Aung San Suu Kyi and Hillary Clinton establish strong bond (video)

Pro-democracy leader Aung San Suu Kyi welcomed on Friday renewed U.S. engagement with Myanmar, saying she hoped it would set her long-isolated country on the road to democracy.

Secretary of State Hillary Clinton held a final meeting with Suu Kyi as she wrapped up a landmark visit to Myanmar which saw the new civilian government pledge to forge ahead with political reforms and re-engage with the world community.

Clinton and Suu Kyi - the Nobel laureate who has come to symbolize the pro-democracy aspirations of Myanmar's people - held a private dinner on Thursday and met again on Friday at Suu Kyi's lakeside home, effectively her prison until she was released in November last year after years in detention.

IN PICTURES: Aung San Suu Kyi's gains freedom

"If we go forward together I'm confident there will be no turning back from the road to democracy. We are not on that road yet but we hope to get there as soon as possible with our friends," Suu Kyi said.

The two, arguably the world's most well-known women politicians, met for about an hour and a half then stood on a verandah, holding hands as they spoke to a crowd of reporters.

They both appeared visibly moved as they embraced after their meeting, and a senior U.S. official said it was clear they had established a strong personal rapport during their first face-to-face talks.

Neither mentioned U.S. sanctions on Myanmar, imposed because of rights abuses and the suppression of democracy. But Clinton said at a later news conference that the restrictions might end if reforms continue.

"If there is enough progress, obviously we will be considering lifting sanctions. But as I said before we're still at the very early stages of this dialogue," she said after being asked about sanctions by a Myanmar reporter.

She acknowledged that removing the sanctions would help Myanmar's struggling economy, but said the United States needed to be sure that real changes were under way.

"There need to be some economic reforms along with political reforms so that the benefits would actually flow to a broad base of people and not just to a very few," she said.

ALTERNATIVES TO CHINA

Clinton has repeatedly praised Myanmar's new army-backed civilian government for moving ahead with reforms following elections last November that ended some five decades of unbroken military rule.

The government has taken steps to broaden political participation, release some political prisoners, and gradually expand freedoms of expression and assembly.

Suu Kyi said Myanmar needed help on education, healthcare and strengthening rule of law and welcomed new U.S. support for World Bank and International Monetary Fund (IMF) assessment missions to help draw up priorities for a country whose shambolic economy is increasingly reliant on China.

"We have to find out what our greatest needs are," she said.

Clinton said the United States would do what it could to help, announcing new support for small programs to help landmine victims and support microfinance and healthcare projects.

But in a sign of the straightened circumstances the United States faces amid fears of huge budget deficits, the new funding amounted to just $1.2 million on top of the $40 million the United States already provides in aid to Myanmar each year.

Clinton's trip follows a decision by U.S. President Barack Obama last month to open the door to expanded ties, saying he saw the potential for progress in a country until recently seen as a reclusive military dictatorship firmly aligned with China.

Suu Kyi and Clinton both stressed that Myanmar's new civilian leaders - many of them former military figures - must address the issue of political prisoners, which Clinton said still numbered more than 1,000 despite the release in October of about 230.

"We need all those who are still in prison to be released and we need to ensure that no more are arrested," said Suu Kyi, the daughter of the country's assassinated independence leader, Aung San.

OPPORTUNITIES AND CHALLENGES

Clinton's trip - the first by a senior U.S. official in more than 50 years - represents an opportunity for both Myanmar and the United States, and both appear eager to press ahead with rapprochement.

Myanmar's new leadership hopes the United States will eventually ease or remove the sanctions, opening the resource-rich but desperately poor country to more foreign trade and investment and help it catch up to booming neighbors such as Thailand and India.

For Washington, improved ties could underscore Obama's determination to up U.S. engagement in Asia and balance China's fast-growing economic, military and political influence.

Clinton met representatives of ethnic minority groups, some of which have been locked in bloody conflict with the army for decades, as well as civil society organizations

U.S. officials said the meetings were aimed in part at underscoring that the new outreach to Myanmar's government does not mean a halt to pressure on human rights and political freedom.

Both Clinton and Suu Kyi called for an end to the conflicts between the army and minority guerrillas, which U.S. officials say may prove the toughest challenge ahead for the country's leaders.

Clinton, after her talks with President Thein Sein on Thursday, announced a package of modest steps to improve ties, including U.S. support for the IMF and World Bank assessment missions and expanded U.N. aid programs.

She also said the United States would consider reinstating a full ambassador in Myanmar - a position which has been unfilled for more than 20 years - which could mark a symbolic next step in the warming ties between the two countries.

(Editing by Robert Birsel)

IN PICTURES: Aung San Suu Kyi's gains freedom