East Timor President Xanana Gusmao is in Jakarta for a five-day visit to forge new ties with his country's former occupier.
During their first meeting in Jakarta since Mr. Gusmao took office in May, the East Timorese leader and his Indonesian counterpart, Megawati Sukarnoputri, agreed to establish formal diplomatic links. The two leaders also agreed to set up a commission to boost economic trade.
Ms. Megawati described their first day of talks as very warm and useful.
Prior to the meeting, Mr. Gusmao received a 21-gun salute at the state palace. A number of East Timor's national flags fluttered nearby, signifying just how radically the relationship between East Timor and Indonesia has changed since 1999.
That was the year East Timor voted overwhelmingly for independence during a U.N.-sponsored referendum.
The vote was soon followed by a wave of destruction and violence, led by militias loyal to Indonesia. Many Indonesian politicians and generals felt bitter at the East Timorese for choosing to split from Jakarta's rule. Indonesia invaded East Timor in 1975 and annexed it the following year. The weeks-long rampage left more than 1,000 people dead. About 250,000 more were forced across the border into Indonesian West Timor. International peacekeepers stopped the bloodshed and a U.N. transitional government ran East Timor until May, when it gained full independence.
Mr. Gusmao's subsequent election as the country's first president was widely expected. He was East Timor's best-known dissident soldier, who spent seven years in a Jakarta prison for leading a decades-long guerrilla movement against Indonesian rule.
But the former guerrilla leader says the two once bitter foes are now trying to work together to improve ties and resolve remaining issues between them. In the coming days, he is expected to meet cabinet ministers and politicians to discuss border issues and the fate of up to 40,000 East Timorese refugees still in West Timor.
President Gusmao has repeatedly said that he believes maintaining good relations with Indonesia is crucial to East Timor's stability and future economic success.