Leaders of 16 South Pacific countries, led by Australia and New Zealand, have agreed to pool resources to boost regional economic development, and to combat the threats of bird flu and terrorism. The agreement came at the 36th annual Pacific Forum, held in Papua New Guinea.

The so-called "Pacific Plan" seeks to increase co-operation between the disparate group of island nations in areas such as trade, aviation, health and security over the next decade.

Contemporary concerns about terrorism and bird flu were high on the agenda. Australia has pledged $6 million to tackle possible outbreaks of bird flu in the region.

Papua New Guinea shares a border with Indonesia, where four people have died of the disease, and there are concerns that an outbreak in PNG could easily spread to Australia, which, in places, is just a short boat ride south.

Australia has also long feared that instability on its doorstep could provide opportunities for extremists. The leaders of the Forum nations have conceded that their region remains vulnerable to organized criminal gangs and terrorist organizations.

In recent years Canberra has sent troops and police officers to help restore law and order in the Solomon Islands and Papua New Guinea.

This annual summit did have its disagreements. The smaller states asked Australia and New Zealand to accept seasonal workers from the islands. Australia flatly rejected the request. New Zealand said it was worried about islanders overstaying their visas.

Australia replied that setting up a regional technical college would be an effective way to address problems of unemployment in the region. Australian Prime Minister John Howard told his fellow leaders such a college would raise trade skills across the board.

"It will bring to the Pacific Islands the availability of Australian trade qualifications, which will not only be valuable of course in Australia but will be valuable all around the world,"

The Forum's 16 countries range in size from Australia, with a population of 20 million people, to tiny Niue, which has fewer than 2,000. The nations are spread over 30 million square kilometers of ocean, and their citizens speak more than 1,000 languages.

Many are beset by high levels of unemployment and deep-seated political corruption, which has stifled development. One aim of the new Pacific Plan is to move towards a common market for the region, with the developed economies of Australia and New Zealand serving as anchors.