East Timor remains the poorest country in South East Asia nearly four years after independence, the UN says - and it is getting poorer.
The departure of UN peacekeepers had an impact on jobs
The UNDP report says there are few employment prospects in East Timor in anything other than agriculture.
About 40% of the population live below the poverty line and education and health care remain patchy.
East Timor was ruled by Indonesia for nearly 24 years before a United Nations-sponsored referendum in 1999.
Some 90 babies in 1,000 do not live to see their first birthday and few are immunised, according to the UN report.
Half of the population of less than one million has no access to safe drinking water, and job opportunities are few.
One major factor which could change things is the signing last January of an oil-sharing agreement with Australia, says the BBC's Developing World correspondent David Loyn.
Disputes between the two countries had soured relations in recent years, but now East Timor should be able to benefit from oil revenues.
The UNDP report says it is crucial that these funds go towards alleviating rural poverty - the first major boost to the economy since the bitter war with Indonesia.
The UN administered East Timor for two years before it gained independence in 2002. UN peacekeeping missions remained in the former Portuguese colony until last May when their post-war mandate ran out.
Their withdrawal had a big effect on jobs in the capital, Dili.