Former East Timor independence fighter Xanana Gusmao has been sworn in as prime minister after his party won the parliamentary election in May.
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Crowd cheered as the former guerrilla leader travelled by motorcade to the presidential palace in Dili, the capital, where he and his members of cabinet were sworn into office by President Jose Ramos-Horta, his fellow independence fighter during Indonesia's occupation.
The new government is a coalition between Gusmao's National Congress of the Reconstruction of East Timor, known as CNRT, and the Democratic Party.
Gusmao, 77, became the country's first president between 2002 and 2007, and served as prime minister between 2007 and 2015.
In the May election, his party won 41 per cent of the vote to capture 31 out of 65 seats in the parliament.
That is just short of the 33 needed for an outright majority, and Gusmao agreed to form a government with the Democratic Party which won six seats.
The election result indicated deep dissatisfaction with the previous government, led by the Revolutionary Front for an Independent East Timor, known as Fretilin.
Gusmao faces an uphill battle in tackling economic challenges as nearly 42 per cent of the country's estimated 1.5 million people live below the poverty line.
The United Nations estimates for every 1000 babies born in the country, 42 die before their fifth birthday because of malnutrition.
Gusmao vowed to reduce poverty through his government's strategic development plan and reiterated the importance of national reconciliation and unity to achieve the development goals.
"I promise to carry out the tasks that the people have entrusted to me and to bring prosperity to the Timorese people through government programs," Gusmao said at the swearing-in ceremony.
He pledged to provide opportunities for local governments to design their own development programs, including those to improve health services for mothers and children.
Indonesian President Joko Widodo's envoy, Co-ordinating Minister of Maritime and Investment Luhut Binsar Pandjaitan, and Singapore's Foreign Minister Vivian Balakrishnan were among those who attended the inauguration.
East Timor has a significant young population - 65 per cent are below the age of 30.
It is also among the world's most impoverished.
More than two decades after receiving formal independence in 2002, there is a lack of basic infrastructure including a reliable electricity supply and paved roads in rural areas.
"He has a charisma and rich experience as a leader," a Dili resident, Joao Agustino Sarmento, said of Gusmao.
"But we want to see him make more significant changes with his new government to overcome poverty and unemployment that still face our country."
East Timor's transition to a democracy has been rocky, with leaders battling massive poverty, unemployment and corruption.
The economy is reliant on dwindling offshore oil revenues.
Australian Associated Press
