"I declare the 12th SAARC summit open," Nepal Prime Minister Surya Bahadur Thapa, the outgoing chairman of SAARC, said to loud applause at Islamabad's Convention Centre.
Thapa was flanked by the heads of state and governments of the six other SAARC states, Bangladesh, Bhutan, India, the Maldives, host Pakistan and Sri Lanka.
Pakistani Prime Minister Zafarullah Jamali delivered the inaugural speech, professing optimism that the 18-year old forum could be reinvigorated in its first summit in two years.
"I am confident that our deliberations will be productive and provide a fresh impetus to invigorating SAARC," Jamali said.
"The region's cooperation is a function of growing interdependence in a fast globalising world."
In his speech, Indian Prime Minister A B Vajpayee called for "mutual trust and confidence" in South Asia for long-term economic cooperation.
"We must take the bold transition from mistrust to trust, from discord to concord, and from tension to peace"
A B Vajpayee,
Indian prime minister
"We have to change South Asia's image and standing in the world," Vajpayee said during the opening session of the summit.
"We must take the bold transition from mistrust to trust, from discord to concord, and from tension to peace. Any joint endeavour needs mutual trust and confidence."
Vajpayee said despite centuries of conflicts and wars, a string of regional economic groupings have been formed in Europe, Southeast Asia, Africa, Latin America and the Caribbean region - showing a way for SAARC.
"All these examples remind us that rational economics should
triumph over political prejudice in South Asia," the prime minister said.
He added that the common bonds of religion, language, ethnicity and culture of the region were "far more enduring that the relatively recent barriers of political prejudice that we have erected".
"We should renew these bonds and jointly overcome poverty, disease and hunger."
The Indian leader was hailed by Pakistani Prime Minister Zafarullah Jamali at the conclusion of his speech.
"We have great respect for his excellency Atal Behari Vajpayee. He personifies many qualities. He is a visionary, a poet, a prolific writer and an able politician, which are the qualities of a true leader," Jamali said.
"We subscribe to the vision of global multi-dimensional cooperation in South Asia. But this vision can only be transformed into reality if we are able to overcome our disputes and create a climate of mutual trust and confidence."
Pakistani prime minister
Pakistani Prime Minister Zafarullah Jamali urged an end to tensions in South Asia, saying they had hampered the region's economic progress in his opening address to a landmark summit.
"Greater ecoonomic integration is inexplicably linked to the creation of requisite political climate of peace and stability," he told the SAARC summit.
"It is a stark reality that political differences and disputes have held back prospects of economic cooperation in South Asia.
"We subscribe to the vision of global multi-dimensional cooperation in South Asia, but we must realise that that this vision can only be transformed into reality if we are able to overcome our differences and disputes and create a climate of mutual trust and confidence."
Bangladesh Prime Minister Khaleda Zia called upon South Asian nations to devise trade promotion so that it becomes a "win-win situation for all."
Zia said the new trade regime could include "special measures for the least developed countries" like an adequate timeframe for freeing trade; compensatory financing for revenue loss and the concept of early harvest.
"Economies of the South, especially the least developed among them, have been marginalised," she said.
Sri Lanka President Chandrika Kumaratunga on Sunday hailed peace overtures between India and Pakistan as boosting chances of saving South Asia from global marginalisation.
"Recent developments in our region have given us great cause for hope for the future of SAARC"
Sri Lanka president
The vision and courage demonstrated recently by the leaders of India and Pakistan in their efforts to resolve bilateral issues have infused this summit, as well as the process of SAARC, with a renewed sense of purpose and vigour," Kumaratunga said in her opening address.
"Recent developments in our region have given us great cause for hope for the future of SAARC. The reduction of tensions between the two largest member states of our association gives rise to much confidence," the Sri Lankan leader said.