Pakistan's prime minister said his country and arch-rival India are making progress in peace talks though they have still not resolved the thorny issue of divided Kashmir.

Prime Minister Shaukat Aziz was speaking a day after he met Indian Prime Minister Manmohan Singh on the sidelines of a regional summit.

"We are going step-by-step in confidence-building measures," Aziz told reporters in the Bangladeshi capital, Dhaka. "And my meeting with the Indian prime minister here yesterday was another step in the right direction."

Aziz said his talks with Singh covered "all aspects of our bilateral relations including terrorism and trade" and that they were "productive."

On the issue of Kashmir, Aziz said Pakistan wants a "solution that will be sustainable and will reflect the aspirations of the people of Kashmir."

The Himalayan region of Kashmir is divided between Pakistan and India and has been the cause of two of the nuclear-armed rivals' three wars since partition from Britain in 1947.

India has long-accused Pakistan of aiding militants in their fight against Indian rule in the Muslim-majority territory, a charge Islamabad has denied.

On Saturday, India claimed that infiltration and violence by Muslim militants in Kashmir have not abated even after the devastating Oct. 8 earthquake in the region which killed some 86,000 people, almost all of them on the Pakistani-controlled side of Kashmir. The quake has left millions homeless as the harsh Himalayan winter approaches.

During his meeting with Singh, Aziz said his country is against "all forms of terrorism and is ready to cooperate with any country to combat the menace."

The India-Pakistan peace process received a minor boost after they agreed to open their heavily militarized frontier to exchange relief material, and allow Kashmiris to cross over to visit relatives hit by the quake. Although three border crossings have been opened so far, no one has been allowed to cross because of bureaucratic delays.