The agreement with the little-known Indonesian company guarantees at least 100 million dollars in investment in return for granting GTLeste a 50-year lease over a swathe of "unproductive land" with an option for 50 years more.

The government is touting the move as a major potential source of foreign cash which could generate more than 2,000 jobs.

But opposition agriculture spokesman Estanislau da Silva told AFP the plan was made with little public consultation and could threaten food production in the impoverished and overwhelmingly agrarian country.

"They say they are going to plant sugarcane on unproductive land. Where in the world can you plant sugarcane on unproductive land?" Da Silva said.

"The intention itself is very suspicious and goes against what we are doing in terms of development and increasing food production and food reliance," he said.

"Two thousand jobs means nothing to me when you give away 100,000 hectares."

"What worries us is firstly the process. For a project as big as this ... the government should consult before signing the contract," said Maximus Tahu from independent development watchdog La'o Hamutuk.

Although estimates are difficult to make, the 100,000 hectares proposed for the project comprises at least one-sixth of land that can be farmed in East Timor, including farms already in use, Tahu said. Fretilin puts the figure at one-quarter.

"We have learned from other countries that sugar cane plantations will have negative impacts on agriculture and farmers' lives. More than 80 percent of Timorese are farmers, they live on agriculture, so the land is very important for them," he said.

"Our concern is the project will contribute to the destruction of land fertility."

The government has brushed aside the criticism, saying discussions are in the early stages and no fixed site has been found for the plantation.

Environment Minister Mariano Sabino said critics of the plan had been spreading "false propaganda" that the government had already agreed to give the land to GTLeste.

"Whoever wants to discuss this, sure let's discuss this. But don't carry out false campaigns and lie that the ministry has already provided the land," he said Monday.

The ethanol plan would bring much-needed investment into rural East Timor, Sabino said.

East Timor, which gained formal independence in 2002 after 24 years of often brutal Indonesian occupation, is one of the poorest countries in Asia, with roughly 50 percent unemployment.

Soaring global oil prices and fears of global warming have led to a boom in the production of biofuels, which are mostly made from crops such as oil palms, sugarcane and soybeans.

However, scientists have questioned the environmental benefits of biofuels, saying production can encourage land clearing as well as divert food crops, pushing up global food prices.

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