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Last Updated: Friday, 2 January, 2004, 12:12 GMT
South Asian summit hopes

Sanjoy Majumder
BBC News Online South Asia correspondent

Atal Behari Vajpayee and Pervez Musharraf. AP [left] and AFP Pictures
Vajpayee [L] and Musharraf have overseen an eight-month thaw
When the leaders of seven South Asian nations meet in Islamabad on Sunday, all eyes will be focused off-stage - on a possible face-to-face encounter between India's premier and Pakistan's president.

Two years ago Indian Prime Minister Atal Behari Vajpayee and Pakistani President Pervez Musharraf shook hands at the South Asian Association for Regional Co-operation (Saarc) summit in Kathmandu.

But despite the courtesy, relations between the sides remained in a deep freeze.

The thaw has been slow but, since April last year, steady.

Now the new Saarc gathering offers a chance to further the progress.

War threat passes

It was in April that Mr Vajpayee made a landmark speech in Indian-administered Kashmir.

He suggested he was willing to look forward, after more than 18 months of hostility that followed an attack on the Indian parliament in Delhi.

India blamed that attack on separatist militants it said were backed by Pakistan.

Relations nose-dived and both sides built up their troops along their border.

Indian troops patrol the de facto border in Kashmir
India-Pakistan hostility has long cast a shadow over Saarc

The world feared that an all-out war between the nuclear powers was imminent.

But that threat has long passed and in the past six months, India and Pakistan have re-established top-level diplomatic ties and resumed transport links.

Even though a major breakthrough is unlikely during the Saarc summit, the two sides are widely expected to announce more steps to take the peace process forward.

Much of the pre-summit focus has been on a possible meeting between Mr Vajpayee and the Pakistani leadership - either President Pervez Musharraf or Prime Minister Zafarullah Jamali.

If that happens, both Mr Vajpayee and President Musharraf will operate from a position of strength.

The Indian prime minister is travelling to Pakistan on the back of a string of key electoral victories, having won three out of four recent state elections.

His right-wing Bharatiya Janata Party is well positioned now to take on the opposition in general elections widely expected to take place in April or May of this year.

President Musharraf, for his part, has just won backing for his presidency after two-thirds of the Pakistani parliament voted in favour of his controversial constitutional amendments.

It makes him possibly the most powerful Pakistani president ever.

However, both leaders face opposition from hardliners within their countries who would oppose any moves that strayed from traditionally held positions.

President Musharraf has survived two recent assassination attempts, blamed on radical Muslim groups opposed to his policies, particularly his close co-operation with America in its war on terrorism.

Mr Vajpayee will be similarly wary of any moves that could be exploited by his political opponents in an election year.

His thinking was perhaps most apparent at a recent forum when he said South Asia as a region should look to break down barriers and co-operate closely on security and trade issues, even evolving a common currency.

Public's desire

India has long held the view that if economic and social links with Pakistan can be strengthened, they will help create an atmosphere conducive to a Kashmir settlement.

A trader on the Karachi Stock Exchange
South Asian trade could double with a free trade pact

On the other hand, Islamabad believes the Kashmir issue will always be an obstacle to closer ties and should be resolved as soon as possible.

Recent reports suggest the Indian and Pakistani public favour an improvement in relations, particularly in the area of travel and trade.

This is likely to be the main outcome of the Saarc summit, with the signing of a deal to pave the way for a free trade agreement by 2006.

If this happens, trade in the region, currently worth $610bn, could more than double.

India's trade with Saarc countries at present only makes up a little over 2% of its global trade.

Indian business leaders are hoping for an accord to be signed quickly and for visa restrictions on business travellers to be eased.

A new agreement on battling terrorism is also on the agenda - something that India has long pushed for.

Such an agreement would also help strengthen President Musharraf's standing internationally.

For the smaller countries making up Saarc, the agenda is a little different.

They will hope the regional grouping, long held hostage to India-Pakistan hostility, will finally take meaningful shape in one of the poorest and most heavily militarised regions of the world.

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