JAKARTA, Mar 30 (Reuters) Britain and Indonesia, the world's most populous Muslim nation, will increase cooperation against terrorism and improve understanding between the Islamic and non-Islamic worlds, the countries' leaders said today.
President Susilo Bambang Yudhoyono and visiting Prime Minister Tony Blair were speaking to reporters after two-way discussions and joint talks with Islamic leaders and scholars.
Britain is moving to normalise defence ties with Indonesia and launching an initiative to combat Islamic extremism during Blair's 24-hour visit to the sprawling archipelago of 220 million people, 85 per cent of them Muslims.
''We want in defence terms now to treat Indonesia as it should be, as our friend and our ally,'' Blair said, ''and in respect of counter-terrorism ... we are going to work closely together.'' British officials said this would allow moves such as joint exercises or exchanging military observers. Defence relations had been at a lower level because of Indonesia's authoritarian past.
Blair's visit, the first by a British prime minister in 21 years, seals an improvement in relations between the countries, both of which have been targets of Islamic militant bombings, and marks British recognition of Indonesia's shift to democracy.
The Indonesia stop, the last leg of a week-long tour that also took Blair to Australia and New Zealand, came just over two weeks after US Secretary of State Condoleezza Rice was in Jakarta, also praising Indonesian democracy and leadership.
Washington resumed military ties with Indonesia last year, a move criticised by human rights activists who said Indonesia's military had a long way to go in changing its rough ways.
The United States and Britain view Indonesia, with its moderate Muslim majority and relatively friendly government, as a bridge between the West and the rest of the Islamic world.
''Indonesia has a crucial part in trying to insure that there is greater understanding between people of different faiths and that within that greater understanding we've got a chance of resolving the conflicts that there are in the world,'' said Blair.
In a joint statement, the leaders announced the establishment of a regular forum to promote strategic dialogue, and agreement on police cooperation to combat terrorism. ''MODERATE BUT CRITICAL'' Yudhoyono said of the meeting with Islamic leaders: ''They are all moderate but critical.'' Most Indonesian Muslims avoid extremism, but oppose US and British policy in Iraq.
Din Syamsuddin, head of the 30-million-strong Muhammadiyah, Indonesia's second-biggest Muslim group, said the Islamic representatives told Blair: ''... the British government must pull its troops out of Iraq because Iraq's occupation will only stimulate radicalism, extremism and new terrorism.'' Iraq came up again when Blair visited an Islamic school, where girls wearing Muslim headscarves sat on one side of the room and boys on the other during a question and answer session.
''Do you ever ask your best friend (US President) George W Bush to stop the war in Iraq?'' a 13-year-old boy asked Blair.
''I think we will not agree about Iraq and the decision to remove the government there,'' Blair responded.
''Whatever we thought about the original decision ... we should work with the United Nations and with other countries to make sure that Iraqi people get the same rights as we have,'' he added.
''His answer is not so satisfactory, justice should be applied in a true sense,'' Anissa At Muzir, 17, wearing a headscarf and long white long skirts, told Reuters after the session.
Between their formal bilateral session and the meeting with Islamic representatives, the two leaders took a slow stroll around the spacious grounds of the presidential palace, chatting in a setting of giant banyan trees, fountains and lush foliage.
The end of autocratic President Suharto's 32-year rule in 1998 allowed democracy to flourish in Indonesia. Yudhoyono, a former general with US training, became the country's first directly elected president in 2004.