The government hopes a diplomatic solution will be found to the crisis in neighbouring Indonesia's Aceh, a minister said today, as hundreds of troops parachuted into the province and rockets blasted suspected rebel positions.

"I hope it will be resolved amicably and in a very peaceful manner," Deputy Defence Minister Mohamad Shafie Apdal told reporters.

"Let diplomacy work first. What's important is that negotiations must be done to see how to resolve the situation," he said when asked to comment o­n the conflict in Aceh.

Security aspect

Mohamad Shafie said peace and stability in the region was vital to ensure economic growth and flow of foreign investments.

"We must establish that this part of the world is a very peaceful place and secure for (foreign investors) to make profit"

"With the Aceh situation (now), I don't think it will do any good at all," he added.

When asked if Malaysia would step up security in the narrow Malacca Straits to prevent an influx of refugees or separatist rebels into the country, he said "There's no need for that."

"What we are doing now is good enough. We will be able to prevent them," he said.

Malaysia already houses hundreds of Aceh refugees. An all-out war could unleash a flood of refugees across the narrow Straits of Malacca that separates the two countries.

Martial law

President Megawati Sukarnoputri signed a decree imposing martial law in Aceh today after peace talks in Tokyo with the Free Aceh Movement broke down.

Indonesia had given separatist rebels from the Free Aceh Movement until today to announce they are shelving their independence demands and are prepared to start disarming.

An estimated 10,000 people, most of them civilians, have been killed in the conflict in Aceh since 1976. AFP