The leaders of Pakistan and Afghanistan are seeking to boost trade ties, including a lucrative joint project to pipe natural gas from Central  Asia. They also highlighted increased cooperation in fighting terrorism.

Economic issues and trade links dominated talks between Afghan President Hamid Karzai and his Pakistani counterpart Pervez Musharraf.

The issue of transportation links between the two neighbors was central to the talks. Late Tuesday, President Karzai told reporters that such connections are key to increasing trade between his country and Pakistan.

"We discussed various issues regarding the promotion of trade, of transit, of the strengthening of ties, and of the opening of roads and railway links and communication links," he said.

He also supported plans to build a natural gas pipeline from resource-rich Turkmenistan, through Afghan territory and into Pakistan, saying the project would hold immense economic benefits for all the countries involved.

After meeting with Mr. Karzai, Pakistan's President Musharraf said he was pleased with the recent warming of relations between the two countries.

"We also expressed satisfaction at the fact that the fight against terrorism is a success story in this region," he said.

Following the ousting of Afghanistan's former ultra-conservative Taleban regime in 2001, some Afghan officials accused Pakistan of harboring Taleban loyalists who are waging an insurgency against the new government.

Tensions reached their height in 2003, when an Afghan mob sacked the Pakistani Embassy in Kabul. But increased cooperation on the Taleban issue and on terrorist activity in general, has since brought the two sides closer.

Mr. Karzai's visit to Islamabad included an invitation to the Pakistan Day parade Wednesday, celebrating the 65th anniversary of Muslim leaders' resolution to create an Islamic republic in part of what had been British-ruled India.

The military parade offered a further showcase for the improved relations between President Musharraf and President Karzai, with the two leaders greeting each other affectionately before cheering crowds and watching the event side-by-side.

President Musharraf, in his Pakistan Day comments, also stressed that his government would continue pushing for a peaceful resolution of Pakistan's dispute with India over control of Kashmir. The region, which has a mostly Muslim population, is divided between the two countries and the issue has sparked two wars.