Prime Minister Benazir Bhutto Thursday urged Indian Prime Minister Rajiv Gandhi and other south Asian leaders to spend less money on military might and more on fighting poverty and disease.

Bhutto spoke at a summit of the seven-nation South Asia Association for Regional Cooperation. It was her first face-to-face meeting with Gandhi and came amid hopes of improved relations between India and Pakistan, longtime antagonists and south Asia's most powerful nations.The meeting of Gandhi and Bhutto, Pakistan's first popularly elected leader in 11 years, overshadowed the presence of leaders from Bangladesh, Bhutan, the Maldives, Nepal and Sri Lanka.

Bhutto urged her fellow leaders to redirect their resources away from defense spending and toward eradicating "many of the same common problems - poverty, slums, disease, ignorance and unemployment."

Pakistan spends 40 percent of its budget on defense.

"It is therefore time we should seek and consider ways of limiting our arms expenditures and seek regional solutions for curbing the arms race and the danger of a nuclear proliferation and war," Bhutto said.

India's nuclear weapons program and Pakistan's ability to manufacture nuclear arms have been a major obstacle to friendlier relations between the two countries.

Bhutto said earlier that Pakistan has no plans to produce a nuclear weapon. "We have no intention other than peaceful energy," she told The Associated Press earlier.

In the cavernous auditorium of Paksitan's State Bank building, the seating arrangement for officials, like their leaders, put India and Pakistan side by side. The two nations have touted the conference as an opportuntity to create friendlier ties between long-time antagonists.

Gandhi is the first Indian prime minister to meet a Pakistani leader in Pakistan since his grandfather Jawaharlal Nehru, met President Ayub Khan in 1960.