U.S. lifts travel warning for Indonesia

JAKARTA (Reuters) - The U.S. State Department has lifted its travel warning for Indonesia, the U.S. ambassador in Jakarta said on Sunday, reflecting improved security and paving the way for closer ties between the two countries.

The Islamic militant group Jemaah Islamiah, which wanted to create an Islamic caliphate in Southeast Asia, carried out a series of deadly bomb attacks in Indonesia between 2002 and 2005, dealing a severe blow to the country's tourism and trade.

Following the bombings, the Indonesian authorities worked closely with foreign allies to arrest militants and step up security.

"The U.S. has lifted the warning due to objective improvements made by Indonesia in its current security situation," the U.S. embassy said in a statement.

"Indonesia has not experienced a major terrorist attack since October 2005, and the government of Indonesia has disrupted, arrested, and prosecuted numerous terrorist elements," it said.

The embassy added that the warning had been in effect since November 2000 and that it was cancelled with effect from May 23.

Members of Jemaah Islamiah bombed bars in the Indonesian resort island of Bali in 2002, killing more than 200 foreigners and Indonesians. The group later bombed Western targets in the capital Jakarta, including the JW Marriott hotel and Australian embassy.

Indonesia, Southeast Asia's biggest economy, has the world's largest Muslim population.

While many U.S. firms already do business in Indonesia, including mining giant Freeport-McMoRan Copper & Gold Inc., a lifting of the travel warning should reduce security concerns and cut insurance costs for businesses operating in the country.

But economists such as Helmi Arman of Bank Danamon warned that security was only one of the many factors influencing investment flows into the country.

"Well, it is good, but the problem is this isn't only about security problems in Indonesia," he said.

"There are problems like competitiveness, label productivity, and also people's purchasing power. So if we expect that when a travel warning is lifted then investments will come, it's not really true."

(Reporting by Ade Mardiyati in Jakarta; Writing by Sara Webb; Editing by Bill Tarrant)