March 17 (Bloomberg) -- Pakistan, a key ally in U.S.-led war on terrorism, is a pivotal country in South Asia and can be a model for the Islamic world, U.S. Secretary of State Condoleezza Rice said during a visit to Islamabad.

Rice, ``appreciated Pakistan's constructive role in stabilizing the situation in Afghanistan,'' Pakistan's government said in a statement issued late yesterday after Rice held separate meetings with Pakistan's President Pervez Musharraf and Prime Minister Shaukat Aziz.

Rice arrived from India for two days of talks to boost relations between the countries. She is scheduled to meet Pakistan's Foreign Minister Khurshid M. Kasuri today after making a brief visit to Afghanistan.

The U.S. in 2004 designated Pakistan a major ally outside the North Atlantic Treaty Organization. Pakistan has supported the U.S.-led war against terrorism that began after the Sept. 11, 2001, attacks on the World Trade Center in New York and the Pentagon and extended intelligence and logistical support to U.S. forces for their operation in Afghanistan to oust the Taliban regime and al-Qaeda terrorists it was harboring.

Pakistan's army is searching for al-Qaeda and Taliban fugitives in the country's tribal region bordering Afghanistan.

Musharraf called on the U.S. government to lend its support to the efforts aimed at resolving the Kashmir dispute with India, the Pakistani statement said. Rice appreciated Pakistan's role in promoting peace in the region, it said.

Nuclear-armed neighbors Pakistan and India, which came close to a fourth war in 2002, have resumed diplomatic, transportation and sports links as part of a 23-month peace effort. Their main dispute is control of the Himalayan territory of Kashmir, which is divided between the two countries and claimed in full by both.

Afghan Visit

Rice will meet Afghan President Hamid Karzai and other leaders during her visit to Kabul today to discuss the country's reconstruction and the parliamentary and local elections scheduled to take place this year.

Plans to hold the elections between April 21 and May 21 have been delayed because voting districts still have to be settled. Afghanistan's move to democracy began with October's first direct presidential election, won by Karzai, who served as interim president after the Taliban regime was ousted in December 2001.

``We'll continue to talk with the Afghans about reconstruction, about building an economy there,'' Rice said in remarks made before beginning her visit to India yesterday, according to a State Department transcript.

War on Terrorism

Discussions will include the problems Afghanistan continues to face, ``continuing in the war on terror, and on the counternarcotics side as well,'' Rice said.

Afghanistan is the world's biggest opium producer where poppy cultivation, the main engine of economic growth, increased 64 percent in 2004, the United Nations said in December. The opium poppy is the raw ingredient in producing heroin.

During her visit to India, Rice said the U.S. has ``concerns'' about plans for a pipeline to transport natural gas from Iran to India. The U.S., which prohibits direct investment by American companies in Iran, accuses Iran to trying to build a nuclear weapon, a charge the Iranian government denies.

Rice's Asia tour will take her to South Korea, Japan and China where talks will center on trying to bring North Korea back to the six-nation forum that is discussing dismantling North Korea's nuclear programs.

To contact the reporter on this story: Khalid Qayum in Islamabad kqayum@bloomberg.net

Last Updated: March 16, 2005 17:32 EST