WASHINGTON, April 21: Senior US and Pakistani officials said on Friday that the two countries were close to signing a bilateral investment treaty (BIT) and perhaps even a free trade agreement.

Pakistan and the US are expected to hold talks next week on some of the technical and legal issues still delaying the BIT, they said.

“We will be signing the BIT very soon and we may sing the FTA by 2007,” said Salman Shah, adviser to the prime minister on finance. Dr Shah is in Washington to attend the annual spring meetings of the World Bank.

“We are still close to signing the BIT,” said US Assistant Secretary of State for South and Central Asian Affairs Richard Boucher. “We still think it can be done and it is on our agenda.”

Before leaving for Pakistan in early March, President George W. Bush also had said that the two countries were close to signing a BIT, indicating that it might be finalised during his visit. But later US and Pakistani diplomats said last minute snags delayed the signing.

Asked to explain what caused the delay, Dr Shah said the US administration was seeking some safeguards for investors which Pakistan believed it could not offer to all investors. “We want an arrangement that can be made with other countries as well,” he said. “The wording has to be right and I believe we will soon be able to resolve these legal issues.”

Mr Boucher said the discussions on the treaty were now focused on “a couple of final issues” as “we could not find the right agreement on very technical matters important to both.”

But he said he believed these snags could be removed and the treaty could be signed soon.

A bilateral investment treaty is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in the state of the other.

The FTA promotes trade between nations without protective restrictions.