Timor-Leste has been facing the arduous task of building a viable nation-state since the country's 2002 restoration of independence. The dual challenge consists of interdependent efforts at nation-building and state-building. The author discusses both terms with regard to their relevance to public education and economic development. He raises the question of why nation-building and state-building experience rather contrary prioritisations in these functionally close policy fields. In the educational sector, government activities demonstrate Fretilin's orientation towards Portuguese-speaking countries. The introduction of Portuguese as an official language has accentuated existing lingual and generational cleavage lines. Economic policy in Timor-Leste, however, tends to be more pragmatic and less ideological. The article aims to make an innovative contribution to the interrelationship of nation-building and economic development by addressing important issues on the agenda such as the exploitation of oil, agriculture, tourism, the economic dependency on the former oppressor Indonesia, and foreign aid. The author argues that economic growth will eventually shape the future format of the East Timorese nation as either a new self-confident political player or a withdrawn peasant nation.