The Federal Government has abandoned plans to establish a regional immigration processing centre in East Timor.

The proposal was announced by Prime Minister Julia Gillard last year, but ran into difficulties when East Timor's parliament rejected it.

Immigration Minister Chris Bowen says the Government is now focused on negotiating the proposed asylum seeker deal with Malaysia. But he told ABC's Radio Australia there are alternatives if that deal falls through.

"We're not having any further discussions with East Timor but we will have discussions across our region," he said. "There are 44 members of the Bali Process, we've reached a very good outcome in Bali in terms of countries of the region agreeing to enter into just these sort of arrangements to break the people smugglers' model."

The Government's deal with Malaysia will see the country take up to 800 asylum seekers in return for Australia accepting 4,000 refugees who have had their claims processed in Malaysia. The agreement is yet to be formalised.

Last month, East Timor president Jose Ramos-Horta dealt another blow to Australia's hopes of forming an agreement with his country by saying he did not believe the two countries should hold bilateral talks on the issue.

Dr Ramos-Horta said his country would not engage in bilateral talks with Australia about the issue, because it needed to be done through multilateral forums instead.

The country's prime minister Xanana Gusmao also reportedly shot down the idea in March. The Economist magazine said he "finally put the idea out of its misery" during an interview.

"Chief among Mr Gusmao's reasons for opposing the processing centre is the fact that he would not be able to explain to his poor countrymen why foreign asylum seekers would be entitled to international-grade health care, food, clothing and schooling for their children while so many Timorese do not," The Economist said.