Matthew Moore, Jakarta – The leaders of Indonesia and East Timor have quietly agreed to discuss setting up a "truth and friendship commission" that would reconsider the massacre of East Timorese about the time of their 1999 vote for independence.

At their first meeting held in Bali late on Tuesday, Indonesia's President Susilo Bambang Yudhoyono and East Timor's President Xanana Gusmao agreed to the idea of the commission to defuse tensions between the two countries.

More importantly, the creation of such a body would allow Indonesia and East Timor to argue that there was no need for the United Nations to take any further action over the massacres of East Timorese for which virtually no one in Indonesia has been punished.

A spokesman for East Timor's Prime Minister, Mari Alkatiri, said the idea of the new body was to "strengthen friendship between the two countries" and increase co-operation. But he said the commission would also discuss "the truth about the events of 1999", although he said there was no plan to make it a reconciliation commission.

About 1500 East Timorese were murdered and many of the country's buildings destroyed after their vote for independence.

Under heavy international pressure, the Indonesian Government set up an ad hoc human rights tribunal and promised to prosecute those responsible for the bloodshed, but every Indonesian-born defendant was found not guilty or had convictions overturned on appeal.

The United States and human rights groups condemned the trials as a farce and UN Secretary-General Kofi Annan has been under pressure to establish a commission of experts to examine the massacres and Indonesia's failure to punish those responsible.

However, East Timorese leaders have said they want good relations with their much bigger neighbour want and to put the past behind them, something such a joint commission with Indonesia might help them do.

Earlier this year the East Timorese Government opposed an attempt by UN-funded prosecutors to issue an arrest warrant for General Wiranto, the commander of Indonesia armed forces at the time of the bloodshed.

Mr Alkatiri's spokesman said the commission's membership and terms of reference would be discussed between foreign ministers.