By Richard Galpin BBC Indonesian correspondent reporting from Bali

Australia has pledged more than $3m to help Indonesia and the United Nations repatriate tens of thousands of East Timorese refugees still living in camps in Indonesia.

The announcement came after senior politicians from East Timor, Indonesia and Australia held their first-ever joint talks, in Bali.

In May, East Timor is due to gain full independence from the United Nations administration which took control two years ago.

It is estimated there are up to 80,000 refugees still in West Timor, which is part of Indonesia.

They are the remainder of up to a quarter of million people who were fled across the border in 1999, forced by retreating militia gangs and Indonesian troops following the vote for independence.

Those who have still not been repatriated are living in miserable conditions, especially since the local government stopped providing assistance at the beginning of this year. The money pledged by Australia is therefore much-needed.

'Historic meeting'

Australian Foreign Minister Alexander Downer told the BBC he was optimistic the refugee problem would now be resolved.

"I think once particularly the presidential election in East Timor is out of the way, which is in the middle of April, that it will be possible to get the bulk of those people back.

"There'll always be some who want to remain in Indonesia indefinitely, but I think the bulk of them will in the end go back."

The problem of the refugees is one of the main outstanding issues between Indonesia and East Timor. With just a few months before East Timor becomes a fully independent nation, there has been much diplomatic activity these past two days to ensure positive relations with neighbouring countries are already established.

On Monday, Indonesia and East Timor, whose history is marred by so much violence, signed a series of agreements covering several key areas.

And on Tuesday, the Australians joined the negotiations of what was described as an historic meeting. Afterwards, all sides said they believed the foundations had been set for co-operative relations.