The announcement came after Mrs Albright held talks with the the jailed separatist leader, Xanana Gusmao, at which they discussed ways of ending the conflict in East Timor.

She said Washington favoured an international presence in East Timor, possibly involving the United Nations, adding that "vigorous steps" must be taken to avoid further outbreaks of violence.

Madeleine Albright: "This is an important time for Indonesian history"

"The goal must not be simply to slice East Timor apart or cast it adrift; but rather to ensure its cohesion and viability - whether through autonomy or independence," she said.

"We favour confidence-building measures, such as a reduction in the number of troops and an international presence to reduce the prospects for future violence."

Observers fear even greater violence in East Timor

Earlier Mrs Albright gave a similar message to Indonesian President BJ Habibie at a meeting in which she sought assurances that there would not be an abrupt withdrawal of Indonesian security forces if the East Timorese chose independence rather than autonomy within Indonesia.

"We urged him not to walk away from this in some fit of pique if they voted for independence," a State Department official was quoted as saying.

Jonathan Head: "One diplomat described Mrs Albright's visit as a cheer leading exercise"

Correspondents say the US sees Indonesia as a moderating power in South East Asia, and that Washington is concerned that any political instability there in the run up to June general elections might prevent Jakarta from continuing that role.

Meanwhile the East Timorese independence activist, Jose Ramos Horta, has called for United Nations sponsored elections in East Timor to elect representatives to decide the future of the territory.

Nobel peace prize winner Jose Ramos Horta: "I'm pleased this meeting took place"

Speaking to the BBC, he said the UN should conduct a census so that only Timorese people could vote. He said that all Indonesian soldiers should leave the island before the election.

Peacekeeping force

Indonesia's election campaign has already got underway

Last week Australia's Foreign Minister, Alexander Downer, said he opposed the idea of sending an armed UN peacekeeping force to the territory but said he supported the organisation sending a civilian monitoring team.

Madeleine Albright's meeting with the East Timorese leader took place at the Foreign Ministry in Jakarta because of concerns over security at the house where he is serving a 20-year sentence.

He is playing a key role in domestic and international negotiations to settle the fate of the impoverished former Portuguese colony, which was occupied by Indonesia in 1975.

Democracy 'blooming'

BBC Jakarta Correspondent Jonathan Head: "Albright brought a message of encouragement"

After her talks with Mr Habibie, Mrs Albright praised Indonesia's democratic reforms saying she saw "a spirit of democracy blooming" as the country approaches elections in June.

"The sense that I got from talking to the president is that he is obviously devoted to having a free and fair and open election," Mrs Albright said.

Mrs Albright has said she believes Indonesia is at a pivotal time in determining whether democracy triumphs over violence.

Human rights progress

Indonesia has been rocked by civil unrest over the past year

Mrs Albright also spoke of an improvement in Indonesia's human rights record, although she said there was still more to be done, particularly in prosecuting offenders and releasing political prisoners.

"Generally, it's been my sense that there was obviously a huge improvement in the human rights situation in Indonesia and that we consider continued work on human rights issues very important," she said.