The Australian government is standing by its aid program in East Timor after a scathing assessment of the performance of donors by Prime Minister Xanana Gusmao.

At a conference of development partners in Dili, Mr Gusmao lashed out at donors, accusing many of squandering aid budgets on their own consultants. But East Timor itself is also coming in for criticism, about its own wealth from resources and how that should be spent.

Presenter: Elizabeth Byrne

Speakers: Professor Stephen Howes, development economist, Crawford School of Economics and Government, Australian National University; Stephen Smith, Australian Foreign Minister

Byrne: Xanana Gusmao's speech takes a wide aim at its donors from the recent US embargo on the port of Dili to the division of Timor Gap spoils by Australia and Indonesia in the late 1980s. Development economist Stephen Howes from the Australian National University says the frustration stems from East Timor's slow development.

Howes: The fact that it has now been independent for more than ten years but half the population still lives in poverty. And I think even more than that the fact that they've got all this oil revenue but that they are not able to convert that into development success. I think that's at the root of this frustration and at the root of this outburst.

Byrne: East Timor remains the world's youngest country. Its growing pains are palpable, reaching a low point in 2008 when the President Jose Ramos Horta was shot. It was just one of many symptoms of East Timor's troubles. Mr Gusmao has blamed donors for not doing enough to help the country progess. He's accused them of providing only technical assistance, with some insisting it be in areas of their choosing. He says others promise assistance which doesn't eventuate. Only a very small number agree to make physical investments, and he says, most of the money goes to their own consultants. East Timor's major donor, Australia, rejects the criticism. Foreign minister Stephen Smith.

Smith: I'm very comfortable with the support we give to East Timor to build the capacity to manage their affairs and to improve the service delivery to their people.

Byrne: Mr Smith wouldn't be drawn though on a scathing assessment in Mr Gusmao's speech on Australia's wider history with East Timor, going back to World War Two.

Smith: I'm not proposing to engage in a running commentary about Australia or East Timor or Indonesia's view of history.

Byrne: Stephen Howes says the most important thing will be security.

Howes: Having a military presence and a police presence, I think that is very important to maintain long term so that East Timor isn't allowed to slide back into basically what was a civil war a few years ago.

Byrne: And he says how the country uses its resources revenue will also be critical.

Howes: If East Timor can maintain stability and I think it can only do that with long-term help from donors then it has at least the potential to convert this oil revenue into development benefits for the people. It's not easy. And a lot of small, resource-rich countries suffer from the resource curse. So I don't think it's going to be easy. But it's going to be impossible without internal security and stability. And I think that's the key role which the donors have to provide long term.

Byrne: Xanana Gusmao has also used the speech to propose his own strategic plan for the future. He wants East Timor off the list of fragile states and to become a medium income country within 15 to 20 years.