``What is clear is that I will be meeting with all components of the people of East Timor to reach a peaceful settlement. We all can lay the foundation for an independent East Timor state,'' Gusmao told media persons shortly after he moved into a guarded house in Central Jakarta.

Gusmao, 53, said he would work to `help to unite the people of East Timor in one perception, that would be able to help the attainment of a peaceful solution.' Gusmao had served more than five years of his 20-year jail sentence in Cipinang prison, which he left on Wednesday. Officials have designated the house an extension of the Cipinang prison.

``With my move to here...I have been tasked with a larger participation to obtain a better settlement,'' he said.

Indonesia invaded the former Portuguese colony in 1975 and annexed it in 1976. Butthe United Nations and most countries still recognise Portugal as the administrator.

UN Secretary-General Kofi Annan had called for Indonesia to release Gusmao or put him under house arrest so he could play a larger role in the search for a settlement.

Indonesia, announcing plans for Gusmao's transfer, also said it was prepared to envisage a free East Timor if the people there rejected an offer for broad autonomy currently formulated in talks between Indonesia, Portugal and the United Nations.