and agree on solutions," it said.
Robert Templer, ICG's Asia Program director, said that the "crisis escalated in part because there were no checks on individuals with personal interests and private power bases. "The way out is through institution-building precisely so that the actions of individuals will not carry so much weight."
The roots of the crisis, the report said, lay partly in tensions within Fretilin before and during Indonesia's occupation of East Timor. The East Timorese voted for independence from Indonesia in 1999.
"Ideological and political disputes in the 1980s and 1990s, particularly between Fretilin central committee members and (now President) Xanana Gusmao, then commander of the guerrilla army Falintil, carried over into the post-conflict government," it said.
Another seed was planted when Falintil fighters were demobilised in 2000. A new defence force absorbed some but left others unemployed and resentful as the international community focused on the creation of a new police force.
"That many of the police, vetted and retrained, had worked for the Indonesian administration, was more salt in the wounds of the ex-fighters," the report said.
Rivalry between the largely powerless Gusmao committed to democratic pluralism and a ruling party with authoritarian tendencies was another factor, it said.
Former interior minister Rogerio Lobato – who now faces weapons distribution charges – was singled out by the ICG for his manipulation of the tensions.
"As interior minister, he controlled the police force, encouraged rivalry with the defence force, most of whom were personally loyal to Xanana Gusmao, and created specialised police units that effectively became a private security force," the ICG said.
"The police under him were in charge of law and order, border patrol, riot control and immigration. It was never clear what the role of the defence force was."
The report comes ahead of the release of a UN-appointed Independent Special Commission of Inquiry, which is expected later this month and will likely name those behind the worst incidents of violence this year.
It warned that the release of the UN report could trigger demands for instant justice which Dili courts are ill-equipped to provide.