US Secretary of State Hillary Clinton announced $600 million in aid for Indonesia Saturday, most of it for "green prosperity" in the world's third-biggest greenhouse gas emitter.

The money will be funnelled through the Millennium Challenge Corporation (MCC), a US government aid agency, which said that while Indonesia is rich in natural resources, many of its rural people do not benefit.

"This will help provide viable renewable energy alternatives and helps support natural resource management," Clinton said on the Indonesian island of Bali where she is attending the East Asia Summit with President Barack Obama.

"We see this as an end in itself. We think that rural people will be able to raise their incomes while reducing their reliance on fossil fuels and on logging."

Indonesia is the world's 18th-largest economy but the third-biggest producer of greenhouses gases, with an estimated 85 percent of emissions coming from deforestation and other destructive land uses.

More than $300 million of the US funds will go towards renewable energy and natural resource projects to raise incomes and reduce emissions.

But Indonesia is regularly rated by watchdogs as one of the world's most corrupt countries and previous attempts to protect forests have run into problems.

A moratorium on logging promised by Jakarta in connection with a $1 billion programme funded by Norway was delayed for five months.

When it was finally signed by President Susilo Bambang Yudhoyono in May this year environmentalists condemned the ban on logging in primary forests and peatlands as containing "gaping loopholes".

Climate Advisers, a Washington-based environmental consultancy, praised the US deal as "a cause for hope" and a "step forward in modernising US foreign aid programmes".

But in a paper for the Brookings Institution think-tank it said: "For a long time Indonesia's forest economy has been notoriously inefficient and corrupt, with profiteering and resource exploitation often trampling the rights of the rural poor.

"Mismanagement and corruption are deeply embedded in Indonesia's land-use sectors, and entrenched interests will fight against efforts to increase transparency and rationalise natural resource decisions."

It warned that Indonesia would need to "sustain the political will to overcome these challenges at all levels of government" for the agreement to work.

Indonesia's finance minister Agus Martowardojo said some of the funding would go towards hydropower and solar energy, and that the country was committed to fighting corruption.

"Everybody is watching this, we will have a surveillance organisation to make sure all the implementation of this fund will be according to good governance," he said.