At a joint news conference, Malaysian Prime Minister Mahathir Mohamad said he and Indonesian President BJ Habibe had "decided on ways and means of ensuring that these things do not happen to the detriment of each other's country."

Correspondents said the talks, on the Indonesian island of Batam, were a chance to repair relations between the two countries.

Mr Habibie called for greater cooperation between the two countries

They had become strained during the Asian financial crisis and by Mr Habibie's publicly expressed concern over the sacking and arrest of Dr Mahathir's former deputy, Anwar Ibrahim, on sodomy and corruption charges.

Mr Anwar has been sentenced to jail for six years on a corruption conviction, and faces another trial on the sodomy charges.

Cultural 'compatibility'

Mr Habibie called for greater co-operation between the neighbours.

"Malaysia and Indonesia should work together in upgrading industries and human resources to face the new millennium," he said.

"It is easy for Malaysia and Indonesia to work together because of our compatibility in culture and language."

Before the meeting, Dr Mahathir said he would raise the question of illegal immigrants from Indonesia. Malaysia has deported thousands of Indonesians pouring through the border to take up jobs illegally in Malaysia.

Indonesia has complained that some of its workers have been mistreated by their Malaysian employers.

"As a result of this meeting, we are able to know the true situation in each other's country," Dr Mahathir said.

Boosting trade

Foreign and trade ministers and officials from both nations met for several hours on the sidelines of the summit talks.

Malaysian Trade and Industry Minister Rafidah Aziz said, after meeting Indonesia's economy and industry ministers, the two administrations had agreed to step up barter trade and cross-border investments.

She said both countries had decided not to back away from the creation of a free trade area between members of the Association of South East Asian Nations (ASEAN) due in 2003.

But she said there was no talk of Malaysian financial assistance for Indonesia, which is suffering its worst economic crisis in more than 30 years.