Pakistan and India engaged in two punishing wars in the third quarter of the 20th century, and the two continue to clash on the question of Kashmir and how much of the state belongs to either country.

The rift has been exploited by other nations, including the United States and the Soviet bloc, and this has not helped to improve relations between two neighbours who share a common cultural background, and even speak common languages (Punjabi and Urdu).

A little into the new millennium, however, the wisdom of living in harmony and an environment of mutual prosperity seems to have dawned on the leadership of both countries.

The thaw in Indo-Pakistan relations over the past two years, triggered mainly by some adroit 'cricket diplomacy', has resulted in both sides showing a greater willingness to issue visas and allow families torn apart by the partition to cross the border and visit relatives.

Meanwhile, cultural, trade and sports exchanges have done much to improve relations between both sides.

Indeed, sports have played a big role in bringing the two countries together.

Cricket tournaments in particular have helped to raise the level of goodwill between the rival nations, and so have hockey, squash, snooker and billiards exchanges.

Cultural exchanges include popular and well-received concerts and other forms of entertainment.

Inevitably, trade between the two countries has prospered.

India-Pakistan trade registered a 146 per cent jump in the period from April to December 2004, moving up to US$429.38 million from US$174.32 million in the corresponding period in 2003.

Indian exports to Pakistan jumped to US$353.86 million in April-December last year from US$124.29 million in the corresponding three quarters of 2003.

Pakistan's exports to its neighbour also rose to US$74.53 million from US$50.03 million for the same period.

Commodities showing significant growth include man-made fibres (1,145 per cent), plastic and linoleum products (1,864 per cent), non-ferrous metals (1,311 per cent), rice (other than basmati, 542 per cent), ferro alloys (875 per cent), pulses (759 per cent), and meat and meat products (521 per cent).

Pakistan's economic performance has been strong over the past couple of years, thanks to a change of attitude towards India and drastic macroeconomic reforms under the president, General Pervez Musharraf.

The government has tackled some daunting economic reform issues, including the country's huge debt overhang.

Pricing has been broadly deregulated, including in the energy sector, and import tariffs rationalised and considerably reduced.

The central bank has been granted unprecedented autonomy, with a greater control of the capital market.

At the end of last year, Pakistan for the first time clinched two International Monetary Fund programmes - the standby loan facility and the poverty reduction growth programme - after several aborted attempts in the 1990s.

With the appointment of former Citibank country chairman and Finance Minister Shaukat Aziz as Pakistan's prime minister, replacing the more conservative Mir Zafarullah Khan Jamali, General Musharraf increased the west's confidence in the country's ability to keep the economy moving forward. It also gave the signal that further foreign direct investment was welcome.

Prime Minister Aziz, who has sold government stakes in several public sector enterprises, said the proceeds of privatisation in Pakistan last year went beyond the US$500 million mark, about half of the foreign investment target of US$1 billion.

The results are there for all to see. Foreign exchange reserves today exceed US$12.5 billion, equal to 21 months of import cover, while gross domestic product growth has hovered at the 5.1 per cent mark.

Deficits - fiscal and balance of trade - have been declining in the face of a strong and stable currency.

After more than half a century of turbulence, Pakistan appears set to establish itself as a vibrant, rapidly emerging Asian power.