The three-day South Asian Association for Regional Cooperation summit began in Islamabad on Sunday.

"The Asian region has immense resources in terms of geographical affinities, rich cultural heritage and huge talented people, which are great assets," Pakistan Prime Minister Mir Zafarullah Khan Jamali said in the inaugural address.

The SAARC summit: The Complete Coverage

Political differences, which were holding back economic development in South Asia, should be overcome, he said.

Jamali hailed the South Asian Free Trade Agreement as a welcome step that should result in a win-win situation for all seven members of the group.

This, however, required complementary steps, including extending of trade facilities and elimination of customs rules and tariff barriers, said Jamali, who took over as SAARC chairman from his Nepali counterpart Surya Bahadur Thapa.

He said the dream of economic cooperation could not be fulfilled until a requisite political climate was created in the region.

Jamali proposed setting up of a South Asian Development Bank for economic progress of South Asia. The proposed bank should look to cooperate with international development institutions, he said.

The summit was being held to consider the prospect of further intensification of cooperation in South Asia, he said, adding fresh impetus needed to be given to this in view of "growing interdependence in a fast globalising world".

Jamali welcomed the proposed protocol on suppression of terrorism.

He also proposed setting up of a south Asia energy rim with hydro and gas pipelines. "Pakistan is ready to extend its fullest cooperation in this regard," he said.

The Pakistani PM said finalisation of a social charter for SAARC was a major landmark.

Finance ministers of the member states had prepared a plan for alleviating poverty, he said.

SAARC machinery should be further strengthened and it must be made a truly multidimensional enterprise tackling communicable diseases, illiteracy and poverty and promoting cooperation in the fields of education, culture, science and information and communication technology, he added.