TEHRAN, Feb 22: Prime Minister Shaukat Aziz said here on Tuesday that 'pipeline diplomacy' would bring peace to the region, the state news agency IRNA reported.

"This development will build a very good atmosphere for improvement of relations among all the region's countries," said the prime minister who arrived here on a three-day visit to boost ties and discuss a proposed Iran-Pakistan-India gas pipeline project.

Mr Aziz also expressed happiness over India's agreement to join the pipeline plan. "Fortunately with the agreement of the Indian government, we hope that this significant project will be operational as soon as possible," he said.

Referring to Pakistan's growing economy, he said: "In order for us to ensure such a fast and constant growth, we need a reliable source for energy supply." -AFP

OUR REPORTER INTIKHAB HANIF ADDS: The prime minister called on Iranian President Syed Mohammad Khatami at Tehran's Hafezieh Building, Saadabad Palace, after his arrival and discussed bilateral relations.

They expressed their resolve to boost political, economic and trade cooperation. Discussions were also held on the ongoing composite dialogue process between Pakistan and India and views were exchanged on regional and international issues of mutual interest, including Kashmir, Iraq and Afghanistan, besides steps to boost economic and trade relations between the two countries.

According to Mr Aziz, the talks covered the whole spectrum of relations and both sides explored new avenues of cooperation. Discussions on the proposed Iran-Pakistan-India gas pipeline were also held, the prime minister said and added that the project would help improve atmosphere in the region and generate economic activity.

President Khatami described the talks as productive and satisfactory, and said the two countries needed to further enhance all-round cooperation to its maximum potential, according to Iranian officials.

Later, the prime minister visited the shrine of Imam Khomeini to pay homage to the late leader. He also laid a wreath and met the shrine's custodian Hasan Khomeini, who is the grandson of the late leader.

RESOURCE MOBILIZATION: Speaking at a reception hosted by the Iran Chamber of Commerce, Industry and Mines, Mr Aziz said both countries had not properly utilized their potential. "We have to work together to mobilize resources for taking advantage of our true potential."

He presented an overview of Pakistan's economy and said it was rapidly progressing. The country had the best performing stock market in the world and had a seven per cent growth rate.

The prime minister said that exports and tax collection in Pakistan were increasing with a 15 per cent increase in industrial production. During the last five years, the country witnessed changes in its economy with the philosophy of deregulation.

He said the government wanted to promote the private sector while playing a role of a policy-maker and facilitator. "Around 80 per cent of the banking sector is in the private sector," he added.

Mr Aziz said inflation was the only major problem facing the economy. It was rising because of the increase in oil prices. "We are on the verge of second-generation reforms after completing the first phase," he said.

The prime minister said the joint economic commission would ensure economic cooperation between the two countries. He said that a preferential trade agreement would help the two countries rationalize tariff. He informed the Iranian businessmen that Pakistan was considering three gas pipelines projects to meet its energy requirements.

ICCIM President Naqi Khamoushi stressed the need for improving road, rail and air links between the two countries for enhancing people-to-people contact. Both countries could utilize their sea ports for their mutual benefit and adopt measures for increasing trade with Central Asian countries.

Replying to a question, the prime minister said that an Iranian delegation would visit Pakistan next month for talks on the proposed Iran-Pakistan-India gas pipeline.