Indonesia's President Susilo Bambang Yudhoyono, right, greets Australia Foreign Minister Julie Bishop during a meeting in Bali, Indonesia, Thursday. Pic: AP.

BALI, Indonesia (AP) — Indonesia and Australia have signed a new security agreement to mend ties damaged last year by spying allegations.

The agreement was signed by the countries’ foreign ministers Thursday on Indonesia’s Bali island. Outgoing Indonesian President Susilo Bambang Yudhoyono witnessed the ceremony.

Indonesian Foreign Minister Marty Natalegawa said the pact will lead to enhanced intelligence operations and the restoration of full military cooperation between the countries, which have a history of testy relations.

Yudhoyono downgraded relations with Australia last year over reports it had phone-tapped him, his wife and eight Indonesian ministers and officials in 2009.

Indonesia said normal diplomatic relations were contingent on the deal, which stipulates that the countries will not use their intelligence and surveillance capacities in ways that would harm each other’s interests.