The three-day summit in Accra, Ghana's capital, is being attended by more than 30 heads of state, including the presidents of Nigeria, South Africa and Zimbabwe.
In his opening speech to the summit Alpha Oumar Konare, the AU's top diplomat, supported an integrated continent but said many problems must be overcome, including the future of existing pan-African bodies and regional economic blocs.
Gaddafi has long campaigned for a United States of Africa as the only way to address the continent's extreme poverty and variety of other problems including the challenges of globalisation.
"Gaddafi's idea is good in theory but it won't work for a very long time"
Van Zwam, Dendermonde, Belgium
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In an impassioned speech on the eve of the summit he told cheering activists and students: "Our continent is backward, poor, suffering from illnesses, divided and exploited... shall we allow such a situation to continue?"
Antonio Guterres, the UN refugee chief, also supported closer African integration, saying it would help avoid conflicts generating tens of thousands of refugees.
Haru Mutasa, Al Jazeera's correspondent at the summit, said that Gaddafi's" idea has been around for many years but "some people are saying that it will help to unite African countries.
"Those leaders in negotiations basically want to try and get one currency, which would make Africa more credible on the international market. It will help with world trade talks."
Mutasa said: "The problem is that leaders are divided over what form it will actually take. Gaddafi wants it done immediately, but most African leaders want it done regionally first, step by step, and when it's capable it should emerge."
Leaders of larger countries, such as Thabo Mbeki, the South African president, and Umaru Yar'Adua, the Nigerian president, are thought to be much less keen on the idea of a closer federation.
Away from unity talks, Konare also questioned the Sudanese government's commitment to peace in his speech.
"It is also important that Sudan end the bombardments," Konare said, referring to the government's four-year battle with rebels in the country's western Darfur region.
Immediate crises in Africa, such as conflicts in Sudan, Somalia and Chad, along with political turmoil in Zimbabwe, are expected to be addressed in private during the summit.
Omar al-Bashir, the president of Sudan is not in Ghana as he cancelled his trip after the death of an adviser, but he held a teleconference from Khartoum late on Saturday in which he charged that Western governments were intervening in Darfur out of self-serving motives.
"Some of them are only involved because of what they will gain from the resources of the people," he said.
Asha-Rose Migiro, the deputy secretary general of the UN, used her speech to the summit to commend the AU for stepping in to the Darfur crisis when no one else would.
|Gaddafi's idea for unity has |
drawn support and caution [AFP]
But she also said that African states alone do not have the resources to bring an end to the conflict and urged those at the opening session to "urgently proceed" with the hybrid force that the Sudanese government agreed to earlier this month.
Organisers of the summit will be hoping the rest of the discussions in the next couple of days are not beset by the same technical glitches that marred the opening of the event.
Chaotic scenes ensued when a live feed of the opening speeches failed and internet access collapsed forcing journalists to be barred from leaving the media centre.
So incensed were one group of reporters that they threatened to march from their tent to the main conference centre to launch a protest about both the poor infrastructure and the lack of access to delegates.
Even when filming from a distance they were then prevented from leaving by security guards.