COLOMBO Nov 21: Pakistan and Sri Lanka on Sunday agreed to enhance defence and trade cooperation and take a number of steps to expand and consolidate bilateral ties.

The accord was reached at a meeting between Prime Minister Shaukat Aziz and Sri Lankan President Chandrika Bandranaike Kumaratunga at the President's House in Colombo. The prime minister who is on his first visit to Sri Lanka since assuming office offered his host a $10 million credit to purchase Pakistani products.

During the 60-minute delegation-level talks led by the two leaders, important bilateral, regional and Saarc-related issues were discussed. Later, the prime minister and the Sri Lankan president also had a 45-minute one-to-one meeting.

Prime Minister Aziz, who is visiting Colombo in his capacity as the Saarc chairman, stressed the need to activate the potential of Saarc. The two leaders pledged to work together to make the regional forum an effective and vibrant regional organization.

On the bilateral front, the two sides decided to activate the Free Trade Agreement that was signed in 2002. A meeting of the Pakistan-Sri Lanka Joint Economic Commission will be held in Colombo to discuss issues relating to trade promotion.

The two-way trade between Pakistan and Sri Lanka during 2003-2004 stood at $146.2 million. Pakistan offered Sri Lanka export of engineering goods, including fans and air-conditioners and sought expertise in gemmology from Sri Lanka.

It was also decided that Pakistan would import tea from Sri Lanka and the latter would purchase rice from Pakistan. Modalities in this regard will be worked out at the Joint Commission meeting next month.

Pakistan will also hold a single country exhibition in Sri Lanka. It was agreed that both the countries would exchange parliamentary and cultural delegations. Joint filming and exchange of television programmes was also discussed at the meeting.

In the education sector, Pakistan decided to raise scholarships for Sri Lankan students in different disciplines from eight to 16 and agreed to provide admission to students in medical, engineering, IT, business administration and other disciplines. Pakistan asked Sri Lanka to provide it with English language teachers.

The Sri Lankan president emphasized the need to increase trade and commerce among Saarc member states to improve relations. The prime minister also briefed the Sri Lankan president about the ongoing composite dialogue with India to resolve all outstanding issues including the Kashmir dispute, which he said, must be resolved according to the aspirations of the Kashmiri people. He maintained that Pakistan was committed to peace and had no ill designs against any country.

Mr Aziz also thanked President Kumaratunga for Sri Lanka's support for Pakistan's re-admission to the Commonwealth. President Kumaratunga will visit Pakistan in the second week of January.

MEETING WITH LANKAN PM: Prime Minister Shaukat Aziz called on his Sri Lankan counterpart Melinda Reawakes along with the members of his delegation and held wide-ranging talks with him.

Mr Aziz underlined the need to energize Saarc and make it more meaningful. To use full potential of Saarc, he advocated closer trade and economic cooperation among the seven-member forum. He said Pakistan was an anchor of peace in the region and believed in a policy of non-interference. Small and big countries both deserve respect, he added.

In a telling observation, the prime minister said: "Saarc functions well if India and Pakistan talk to each other." In this context, he briefed the Sri Lankan prime minister on the current Indo-Pakistan peace process.

During his talks with the Sri Lankan leadership, Mr Aziz also underscored the need to institutionalize the Saarc process to make the regional body result-oriented.

BANQUET: In the evening, Prime Minister Shaukat Aziz attended a banquet hosted in his honour by the Sri Lankan prime minister. In his address at the banquet, the prime minister thanked Sri Lanka for its important contribution to the revival and re-invigoration of regional cooperation.

Reiterating Islamabad's commitment to promoting peace and stability in South Asia, the prime minister said Pakistan sincerely believed in cultivating good neighbourly relations with all South Asian states.

Referring to Pakistan's 'excellent bilateral relations' with Sri Lanka he emphasized the need to add more substance to them in terms of economic and commercial cooperation as well as people-to-people contact.

He said under the chairmanship of Pakistan Saarc had covered fresh ground in recent months. "At the Islamabad Summit, we were able to set new markers and build a new sense of momentum," he maintained.

He hoped that the next summit in Dhaka in January would also be rewarding. Mr Aziz stressed the need for greater emphasis on project cooperation, poverty alleviation and setting the framework for investments and joint ventures.

The Sri Lankan prime minister in his address of welcome appreciated the support and assistance extended to Sri Lanka by Pakistan during critical moments in its recent history.

Mr Reawakes said as chairman, Pakistan had guided the Saarc process with commitment and diligence, adding that the success of the 12th Summit was largely due to the leadership provided by Pakistan. "I strongly believe that stronger the relations between Pakistan and India, more stable our region would be," the Sri Lankan prime minister stated.

ARRIVAL: Earlier, the prime minister arrived at Sri Lanka's Bandranaike Airport along with a 76-member entourage on a warm and cloudy afternoon aboard his special aircraft. He was received by Sri Lankan Prime Minister Melinda Reawakes.

Mr Aziz was given a guard of honour by a contingent of the Sri Lankan Navy. Later, he along with his wife was flown to the State Guest House in a Air Force helicopter. From there they were taken to his hotel where he is staying.

His entourage comprises six cabinet members, parliamentarians, businessmen, bureaucrats, media members, personal staff and security personnel. Federal ministers of petroleum; water and power; railways; overseas Pakistanis; and sports, culture and youth affairs are accompanying the prime minister.