Malaysian Prime Minister Abdullah Badawi and Indonesian President Susilo Bambang Yudhoyono agreed on extending the deadline for illegal workers from Indonesia to leave Malaysia.
With President Yudhoyono at his side, Prime Minister Abdullah told reporters that Malaysia would give illegal workers until March 1 to leave the country. After that, he said, they will face the harsh penalties allowed under Malaysian law.
Malaysia has been demanding the Indonesians' departure for the past few weeks. Last week, the Indonesian embassy in Kuala Lumpur announced that it planned to sue Malaysian companies that failed to pay Indonesian workers, legal or illegal. That announcement sparked a muted diplomatic dispute between the two Southeast Asian neighbors.
The Malaysian government has said the payment issue should be solved by the private sector, but said it will encourage employers to pay outstanding salaries.
After a meeting between the two leaders on Monday, Mr. Yudhoyono indicated that he was satisfied with Mr. Abdullah's remarks and actions.
Mr. Yudhoyono said that with the agreement just reached, he hopes the problems can be resolved by the beginning of March.
But he added that if the problem was not solved, Indonesia would "have to move to the next step" - meaning a lawsuit over unpaid wages.
Indonesia is struggling to recover from the December earthquake and tsunami, which devastated part of the island of Sumatra and killed as many as a quarter of a million people. While it seeks justice for its citizens in Malaysia, Indonesia is also trying to cope with the return of about one-half-million people at this difficult time.
Malaysia is trying to rid itself of illegal migrant workers. About 400,000 such workers have left under an amnesty program, and the government has warned of stern action - including fines, jail and caning - if the rest fail to leave voluntarily.
The government had estimated that there were more than one million illegal workers in Malaysia, mostly from Indonesia, but also from the Philippines, India, and other Asian countries.