President Bush, appearing at Camp David Tuesday with Pakistani President Pervez Musharraf (search), said he would ask Congress for $3 billion in aid to the South Asian country.

Bush also announced deals aimed at increasing U.S. trade with Pakistan (search), and both leaders vowed to continue their hard line against terrorism.

"It's just a matter of time" before Usama bin Laden and Saddam Hussein are captured, Bush said following his meeting with Musharraf. "We'll continue on the hunt, no matter how long it will take."

Musharraf, who has said he thinks bin Laden may be in Pakistan, told a reporter that "whether Usama bin Laden is here or across the border, your guess, sir, would be as good as mine."

For the first time ever, the Pakistani military has entered the Tribal Areas (search) along the Afghan border in search of Al Qaeda and Taliban fugitives.

The region has been ruled by Pashtun (search) warlords, with little government interference, since British times, and Musharraf called it "treacherous territory."

Bush credited Musharraf with the capture of more than 500 Al Qaeda and Taliban members, deeming the Pakistani president "a courageous leader" and a friend of the United States.

"We stand determined to rid the world of this menace," Musharraf added. "Pakistan is moving against terrorism in its own national interest."

The two also discussed how to put Pakistan on the path toward democracy and how to defuse the continuing nuclear arms race with India.

The U.S. government in April granted $1 billion worth of debt relief, representing nearly one-third of what Pakistan owes to the United States.

Bush's proposed five-year, $3 billion aid package for Pakistan would be "to help advance security and economic opportunity for Pakistan's citizens," he said. About half of that money would be used for defense equipment and security. Bush has also requested $120 million in fiscal 2004 for Pakistan in development assistance, health, law enforcement and other programs.

"For more than 50 years, the United States and Pakistan have worked together for the security and prosperity of South Asia," Bush said. "Today we reaffirm a friendship that has brought great benefits to our people.

"Greater economic development is ... critical to fulfilling the hopes of the Pakistani people."

Bush also announced a trade and investment "framework agreement" between the United States and Pakistan, which he said would create "a formal structure for expanding our economic partnership." The hope is that this deal would help eventually move the two nations toward a free trade agreement.

Another deal reached relates to an agreement on cooperation in the field of science and technology, to spur growth and development.

Musharraf is spending six days in the United States shopping for non-nuclear military equipment, Pakistan Foreign Ministry spokesman Massod Khan said in advance of the visit.

After Musharraf backed the U.S.-led effort in 2001 to depose the Taliban in Afghanistan, the Bush administration lifted many of the sanctions that had been imposed on Pakistan after its nuclear program was revealed and Musharraf took power in a 1999 coup d'etat.

"We’ve had no better partner in the fight on terror than Mr. Musharraf," Bush said.

Some sanctions remain. Congress continues to block the shipment of 28 F-16 fighter jets (search) that Pakistan bought 13 years ago. Bush said that although half the proposed $3 billion package goes to defense, the F-16s are not part of the deal.

Musharraf said he was both "honored and touched" by Bush's invitation to Camp David. He described their talks as "wide-ranging and extensive" and "highly productive."

Musharraf is the first leader from South Asia to have been invited to Camp David, the presidential retreat in the mountains of Maryland.

"Both sides have reaffirmed that our ties should be ... based on a long-term and predictable basis," Musharraf said, adding that the economic and defense packages "exemplified the United States' commitment to remain involved with us for a long time."

U.S. and Pakistani officials expected tensions with India to be high on the agenda for the meetings. The United States has played an important behind-the-scenes role in arranging negotiations between India and Pakistan, Khan said.

Asked by reporters about Pakistan's nuclear weapons, Musharraf said, "we are not into any arms race," but stressed that his country keeps enough weapons to promote "deterrence."

Indian Prime Minister Atal Bihari Vajpayee initiated a thaw in relations with Pakistan in April, offering "a hand of friendship." The effort has appeared to falter since then.

The Bush administration has pressed Pakistan to stop helping Islamic militants in Indian-controlled Kashmir.

Bush said he was encouraged by progress India and Pakistan have made in easing tensions over Kashmir and other issues, and he pledged that "we will do all we can to promote peace."

Control of the disputed Muslim-minority province, three-fifths of which is under Indian rule, has been the center of Indian-Pakistani relations since both countries became independent in 1947.

New Delhi routinely accuses Pakistan of training and arming Islamic militants, which Islamabad just as routinely denies.

Some critics of the Bush administration's Pakistan policy stress that while help against terrorism is appreciated, the country's faltering democracy and institutional support for Islamic extremism should not be overlooked.

"One of the things we've got to worry about is we don't put all our eggs in one basket," said Fox News contributor and senior writer for U.S. News and World Report Michael Barone. "We can't depend entirely on one man."

Musharraf must take control of parts of Pakistan "where they really let terrorists run astray," Barone added.

Bush said he spoke with Musharraf about reforms the Pakistani leader is putting into place "and the democracy to which he is committed," particularly praising education-reform efforts.

"I am extremely concerned about introducing sustainable democracy in Pakistan," Musharraf promised, but pointed out that efforts to do so over the past 50 years have failed.

Still, he said he is trying to ensure political and social stability in the region in the hopes that democracy can be the ultimate goal.

"We will continue in this process to ensure that democracy is never derailed in Pakistan," Musharraf vowed.

On Monday, Pakistani officials announced the arrests of five suspected members of an outlawed Sunni Muslim militant group blamed for killing Shiite Muslims and the kidnap-slaying of Wall Street Journal reporter Daniel Pearl.

The White House also is encouraging Pakistan to extend formal recognition to Israel. Musharraf recently hinted his country might do so under certain circumstances.

Pakistan has said it supports the Mideast "road map," which would lead to a full-fledged Palestinian state alongside Israel by 2005.

Fox News' Liza Porteus and The Associated Press contributed to this report.