Australia’s draw-down of its remaining military force in East Timor, and the conclusion of the United Nations mission on December 31, has signalled that this sometimes troubled tiny country is now responsible for its own future. The stark realisation that the security blanket provided by the international community is being taken away has left some in East Timor feeling vulnerable.

Some observers, too, have suggested that the withdrawal is still too soon and that East Timor still has the potential to slide back into internal conflict. The country’s leaders, however, have been making clear they are not only ready to take full responsibility for their own affairs but are demanding to do so.

In this, Australia’s continuing military presence is regarded by some East Timorese as neo-colonial, and the UN as of marginal competence or value.

The assertion of confidence displayed by the country’s leaders, including Prime Minister Xanana Gusmao, has been growing since not long after the 2007 elections. Despite occasional outbreaks of localised violence, East Timor has remained largely calm over the past five years.

Many of the disaffected groups that were potential spoilers for peace, such as veterans and former members of the defence force, have been mollified with cash payments. The 15% of the population that were internally displaced have long been sent home, also with cash payments; the drought has broken and few East Timorese now starve.

This year’s successful elections were, in the eyes of many, the finishing touch for the transition towards post-conflict stability.

However, East Timor faces some longer-term challenges that could derail its current sense of stability. The most critical of these is the unsustainable use of the country’s $11 billion petroleum fund, the interest from which is supposed to pay for government activities and hence flow through to the rest of the nation. The fund is currently being used at around three to four times its sustainable rate.

Gusmao argues the country desperately requires infrastructure development, which is expensive. This is true, but it is also true that the urgency to spend money has led to budget blow-outs and high levels of waste. And, at the current rate of expenditure, assuming no other source of major economic activity, East Timor would be broke in around 15 years.

East Timor’s population explosion, too, is a ticking time bomb. There are too few jobs now, and there will be proportionately fewer in the future. Very large numbers of unemployed men is a recipe for future discord.

For the moment, though, the country is in relative balance, Australia’s military presence is no longer needed or wanted and the UN’s marginally competent paternalism is coming to an end. From an Australian perspective, it is also time to switch focus less to peacekeeping and more to development assistance.

As with any developing country, there will be major challenges ahead for East Timor. It will require all of the wisdom of its now ageing leadership to navigate through them.

*Professor Damien Kingsbury is personal chair of Deakin University’s School of Humanities and Social Sciences