Indonesian President Joko Widodo met with his Papua New Guinea counterpart James Marape in Port Moresby on Wednesday.
Reuters reports Widodo's one-day visit had a border agreement and trade as the focus of talks.
"PNG and Indonesia are both economic giants. PNG in the Pacific and Indonesia in south-east Asia. You can imagine if the two potentials merged, it would surely bring tremendous impact, not just for the people of both nations, but also the region," Widodo told reporters.
Marape said Indonesia has agreed to sponsor 2000 PNG students to attend university in Indonesia, and pledged around $US15 million to upgrade Port Moresby's hospital.
He said other outcomes included agreements on customs and combating trans-national crime, and a new review of border arrangements to strengthen economy and trade.
Marape said areas that need further progress include the ratification of a Defence Cooperation Agreement with Indonesia at parliament's next sitting.
He said Widodo's visit had boosted business opportunities between the two nations.
Marape said outcomes included agreements on customs and combating trans-national crime, and a new review of border arrangements to strengthen economic and trade.
The visit comes after Indian Prime Minister Narendra Modi and US Secretary of State Antony Blinken met a dozen Pacific island leaders in Port Moresby in May.
Papua New Guinea, which counts China as a major trading partner, signed a defence cooperation agreement with the US during Blinken's visit.
The deal allows US military access to PNG ports and airports.
PNG shares a 760km border with Indonesia. Diplomatic relations have been complicated by the separatist ambitions of Melanesian groups on the Indonesian side of Papua, which was absorbed by Indonesia after a 1969 vote.
A basic border agreement with Indonesia, which had been stalled for 10 years by PNG's parliament, was ratified in March.
Prior to his visit to Port Moresby, Widodo met with the Australian prime minister Anthony Albanese in Sydney.
ABC reports Australia will ease some visa rules for Indonesians visiting the country, as part of a series of agreements struck during the president's visit.
The head of state met with business and political leaders, in what is expected to be his last visit as president as he nears the end of a second and final term in office.
Following the bilateral talks, Albanese announced Indonesians would have immediate access to an extended visa from three to five years.
- Reuters/ABC