New Zealand welcomes Indonesia's decision which will allow East Timor to become independent, Prime Minister Jenny Shipley said today.

"We congratulate Indonesia on taking this historic decision," the Prime Minister said.

Mrs Shipley was commenting on the decision of Indonesia's Peoples Consultative Assembly to revoke the1978 declaration incorporating East Timor as a province of Indonesia.

"Last night's decision is an important step in the process started by President Habibie to allow the people of East Timor to decide their own political future through a UN ballot," Mrs Shipley said.

"The East Timorese people are now on course to independence. The next step is for the Indonesian and UN authorities to agree on a timetable for a transfer of formal authority to the United Nations. We look forward to early progress in those discussions.

"New Zealand will continue to play its part in helping that transition through our peace-keeping personnel as well as our humanitarian, policing and development assistance," the Prime Minister said.

ENDS

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