David Cameron plays down embarrassing moment in Indonesia

David Cameron with Indonesian President Susilo Bambang Yudhoyono today (Reuters)

David Cameron suffered an embarrassing moment today when his Indonesian host suggested that boosting government spending and preventing companies laying off staff was the best way to fix a wrecked economy.

The comments by President Susilo Bambang Yudhoyono came at a joint press conference in Jakarta as Mr Cameron continued his trade mission in South East Asia.

Mr Yudhoyono insisted he was not trying to tell other countries what to do, and every government had to find their own solutions.

But he proceeded to set out an approach that seemed to contradict key policies being pursued by the coalition.

"In 1998 our economy was devastated. It collapsed. We learnt a lot. We had major reforms," he said.

"We did many things. So 10 years later, when the economy was impacted, we were united - the government, private sector, regions.

"We also developed policies - fiscal policies, monetary policies - that protected us. We should prevent (companies) conducting lay offs.

"We should safeguard unemployment levels. We know the community was impacted by this. We provided social assistance, we provided stimulus so that (people) can buy purchases.

"It seemed to work for Indonesia. It may not work in other countries. What is important is we have to prevent lay-offs, we must ensure people can buy, we must ensure industries can produce and we must make the government be able to make the right fiscal and monetary policy responses."

Speaking to ITV News in a round of broadcast interviews, Mr Cameron played down the incident.

"I think he was making a very sensible point which is that both of us have a challenge which is to generate the growth necessary to ensure that young people in our countries have a job and a future and that is critical in Indonesia just as it is critical in Britain," he said.

The Prime Minister also warned that Britain could have been in the same position as other European countries such as Spain if not for the government's tough action to tackle the deficit.

"If you look around Europe you can see countries that don't have robust plans getting profoundly punished with high interest rates, whereas we have got some of the lowest interest rates we have had for decades," he added.

Mr Cameron targeted fast-growing Indonesia - the world's most populous Muslim country - for the second stop of his trip.

The leaders set a target of doubling trade between their nations by 2015.

And they unveiled a £326 million deal which will see Indonesian airline Garuda buy 11 Airbus A330s, shoring up thousands of jobs in Britain.

However, the premier was forced to respond to criticism that the planes would not be able to fly direct to the UK because Heathrow did not have enough capacity.

A spokesman for airport operator BAA welcomed Mr Cameron's emphasis on links with emerging economies.

But he went on: "It is not enough to have one plane of business people visiting Indonesia once.

"Until the government has an aviation policy which supports direct connections to emerging markets the Prime Minister will be fighting for British exports with one hand tied behind his back."

Mr Cameron told ITV News the coalition had made a "clear promise" not to build a third runway at Heathrow, and was "sticking to it".

"I was talking to the head of Garuda, and he was saying that he hopes there will be a direct flight in future between London and Jakarta, so that will be a step forward," he went on.

"We have got a paper coming out on the future of aviation to make sure that we are well connected. Remember that we do have in Heathrow one of the biggest and most successful airports in the world.

"There is expansion taking place at Heathrow. The BA and BMI deal might make available extra slots that will allow expansion to take place."

Just hours after Mr Cameron's arrival today a huge 8.6-magnitude quake hit off the coast of Indonesia near Aceh.

The premier said Britain "stood ready" to provide help, but fears of major casualties and a tsunami did not materialise.

Mr Cameron, who will head on to Malaysia tomorrow, also looked forward to his visit to Burma on Friday, when he is due to become the first western leader to meet Nobel Peace Prize winner Aung San Suu Kyi since she was elected to parliament this month.

Asked if it was too early to assume that democratic reforms would continue, he replied: "There are never guarantees but of all the bad things that are happening in our world I think Burma is a bright spark, where you see an inspirational leader who has been so patient and hard working and wanting to see democracy flower in that country, we see that flowering taking place. I think it is a good time to go and visit and I am looking forward to doing that.

"Britain has helped put huge pressure and sanctions on that regime and I think there will be opportunities now to work with Aung San Suu Kyi and make that process is irreversible."

PA