Malaysia said today it could open up its service sector to US firms and reported progress in free trade talks with the world's biggest economy.

The Malaysian trade ministry said negotiations had moved forward during an eighth round of talks earlier in July in Washington.

"Progress was achieved with both sides showing willingness to seek solutions to the outstanding issues," the ministry said in a statement.

"On services, Malaysia is considering allowing US participation in sectors where investment, technology and expertise would be needed for its further development," it said.

Last round ended in deadlock

The seventh round in January ended in deadlock and Malaysia said in May that it would not compromise on its agriculture sector. The talks began in March 2006.

Some local critics fear a free trade deal could leave Malaysia in an unfavourable trading position.

Malaysia's list of sensitive areas - including environmental protection and the practice of giving Malay companies a leg-up in lucrative government contracts - have bogged down the talks.

The US is Malaysia's biggest trading partner and wants the deal to be struck before President George W Bush leaves office in January 2009, having warned the talks could end after he departs.