On the eve of East Timor's independence, the United States plans to resume its controversial and bloodstained military aid programme to Indonesia, the new state's former invader and oppressor.

At midnight, the country will become the world's newest nation after two-and-a-half years of UN rule, 24 years of often brutal Indonesian occupation and more than three centuries of Portuguese colonisation.

The celebrations will be attended by UN Secretary-General Kofi Annan, former US President Bill Clinton, Portuguese President Jorge Sampaio and Australian Prime Minister John Howard. But the person attracting most attention is Indonesian President Megawati Sukarnoputri, long-standing opponent of East Timorese independence.

She was among the first leaders to visit George Bush in the Oval Office after 11 September. And she has been able to take advantage of America's war on terror with the resumption of military aid which Clinton suspended in 1999, after the orgy of killing that followed Timor's independence vote, when it was disclosed that civilians had been massacred by US-trained troops.

Within a week, Bush is expected to present the US Congress with a $16 million package to train and equip counter-terrorism police units and a rapid response force in the Indonesian army. The provision is hidden in a foreign aid Bill mainly concerned with Afghanistan and Pakistan.

Pressure to resume the programme comes from the Pentagon, specifically Deputy Defence Secretary Paul Wolfowitz, a hardline ambassador to Jakarta during the Reagan administration. Defence officials from each country met officially last month for the first time since aid was suspended.

The proposal has invoked an outcry from human rights groups based in the US, Britain and Jakarta and from local activists trying to highlight massacres and other abuses of civilians by the Indonesian military, its cohorts and the police.

Even the Bush administration's State Department report on Indonesia noted that its human rights record 'remains poor - Security forces were responsible for numerous instances of, at times, indiscriminate shooting of civilians, torture, rape, beatings and other abuse'.

Amnesty International described the proposed aid package as 'a green light for the Indonesian military'.

Amnesty's Indonesia researcher, Lucia Wither, said: 'To renew aid at this moment, when even a casual observer would have acute concerns over the increasing power of the army and what is happening to human rights, is a clear message that the US really doesn't care whether there is any accountability over what happens in Timor or anywhere else.

'This should be about preventing what happened in Timor happening in other regions.'

But attention is also being focused on other regions seeking independence, including Aceh, Molucca and Papua. Human rights groups fear that the military will use the fresh influx of aid from the US to add to its brutal record.

In East Timor itself, pleasure at independence is tinged with bitterness. In Maliana, a picturesque hill town close to the border with Indonesia, a mass was starting early to give people the chance to be in the capital Dili, 70 miles to the east, for tonight's celebrations.

But the attendance was sparse and the mass itself, in a country where 41 per cent of the population are below the poverty line and life expectancy stands at 56, was not so much a celebration as a memorial service for the thousands of residents of the district killed under the Jakarta regime.

It is clear that this community is still tied to the past. Silvino Noronha, 40, a driver for the outgoing UN administrators, is typical when he says the town will never truly celebrate until the perpetrators of the carnage that left more than 90 per cent of the buildings destroyed are brought to justice.

'People are not rejoicing because we still feel broken-hearted,' he said. 'The hurt will be very hard to cure if the killers are not brought to court.'

However, Annan, on his way to the celebrations, yesterday played down suggestions that there should an international war crimes tribunal similar to those dealing with Rwanda and the former Yugoslavia. He said that the Indonesian government should proceed with its own trial of 18 suspects - among them several high-ranking military and government officials - in a specially-convened human rights court in Jakarta.

Few observers believe that the defendants - many of whom have influential civilian and military backers - will face justice in Indonesia's notoriously corrupt legal system. New York-based Human Rights Watch said: 'There is widespread scepticism that trials under way in Jakarta before Indonesian ad hoc tribunals will bring accountability.'

For less serious crimes, the national Truth, Reception and Reconciliation Commission will first hold private-truth-telling sessions, then community reconciliation hearings.

'It's crucial for everyone in East Timor to know what happened,' says Isabel Amaral Guterres, one of the seven national commissioners. 'It's necessary to have justice and reconciliation if the nation wants to go forward.'

East Timor's charismatic resistance leader-turned-president-elect, Xanana Gus mao, curiously disagrees. Justice has moved off his list of priorities and he is even talking about amnesties.

'My priority is social justice,' he said. '[People] want to send children to school or hospital if they are sick. It's a case of balancing the importance of justice.'

But there was general agreement that Indonesia's dispatch of six naval vessels to East Timor to accompany Megawati as she attended the celebrations had been singularly tactless. East Timor's Foreign Minister, Jose Ramos-Horta, said: 'We are not angry, just puzzled by this ostentatious display of navy hardware.'