The leaders of New Zealand and Malaysia agreed today to begin negotiations on a free trade agreement (FTA) between the two nations.

"I think we're going to see the relationship with Malaysia grow very substantially if we can successfully negotiate an FTA," New Zealand Prime Miniser Helen Clark said.

"An FTA negotiation will be the catalyst not just for improved trade but for spin-offs in the relationship in many other areas," Clark said following talks here with her Malaysian counterpart, Abdullah Ahmad Badawi.

Abdullah said he hoped the FTA could be negotiated within a year.

"We are moving forward and taking into account all that we have achieved before," he said.

Modest bilateral trade

Bilateral trade between New Zealand and Malaysia is relatively modest, totalling slightly more than two billion New Zealand dollars (US$1.4 billion) per year.

The bilateral free trade talks will coincide with negotiations launched last month by New Zealand and Australia for an FTA with the 10-nation Association of Southeast Asian Nations (Asean), of which Malaysia is a member.

Australia, where Abdullah is scheduled to visit next month, also plans to begin free trade negotiations with Malaysia in the near future.

Clark said a recent study showed a bilateral FTA with Malaysia would provide benefits to both countries in areas like tourism, education, investment and scientific research.

Abdullah for his part singled out New Zealand expertise in biotechnology and its implications for agriculture as a key area of interest for his government.

"I believe this country is one that regards agriculture as a very important sector with a growth potential and it is the same for us," he said.