Indonesia and Malaysia have agreed to establish designated sea ports to handle timber in an effort to reduce illegal logging in both countries, Malaysian Deputy Prime Minister Najib Razak said on Wednesday.

Najib, on a four-day visit to Indonesia, said both governments agreed that the plan would reduce illegal logging - a rampant problem in Indonesia, which annually loses vast swathes of forest to the unauthorised timber trade.

"This way, we will be able to help eradicate illegal logging totally," Najib told reporters after a meeting with Vice President Yusuf Kalla.

Indonesian police said in February they had arrested at least 15 Malaysians for alleged involvement in illegal logging in the remote eastern province of Papua.

The arrests were a small step for Indonesia whose forest rangers struggle to enforce restrictions in the sprawling forests of Papua, Sumatra and Borneo, a task toughened by corrupt police and military who are sometimes involved in the practice.

A 2002 report by the World Resources Institute, Global Forest Watch, and Forest Watch Indonesia Reports said Indonesia is losing nearly two million hectares of forest annually - an area half the size of Switzerland.

Forest cover of 162 million hectares in 1950 fell by more than one third to 98 million hectares in 2000, they said.