Pakistan and India will lose out in the global economic race unless the nuclear-armed neighbours are able to cement a long-lasting peace, Pakistani Foreign Minister Khursheed Mehmood Kasuri said yesterday. Although both economies are growing strongly ? India is forecast to grow 7 percent to end-March 2006 and Pakistan is targeting 7.5 percent growth 2004/05 ? Kasuri said tensions were scaring off foreign investors.

?All of the regions in the world have bypassed south Asia,? Kasuri told Reuters in an interview at parliament house during the first visit by a Pakistani foreign minister to Australia. ?In 1947 India was the head of all countries in Africa and Asia. In 1962/63 the manufactured exports of Pakistan were greater than the combined manufactured exports of South Korea, Malaysia and Thailand.?

?Today there is no comparison because we have been involved in, I hate to say arms race, but constant tensions,? said Kasuri, who held talks with Australian government leaders ahead of a first visit by Pakistan President Pervez Musharraf next month. The turbulent relationship between Pakistan and India centres on the Himalayan region of Kashmir, which sparked two of the three wars between the rivals since partition in 1947 with both countries claiming the mainly Muslim state.

Tensions between the countries grew further in 1998 when the they conducted tit-for-tat weapons tests that shocked the world and provoked sanctions by the United States that have since been lifted. Kasuri said Pakistan and India had been working hard at improving their ties and had reached a point where he hoped they were on a road ?leading to durable peace.?

?There is so much potential in south Asia. South Asians are a very motivated people but we have not provided an enabling environment in south Asia,? he said. ?If we can set our house in order in south Asia ... then not only is the 21st century an Asian century, but south Asia will play a very important role in that century,? he said.

Thawing bilateral ties were boosted last month when the two sides re-opened historic bus services between Indian and Pakistani Kashmir, reuniting families either side of the militarised border after more than half a century. ?You enable the Kashmiris to travel, they start thinking of their own future and it makes it easier for Pakistan and India to find out what they really want,? Kasuri said. He said the level of trust between Pakistan and India had developed to a point where he believed the next step was to allow Kashmiris on either side of the divide to talk to each other, and then hopefully India, Pakistan and the people of Kashmir would be able to reach a peaceful resolution.

Michelle NICHOLS