China pledges $400m to Indonesia

The presidents pledged closer trade and cultural ties

Chinese President Jiang Zemin has agreed to give Indonesia $400m in loans after a meeting on the first leg of Indonesian President Megawati Sukarnoputri's 13-day regional tour.

The initiative to help boost economic development in Indonesia was announced after talks in Beijing on Sunday.

The two presidents also pledged to increase trade and cultural ties between their nations.

The US sees Jakarta's co-operation as vital for the war on terrorism

Megawati witnessed the signing of five deals between the two countries, including a partnership between China and Indonesia's two largest oil companies.

Analysts say she is also seeking to shore up support in the face of pressure from the US to support the war on terror, to which there is strong opposition from some elements within Indonesia.

"She needs more and varied support and aid. I think this visit to China could have this intention," said Zhang Xizhen, a Southeast Asia expert at Peking University's School of International Relations.

Economic mission

China is the first stop on Megawati's two week tour of Asian nations, which will take in India, South Korea and also North Korea.

The North Korean leg of the tour will be closely watched by Seoul and Washington

The trip aims chiefly to improve economic ties and boost exports, which have suffered from falling demand in the US and Japan.

Indonesia - the world's fourth most populous nation - is struggling to recover from economic woes that began with the regional crisis in 1997.

But analysts are pessimistic about the outcome of the Indonesian president's third lengthy overseas tour since coming into power in 2001.

Investors have so far shied away from a country still subject to political instability and separatist violence.

War on terrorism

The tour also has a diplomatic dimension, with the US-led global war on terrorism creating new tensions in the region.

The US military is aiding security forces in the Philippines clamp down on suspected al-Qaeda rebels, and also want to boost links with forces in Indonesia.

Increased American intervention in the region is likely to be under discussion when Megawati visits communist North Korea.

Scepticism

She met its leader Kim Jong-il when the two were children - a time when the two countries, led by their respective fathers, were friends.

Foreign ministry spokesman Natalegawa said Megawati had agreed to a South Korean request to try to encourage the North back to the negotiation process with Seoul and Washington.

But this may prove a difficult task. Kim Jong-il is angry at Mr Bush's description of his country as part of an "axis of evil".

Analysts are sceptical that Megawati will make any significant breakthrough.