Camelia Pasandaran – Indonesia and East Timor on Tuesday agreed to step up cooperation in solving border problems, said an Indonesian presidential spokesman.

"Regarding shared borders, President [Susilo Bambang] Yudhoyono and Prime Minister Xanana Gusmao agreed to better management using a soft approach," said Teuku Faizasyah, the presidential staff for international relations, at a press conference after a meeting between two heads of state at the Presidential Palace on Tuesday.

"The government has put extra effort into finalizing discussions on three border areas," he said.

The three areas discussed were Delomil village in Belu district, Manusasi village in Timor Tengah Utara district, and Naktuka village in Kupang district.

"These are land border issues," Teuku said. "We need to settle these three border issues so that we can move on to the maritime baseline of the two countries."

The two heads of state on Tuesday also witnessed the signing of five memorandums of understanding (MoU) – on decentralization and local government, diplomatic education and training, public works infrastructure, education and training in the field of transportation, and trade.

"The discussion was a very productive, fruitful discussion. We were able to reach some commitments. Five MoU were signed this afternoon," Teuku said. "This is a clear reflection that the two countries are ready to move forward in many areas of cooperation."

The Indonesian government also reported its willingness to invest in infrastructure in East Timor and give its neighbor credit to by military equipment.

"East Timor says it wants to buy military equipments, and our government is ready to provide it with export credit," Teuku said.

Defense Minister Purnomo Yusgiantoro said East Timor wanted to buy a fast patrol boat to protect its territory and that it had ordered a $20 million boat from shipbuilder PT PAL Indonesia

"They want to be given export credit," he said. "The government is ready to provide it from the Indonesian Export Development Agency (LPEI)," he said.

The Indonesian government also said that it would support East Timor's bid to join the Association of Southeast Asian Nations (Asean).