Hoping that India and Pakistan would take the peace process to its 'logical conclusion' by showing flexibility, sincerity and boldness, President Pervez Musharraf [Images] said on Thursday that there is a realisation now that 'coercive diplomacy' could no longer work.

"Now there is a realisation that coercive diplomacy can no longer work and I am hopeful that a solution (to the Kashmir issue) acceptable to Pakistan, India and the people of Jammu and Kashmir [Images] can be achieved," he said, addressing a gathering of senior civil servants in Rawalpindi.

Noting that Pakistan is engaged in a process of dialogue with India for settlement of all issues, including Jammu and Kashmir, he expressed the hope that with flexibility, sincerity and boldness, the two sides would be able to take the peace process to its 'logical conclusion', the official Pakistani APP news agency reported.

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On extremism, he said Pakistan will address the problem through a long-term prudent approach, while it will continue to deal with terrorism through force. Replying to a question, he said the country has witnessed a decline in poverty in both rural and urban areas in recent years.

"I will supplement the efforts of the government in attaining better health and education for people at the grassroot level and also provision of safe drinking water to all by 2007," Musharraf said.

He said Pakistan will set up oil refineries at Gwadar to serve as a regional trade hub and provide cost-effective fuel for sustaining the country's higher economic growth.

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