'We realised that we had to do something. As I said to a banker when I asked him for a donation, if we did nothing to ease the tension, it would be a time bomb for us.'

Cheng Yen, a 69-year-old Buddhist Dharma master and founder of Tzu Chi, based in the eastern Taiwanese city of Hualien, told the tycoons they must give back to Indonesians something of what they had earned, and in this way win their trust and confidence. Only this might break the vicious cycle of anti-Chinese violence that had been part of Indonesia's history for the past 100 years.

Accounting for between 2 and 3 per cent of the country's 220 million people, ethnic Chinese own about 75 per cent of Indonesia's private corporate wealth, and have been the scapegoat for the anger of the poor and politicians who want to exploit them.

In response to the unrest, Tzu Chi began with free distribution of rice to 2 million households in 1998 and 1999. After serious floods in Jakarta in early 2002, Cheng Yen proposed cleaning one of the city's 13 polluted rivers and rehousing the families who lived on its banks. The members chose Angke river, which resonates with historical meaning. Angke means 'red stream', so named because the Dutch rulers in 1740 massacred 10,000 Chinese residents and dumped their bodies in the river. The Dutch feared a rebellion by the Chinese who had lost their monopoly of trade to the European colonists.

In the summer of 2002, Tzu Chi mobilised 10,000 people, including volunteers and soldiers, to clean the river. Originally seven metres deep, it had become so full of industrial and domestic waste that its depth had shrunk to only one metre, causing flooding in the makeshift homes along the riverbank every time there were heavy rains.

To rehouse those who lived on the banks, Tzu Chi built the Great Love Village on a site in a northwest suburb donated by the city government, at a cost of US$8 million.

Opened on August 25, 2003, by then president Megawati Sukarnoputri, the village has 1,200 units with 3,000 residents, a school with 668 students, a hospital and a paper factory. In July 2005, the foundation completed a second phase nearby, with 600 units. The residents pay only a maintenance fee of US$9 a month.

The village has transformed the lives of those who moved there. Evi Hermawati, who attends the second grade at the village's middle school, used to live under an overpass next to the river and was forced to move home 12 times.

'The government demolished our homes and drove my family out again and again,' she said. 'It hurt me so much and all I could do was sob helplessly. Would I be able to continue school or would I end up as a scavenger for the rest of my life, like so many others around me here?'

She is delighted to live in a clean, permanent home and attend a school with proper desks and facilities, no litter and no graffiti.

Another family at the village - Tuti and Edy and their 10 children, seven of whom are adopted - are equally happy with the transformation their lives have undergone. The family lived in a wooden house on stilts over the Angke river for 24 years and were too poor to move elsewhere. Now, for the first time, they live in a house with a door key. 'Now the children can eat anything they want,' Ms Tuti said. 'I never want to think about our past. We had to share very little food. Sometimes a meal would be just rice with a few pieces of shrimp cake.'

Ms Tuti now has a stall selling cooked food to school students.

Half of the parents living in the village are illiterate. Working as maids and labourers, they earn on average 350,000 rupiah (HK$304) a month, less than half the average wage for Jakarta residents.

Indonesia has an enormous gap between rich and poor. A report by the World Bank in early December said 42 per cent of Indonesians earn between US$1 and US$2 a day, with 40 per cent of the poor unable to give their children a secondary education.

At the top of the pyramid are the 0.3 per cent with annual monthly spending of more than US$470 and a middle class that makes up 34.2 per cent of the population and spends between US$90 and US$250 a month per person.

Suriadi, a Tzu Chi member at the village, said their aim was to change the residents' way of thinking and, through education, give them hope for the future. 'Building the village did not mark the end of the project but the beginning. This is a long-term plan, providing education, health and employment.'

Next door to the village is a low- income residential project built by the government. This place has no school, hospital or employment and the quality of maintenance is poor.

To celebrate the cleaning of the Angke river, Tzu Chi holds an annual dragon boat race with teams from the village. This year's race, staged earlier this month, was attended by Sutiyoso, governor of Jakarta, who appealed in a speech to those who lived on the banks to use public toilets and not to dump their litter into the rivers.

On the same day, Tzu Chi distributed 20kg sacks of rice to 6,800 poor families in north Jakarta. The rice was donated by Taiwan's government, which organises distributions quarterly.

Tzu Chi has also built 3,700 homes in the northern province of Aceh, for victims of the 2004 Boxing Day tsunami.

Conscious of Muslim sensibilities, the foundation does not preach Buddhism nor ask aid recipients to convert.

In Indonesia, Tzu Chi has expanded its membership base to 10,000 people who donate time or money or both, and 100 volunteer officers in charge of fund-raising and projects. Founded in 1966, it has 10 million members worldwide, half of them in Taiwan.

Liu Su-mei, the wife of another Taiwanese businessman who has headed Tzu Chi in Indonesia since 1993, said the 1998 riots were a turning point for the Chinese and, in Buddhist terminology, pre-destined. 'They realised that if they did not show their love, the next generation would receive the same treatment. So we increased the number of our volunteers and the level of our donations,' she said.

Their example has inspired other Chinese groups to get involved in similar charity work, and Tzu Chi has held classes to help them get started.

'The Indonesians are very good-hearted people ... The riots should not happen again,' Ms Liu said.