Newly independent East Timor has sworn in a new government to tackle the enormous task of rebuilding the country's ravaged economy.

President Xanana Gusmao, himself inaugurated shortly after midnight (1500GMT) on Sunday, swore in a 24-member cabinet in the capital, Dili, on Monday morning as the country awoke from an all-night party.

Mr Clinton said the US was not 'sufficiently sensitive' in the past

The new territory quickly received an economic lift, with Prime Minister Mari Alkatiri signing a lucrative oil deal with Australia under which East Timor will get 90% of the revenue from a jointly controlled area of the Timor Sea.

And at the parliament's inaugural session, Mr Alkatiri presented the programme of his new government, stressing that his main spending priorities would be health and education.

Over the next three years, he said, the amount spent on these essential services would increase to almost half the national budget.

Earlier, Mr Alkatiri also emphasised "the importance of the policy of national reconciliation as an essential base for national stability".

East Timor was terrorised by pro-Indonesian militias during the vote for independence in 1999, and President Gusmao wants to rehabilitate these former militia members into East Timorese society.

The legislature also voted to sign the UN Universal Declaration of Human Rights and become the newest member of the 189-strong world body later this year.

East Timor is already forging links abroad.

	East Timor key facts: Population of 800,000 Asia's poorest country Languages include Tetum, Portuguese and Indonesian 90% Roman Catholic See also: East Timor's economic challenge

China announced that it had become the first country to strike up diplomatic relations with the new country, as former US President Bill Clinton raised the stars and stripes at the new US embassy.

Mr Clinton acknowledged after the ceremony that the US could have done more after Indonesia's invasion of East Timor in 1975.

"I don't believe America or any of the other countries were sufficiently sensitive in the beginning or for a long time," he told reporters.

Desperate poverty

East Timor's economy was seriously damaged by the violent Indonesian withdrawal in 1999 and by centuries of neglect as a Portuguese colony.

International donors - particularly former colonial power Portugal - have made an extra $360m available to help in East Timor's construction.

The BBC's Jonathan Head, in Dili, says that among the problems East Timor faces are its isolation, its lack of infrastructure and its poorly educated population.

But if agreements are signed with Australia to cover the other oil fields in the region, East Timor could receive a windfall of billions of dollars over the next two decades.