Fabiola Desy Unidjaja, Jakarta – Indonesia and East Timor agreed on Tuesday to convert Indonesian assets in East Timor, mostly corporate assets, into equity investment in the newly born state.

Concluding the first joint commission meeting on Tuesday, the delegations of both countries agreed to further discussions within the next six months.

"Both parties agreed in principle to find innovative settlement on corporate assets through conversion of those assets for Indonesian investment including joint ventures," a joint statement issued after the meeting said.

Speaking at a press conference with his counterpart Jose Ramos Horta, Indonesian Foreign Minister Hassan Wirayuda said the equity would then be managed by a future joint venture company between Indonesia and East Timor.

The assets in question ranged from buildings to gas stations belonging to Indonesian state-owned companies. The proposal to transform the assets into equity came from the Indonesian side.

East Timor, meanwhile, proposed that both countries reduce the number of troops on both sides of their border, with Indonesia agreeing to the proposal. The two countries also agreed to discuss and settle land borders within a working group. This group would meet in November to determine the demarcation lines.

They also agreed to discuss future cooperation in legal and judicial issues. "The meeting took note of the importance of the two countries working together to make every effort to finalize an agreement on cooperation in legal and judicial matters," the statement said.

The meeting deferred talks on resolving other contentious issues such as those on sea borders, traditional people's movement across the borders and pension funds for East Timorese civil servants and soldiers, who were working for the Indonesian government before the territory voted to separate from Indonesia in 1999. Discussion on maritime borders would start in the first half of next year.

On people movement and trade between East Timor and Indonesian-controlled West Timor, the two countries agreed that it would be conducted under Indonesian regulations until a new arrangement was reached.

Regarding refugees, both parties agreed problems would be settled by the end of the year. East Timor president Xanana Gusmao, a former independence guerrilla who spent seven years in an Indonesian jail, is due to visit West Timor later this month to encourage more refugees to return home.

East timor agreed on Tuesday to preserve the Seroja cemetery where Indonesian soldiers killed in East Timor are buried, at the expense of the Indonesian government and give Indonesians access to the compound. The next round of talks are expected to be held in Dili, East Timor.