Malaysia and Pakistan agreed on Wednesday to work towards a free trade agreement to promote economic cooperation between the two Muslim countries, officials said.

They had agreed to start discussions on a preferential trade arrangement leading to a free trade agreement, Pakistani Prime Minister Shaukat Aziz said after talks with his Malaysian counterpart Abdullah Ahmad Badawi.

Abdullah, who arrived here on a three-day visit on Tuesday, said: "We want to enhance trade. There are tremendous opportunities for us to do more."

He said he hoped that "bilateral relations will be strengthened and deepened" as a result of his visit.

Total trade in 2003 was US$713 million, with US$623 million going to Malaysia. Officials believe a preferential trade arrangement could address the imbalance.

Malaysia exports electronic products but the key item is palm oil which accounts for some US$500 million, while it imports rice and textiles from Pakistan.

"We are also keen to promote cooperation in telecommunications and agriculture," Abdullah said.

First visit

The visit is Abdullah's first to Pakistan since becoming prime minister after veteran leader Dr Mahathir Mohammed stepped down and comes in the wake of brisk diplomatic activity in Islamabad.

It coincided with the visit of Indian Foreign Minister Natwar Singh and a day after British Foreign Secretary Jack Straw concluded a three-day visit.

The Malaysian leader welcomed the ongoing dialogue between India and Pakistan, saying that "peace and stability in this region is something the whole world is looking forward."

Abdullah, whose country is a key member of the Association of Southeast Asian Nations, offered to extend cooperation to the South Asian region.

He also said more Pakistani workers would be accepted for jobs in Malaysia, with numbers yet to be decided.