Malaysian and Indonesian leaders held talks yesterday in a bid to solve disputes over an oil-rich area off Borneo and environmental pollution.

Prime Minister Abdullah Ahmad Badawi and President Susilo Bambang Yudhoyono met for annual talks in the town of Bukittinggi in West Sumatra.

Bilateral relations hit a low in April last year when warships from the two nations had a minor collision near the Karang Unarang reef east of Borneo island, an oil-rich area both lay claim to.

The incident capped a tense period after Malaysia had granted in February an oil concession to Anglo-Dutch firm Shell in the region, which Jakarta said was not in territory controlled by Malaysia.

"We held discussions on the issue and at the moment, there is no acceptable solutions reached by both sides. This issue is not an easy matter to solve," Abdullah told a joint press briefing.

Susilo said both countries would pursue "serious talks" in future in order to solve the issue, adding that he hoped the two nations could "someday reach an agreement" on a joint venture to explore the oil-rich area.

Stop the haze

Abdullah also called for Jakarta to take serious efforts to stop the haze caused by land clearing by farmers in Sumatra and in the Indonesian-part of Borneo.

"There should not be anymore land clearing during the dry season in order to stop the haze," the premier said.

Open burning in areas of Indonesia and Malaysia has been blamed for the choking haze that blankets the region during the dry season and has become an annual nuisance and health hazard.

In 1997 and 1998 haze caused mainly by Indonesian forest fires enveloped parts of Southeast Asia, including Malaysia, for months.

The two leaders also witnessed the signing of a raft of agreements, including an offshore gas pipeline construction deal.