East Timor is set to receive more than Aus$7 billion in royalty payments over the next two decades after the signing of a historic resource agreement with Australia.
The deal means East Timor will get 90 per cent of the royalties of oil and gas production in the Timor Sea and Australia 10 per cent.
Australian Foreign Minister Mr Alexander Downer said he recognised East Timor has been left poor and vulnerable after decades of Indonesian rule and it will benefit enormously from the royalties.
"There is no point in us taking a parsimonious approach to East Timor and plunging it into economic difficulties," he said.
"It is not in our interest to do that, it is in our interest to be generous to East Timor."
The new agreement replaces the controversial 1989 Timor Gap Treaty with Indonesia, which was signed when Indonesia controlled East Timor.
Many East Timorese regarded it as a bitter betrayal by Australia.