HARPSUND, July 5: President Gen Pervez Musharraf and Swedish Prime Minister Goeran Persson on Monday held wide-ranging talks, emphasizing the importance of a peaceful resolution of the Kashmir dispute for durable peace and development in South Asia.

The two leaders discussed the issues of defence and war on terrorism. They agreed on expanding trade and economic relations to the mutual benefit of the two countries.

"The Kashmir dispute has to be resolved for the establishment of lasting peace in the region," asserted President Musharraf while speaking to media-persons after three and a half hours of formal talks with Mr Persson held at the summer residence of the Swedish premier, about 160km south of Stockholm.

Mr Persson told newsmen that Sweden welcomed the Pakistan-India peace process, stressing that "it must move ahead". The Kashmir issue, he said, needed to be resolved for long-term stability and economic development of South Asia.

Gen Musharraf pointed out that three parties were involved in the dispute: Pakistan, India and the people of Kashmir. The Swedish leader said that they had also discussed the strategic importance of Pakistan in the region and called for 'sound and strong' relationship between Pakistan and its neighbour.

He said that a business delegation would shortly visit Islamabad to explore ways of boostng Sweden's trade and economic ties with Pakistan. He identified information technology, paper-pulp and textile as areas where the two countries could increase the bilateral trade.

He observed that Pakistani economy faced problems in the past, but now it had shown marked improvement. "We hope that Pakistan will continue to grow economically on healthy lines," he said.

President Musharraf said Pakistan had been moving strongly against Al Qaeda. "We have been moving militarily as well as politically." In reply to a question, he said the Pakistan Air Force and Swedish companies were in touch with each other on the matter of acquiring the Ericsson radar.

Pakistan, he said, was looking at various options vis-a-vis acquiring high-tech aircraft, adding that there were many choices and Swedish aircraft Gripen was also under consideration.

He said Pakistan believed that balance must be maintained in the conventional field of defence in South Asia. Pakistan had no intention of ever using nuclear weapons as they were meant for deterrence, he said.

Answering another question, the president said that Pakistan had diplomatic relations with the then Taliban regime but it wanted them to change their attitude. "We did not support Talibanization."

He said if the international community had recognized the Taliban, there would have been as many as 70 embassies in Kabul, who would have definitely urged them to change their rigid approach.

"There may not have been the blowing off of the statues of Buddha in Afghanistan, then." The president reiterated that Pakistan would go to Iraq only under the United Nations mandate and if the Iraqi people wanted it to come for the rehabilitation of their country.

"We do not want to go to Iraq and fail to deliver," he maintained. The Swedish prime minister, who was on crutches following a recent surgery on his hip-bone, said the international community should fulfil its responsibility in extending its cooperation for transition of democracy in Afghanistan.

During the talks, President Musharraf briefed the host leader about Islamabad-Delhi ties, Pakistan's position on the Kashmir issue, the situation in Afghanistan and economic achievements of his country.

"Our interaction has been very fruitful...we focused on boosting economic ties." Sweden, he said, could extend cooperation to Pakistan in the fields of health and education.

He also briefed Mr Persson about the 'reality of democracy in Pakistan'. Industries Minister Liaquat Ali Jatoi, Senator Wasim Sajjad and Ambassador Shahid Kamal were prominent among those who assisted the president at talks. -APP

Mr Persson, however, tried to downplay discussions surrounding the Gripen fighters, adds AFP. "There are no discussions about Gripen now. Musharraf mentioned Pakistan's interest, but we quickly moved past (the issue). We have strict laws on weapon exports," the Swedish newswire TT quoted him as saying.