World leaders have welcomed the resignation of Indonesian President Suharto, and have urged for a peaceful continuation of political and economic reforms.

"We welcome President Suharto's decision, which provides an opportunity to begin a process leading to a real democratic transition for Indonesia – an opportunity for the Indonesian people to come together and build a stable democracy for the future," US President Bill Clinton said in a statement read by a White House spokesman.

"The United States stands ready to support Indonesia as it engages in democratic change."

Japanese Prime Minister Ryutaro Hashimoto said that Japan would continue to help Indonesia carry out reforms.

"We will continue to support the Indonesian people's efforts at reform," Hashimoto told reporters in Tokyo. Japan is the largest contributor to the IMF-led bailout programme for Indonesia, having pledged a $5 billion contribution to the $43-billion package.

Both Australia and Thailand stressed the need for the reform process to be carried out peacefully within constitutional boundaries.

"I believe Indonesia can work out its problems through the constitutional process as everyone favours a peaceful transition," Thai Prime Minster Chuan Leekpai said.

Chuan called on the ASEAN to help Indonesia through the transition.

Australian Prime Minster John Howard welcomed the change in leadership and said his government would cooperate with Habibie's administration.

"I welcome the fact that the changes are within the framework of the constitution. It (the transition) should be orderly, it should be without bloodshed and it should be within the framework of the current constitution that forms the Indonesian state," Howard told a news conference.

In Seoul, South Korea's foreign ministry said it welcomed the resignation of Suharto in accordance with the will of the Indonesian people.