By Rob Taylor

CANBERRA, Feb 7 (Reuters) - Australia and Indonesia said they were making inroads into combating extremists in Southeast Asia, agreeing on Thursday to step up counter-terrorism efforts and extend security pacts between the two neighbours.

Indonesia's Foreign Minister Hassan Wirajuda and his new Australian counterpart Stephen Smith met in Western Australia to bring into force a 2006 security treaty which clears the way for training between Australian and Indonesian commandos.

"Counter-terrorism cooperation continues to be a success story of which our security policy agencies in both countries should be very proud," Smith said. "They have both put the terrorist infrastructure in our region under extreme pressure." The pair met as three militants on death row in Indonesia for carrying out nightclub bombings in Bali in 2002 launched an appeal with the country's Supreme Court.

Islamic militants belonging to the Jemaah Islamiah group have been blamed for a series of bombings in Indonesia, although many of its leaders and supporters have been either killed or captured by security forces working with Australian police help.

Wirajuda is in Australia for three days to meet the new centre-left Labor government of Prime Minister Kevin Rudd. He will meet Rudd on Friday.

Rudd's November election victory has been warmly received in Indonesia, especially after the former diplomat agreed in December to ratify the Kyoto climate pact in Bali, overturning a decade of conservative opposition. Jakarta also expects Rudd to be less publicly strident about Islamic militancy in Asia and re-tune foreign policy to be more independent of the United States, abandoning conservative ambitions to be Washington's regional "sheriff".

Smith told Wirajuda that Australia would also increase aid to Indonesia, spending A$40 million ($35 million) to combat HIV, mostly in resource-rich Papua, where more than 3,000 people are suffering HIV/AIDS from a 2.5 million population.

Both countries renewed a counter-terrorism memorandum which paved the way for training between Australia's SAS and Indonesia's Kopassus commandos, curtailed in 1999 after a pro-Jakarta militia carried out attacks in newly-independent East Timor.

Senior officials would also meet more often to discuss counter-terrorism cooperation, Smith said.

The agreement is another sign of improving relations between both countries following disagreements over Papuan separatists granted asylum in Australia and people smuggling.

($1=A$1.12)

(Editing by Sanjeev Miglani)

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