Terrorism, free trade and fighting poverty top the agenda at a South Asian summit on Sunday, but attention will be focused on the sidelines, where Pakistani and Indian leaders have a historic opportunity to cement peace overtures after a half-century of hatred.

Indian Prime Minister Atal Bihari Vajpayee, left, and his Pakistani counterpart Zafarullah Khan Jamali, right, listen to national anthems at Islamabad airport, Pakistan, on Saturday, Jan. 3, 2004. [AP]

The leaders of India, Pakistan, Bangladesh, Bhutan, the Maldives, Nepal, and Sri Lanka are meeting in the Pakistani capital for the three-day summit. A breakthrough agreement that would create a free-trade zone by 2006 was reached at pre-summit meetings on Friday.

Far more interesting will be the chance for talks between Pakistani President Gen. Pervez Musharraf and Indian Prime Minister Atal Bihari Vajpayee, the first since the two men sparked the thaw in relations last year.

In recent months, the region's two most populous nations have traded nuclear brinksmanship for detente, enforcing a total cease-fire between forces on each side of the disputed Himalayan region of Kashmir. They have resumed air, rail and bus links and restored top-level diplomatic relations.

Both nations have expressed a willingness to try new ideas to solve the Kashmir conflict, the source of two wars between the nuclear-armed neighbors since they gained independence from Britain in 1947.

"There's a general assumption that this opportunity will not be missed," Pakistani Foreign Minister Khursheed Kasuri said Saturday.

There are hopes that a formal peace dialogue could be announced.

"The results of such a meeting may not be spectacular, but it will be a breaking of the ice," said Asma Jehangir, a prominent member of the independent Pakistan-India Forum for Peace and Democracy. "This conflict has held the whole region hostage, so just the fact that a meeting is happening is very significant."

Vajpayee has said he would meet with Prime Minister Zafarullah Khan Jamali, who is Pakistan's official representative at the summit, but insists he will not discuss flashpoint issues like Kashmir. He has not yet agreed to one-on-one talks with Musharraf, the nation's real power broker. Officials on both sides say privately that a meeting is likely, however.

It is Vajpayee's first visit to Pakistan since he met former Prime Minister Nawaz Sharif for talks in the eastern city of Lahore in February 1999. Several months later, the two nations' armies were fighting near the remote Kashmir border town of Kargil, killing more than 1,000 soldiers and inflaming nuclear tensions. By the end of that year, Sharif was gone — overthrown by Musharraf in a bloodless coup.

Officials from all seven countries acknowledge that South Asia's fortunes are intertwined with those of its two largest members, whose squabbling has undercut regional trade.

Disagreements between Pakistan and India are a key reason that in its 18 years in existence, the South Asian Association for Regional Cooperation, or SAARC, has little to show for itself.

Poverty among the 1.3 billion people of the region — one-fifth of the world's population, is endemic. In 2001 and 2002, the nations missed two deadlines to create a free trade zone before Friday's agreement, which will break down tariffs starting in 2006.

The association's initiatives to fight human trafficking, improve education and upgrade infrastructure are mostly still paper fantasies.

In fact, the seven nations have had a hard time agreeing even on when and where to meet.

The Islamabad gathering — only the 12th summit of heads of state since 1985 in what was supposed to be a yearly event — was delayed for 12 months because of India's refusal to come.

Many at this year's summit say they hope the India-Pakistan issue does not cloud other desperately important challenges facing the region.

Nepal has been losing ground to a bloody Maoist insurgency that is in control of a third of the country. Peace talks to end a 20-year civil war in Sri Lanka that has claimed 65,000 lives are sputtering. Even the tiny mountain kingdom of Bhutan launched a December military campaign to oust rebels using their territory to attack troops in neighboring India.

The regional summit is taking place amid unprecedented security in the wake of two recent attempts by suspected Islamic militants to assassinate Musharraf.

Weeks before the summit, officials began sprucing up the capital — adding several sculptures along a route delegates must travel to reach the convention site, repaving roads and placing festive lights and multicolored flags on nearby buildings.

But no amount of window-dressing can mask the main challenges facing the seven South Asian nations.

"There has to be cynicism because SAARC has talked big but done nothing," said Jehangir. "If anything, the problems of the countries in the region — poverty, religious intolerance, human rights — feed off each other."

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