The borders of East Timor are not arbitrarily defined, they are no more arbitrary than e.g. the border between the US and Canada. East Timor was originally a Portuguese colony, i.e. Portuguese Timor. The rest of the island Timor was part of the Dutch colonies. East Timor decleared themselves independent from Portugal in 1975 and was invaded by Indonesia 9 days later. Indonesia had declared itself independent of the Dutch in 1945.

For more details on East Timor see e.g. this page on East Timor at wikipedia.