Prime Minister Dr Mahathir Mohamad and Indonesian President Megawati Sukarnoputri agreed to step up cooperation in the fight against terrorism during talks in Kuching, Sarawak today.

"We agreed to cooperate in defense and intelligence sharing to ensure national security," Mahathir told a joint news conference. "We spoke of the need for closer cooperation in the fight against terrorism."

Megawati said Indonesia would press its proposal for an Association of Southeast Asian Nations (Asean) Security Community to enhance regional security.

The proposed ASC would include centres for combating terrorism, training in peacekeeping, a centre for cooperation on non-conventional issues and regular Asean police and defence ministers' meetings.

Refugees issue

Asked about the perception that Indonesia was not doing enough to combat terrorism, Megawati said: "Suicide attacks can happen in any country. We have to unite to fight terrorism."

Indonesia has been the target of major terrorist attacks, in Bali last year and at the Marriott Hotel in Jakarta earlier this month.

The attacks have been blamed on the al-Qaeda-linked Jemaah Islamiah terrorist network, and several Malaysians have been named along with Indonesians as being among the group's senior figures.

The two leaders also discussed Malaysia's recent arrest of more than 200 Indonesians from the war-torn Aceh province as they sought asylum at the office of the United Nations High Commissioner for Refugees (UNHCR) in Kuala Lumpur.

"We do not allow illegals or Acehnese to seek political asylum in Malaysia," Mahathir told the news conference. "They are illegals and they will be caught and put in detention centres and deported."

Indonesian Foreign Minister Hassan Wirajuda told reporters later that "both leaders agree that they (the Acehnese) will be sent back and Indonesia will cooperate to facilitate their deportation.

"The presence of Acehnese in Malaysia has nothing to do with the military operation in Aceh. They are not refugees. There is no excuse for them to come to Malaysia," he said.

Indonesia launched a massive operation to crush separatist guerrillas of the Free Aceh Movement (GAM) on May 19, and the UNHCR and rights group Amnesty International have protested Malaysia's detention of the asylum seekers.

Good cooperation

The two leaders said they had also discussed a number of other issues, including improving trade, increasing cross-border investment, smuggling and piracy.

"There are no problems in our relations," said Mahathir. "We find it easy to to cooperate in all fields."

The issue of illegal Indonesian immigration into Malaysia had not been completely solved but he acknowledged, "Indonesia has taken a lot of measures".

"We hope the annual meeting becomes a tradition between the leaders of the two countries," said Megawati. "It can be a platform to resolve outstanding issues."

Mahathir, who is due to retire in October after 22 years in power, said he hoped next year's meeting would be held in Indonesia.

The two leaders were due to have dinner together later this evening. Tomorrow Mahathir returns to Kuala Lumpur while Megawati is due to fly to Bangkok for a visit to Thailand, officials said. - AFP