East Timor debuts on world stage

The Democratic Republic of East Timor is born as the U.N. flag is lowered...

DILI, East Timor (CNN) -- The Democratic Republic of East Timor became the world's newest nation Sunday, in a ceremony in capital of Dili.

At midnight local time, the flag of the United Nations was lowered and the red, black and gold flag of East Timor rose in its place.

"We have been waiting for this for more than 20 years," said a man named Antonio, 40, who had traveled all day from his home in the town of Baucau just to see the ceremony. He joined a crowd here estimated at 200,000-strong.

Shortly after the new flag was raised, East Timor's president-elect, former guerrilla leader Xanana Gusmao, was sworn into office.

...and the East Timorese flag is raised in Dili.

Earlier, as the evening ceremony began, images of East Timor's long and bloody struggle for independence from Indonesia were broadcast to the crowd on huge TV screens. Many broke into tears as they saw the pictures, but let out loud cheers when images of Gusmao appeared.

For the vast majority of East Timorese, Gusmao is the hero of the resistance against Indonesia – the main reason why some 80 percent of voters cast ballots for him in last month's presidential election.

Joining the huge crowd were representatives of some 90 countries, including many former and current national leaders.

The handover of power was made by U.N. Secretary-General Kofi Annan.

According to an advance copy of his inauguration speech, Gusmao will tell Indonesian President Megawati Sukarnoputri that "the strains in our dealings (were the) result of a historical mistake which now belongs to history and to the past."

CNN NewsPass VIDEO CNN's Atika Shubert reports on how observers are rating the performance of the United Nations as it prepares to hand over administrative duties to a newly independent East Timor. Play video • East Timor video archive    IN-DEPTH East Timor: Birth of a Nation    WEB MOVIE Flash intro: Birth of a Nation    RESOURCES Photo gallery: Voices of Timor  Photo gallery: Countdown to a new nation    PROFILES • Xanana Gusmao  • Jose Ramos-Horta  • Bishop Belo    EAST TIMOR • Timeline: Road to nationhood  • Country profile     East Timorese flag Black: Centuries of colonial rule. Red: Blood shed by East Timorese people. White star: Hope for the future. Arrowhead: Struggle for independence.

"This past," he will say, "should not continue to stain our spirits or to hamper our attitudes and conduct."

Megawati is scheduled to spend just a few hours in East Timor Sunday night, during which time she will lay a wreath at an Indonesian military cemetery before joining representatives from more than 90 nations at the formal independence ceremony.

Most of the soldiers buried in the Indonesian cemetery died fighting Gusmao's Falintil guerrillas.

Indonesia ruled East Timor with an iron first for almost a quarter of a century after it invaded the former Portuguese colony in 1975.

In the following years more than 200,000 East Timorese -- about one quarter of the 1975 population -- were killed or died from famine.

As a result Megawati's visit has sparked perhaps the most interest out of any overseas delegations as well as a high level of security.

A fleet of bulletproof cars has been shipped in by Indonesian president security guards, along with an ambulance, helicopters and a fully equipped ship-born medical clinic.

Emotions high

Almost every East Timorese knew someone who was killed in the struggle against Indonesian occupation and for many the handover of power will be an emotional time.

In the run up to independence East Timorese across the country have been preparing to celebrate their new-found nationhood.

The streets of the normally sleepy capital, Dili, have echoed with car horns and police sirens as motorcades whisk visiting VIPs from the airport into the city.

Across the city the new East Timorese flag is being flown and local radio stations are filling the airwaves with songs revolving around the theme of freedom.

Speaking to reporters at the airport upon his arrival Sunday, Annan called on the world to welcome East Timor's transition to an independent nation as "a moment of pride and liberation."

U.N. Secretary-General Kofi Annan and East Timor President Xanana Gusmao hug after the handover of power.

"This moment belongs, above all, to the people of East Timor who have so richly earned their freedom."

Former U.S. President Bill Clinton, one of many international leaders in Dili for the independence celebration, also praised the "first new nation of the 21st century."

"Tomorrow, the hard work of a free people facing daunting challenges begins," he said.

"The world, including the World Bank, East Timor's neighbors, the United States, must help in facing those challenges. But the people of East Timor will forge their own future."

Prayers

Earlier, East Timorese Nobel Peace laureate Bishop Carlos Belo led the new nation in prayers for peace.

In a dawn mass held at the bishop's residence he asked the congregation to pray for the new government and its recently elected president, Xanana Gusmao, to guide East Timor towards a better future.

"We hope that the Holy Spirit will come to all the people of East Timor so they can celebrate independence in peace," he said.

East Timor is a devoutly Roman Catholic country and for many East Timorese the church has been the sole source of hope during the years of violence that have wracked this small nation.

Among those in the Dili congregation were diplomats and several members of the new East Timorese government, including Belo's fellow Nobel Peace laureate, Jose Ramos Horta.

Ramos Horta, who holds the post of foreign minister in the new nation's government, said after the ceremony that he felt "simply great."

Gusmao delivers his first speech as East Timorese president, calling for reconciliation with Indonesia.

He said the raising of the East Timorese flag at midnight Sunday and the formal handover of power from the United Nations would mark "a new beginning for East Timor -- but with many challenges ahead."

"We have a lot of work to do to find jobs for those who need them," he said.

Bishop Belo is expected to lead another mass later in the day at which he will formally bless the new East Timorese flag ahead of the independence celebration.

U.N. presence

For the past two and a half years the U.N. flag has flown over East Timor as the organization helped guide reconstruction efforts following the violence that surrounded the independence vote in 1999.

Then heavily armed pro-Indonesian militia, backed by their supporters in the Indonesian military, went on the rampage after East Timorese voted overwhelmingly to cut ties with Jakarta.

Their efforts left much of the country destroyed, forced hundreds of thousands to flee their homes and left unknown numbers dead.

Sunday night's ceremony marked a formal end to East Timor's ties with Indonesia and set it on course as a fully fledged democratic nation -- albeit one of the world's poorest.

The new country faces massive social problems, not least of which an unemployment rate estimated at 70 percent and high rate of illiteracy.