Tariffs could be abolished by 2012

India, Burma, Sri Lanka and Thailand pledged to boost investment and lower costs in a free-trade zone by 2017.

Bhutan and Nepal will join the group, known as BIMST-EC (Bangladesh, India, Myanmar, Sri Lanka and Thailand - Economic Cooperation) at a later date.

Bangladesh fears lower tariffs may hurt its manufacturing.

It also said the cabinet would have to approve the agreement.

July meeting

"Our point was in the South Asian Free Trade Agreement, we have that issue [compensation] already accepted by most of the members. We wanted to follow the same pattern," Bangladeshi Foreign Affairs Minister Morshed Khan told Reuters news agency.

"As soon as the issues are addressed and the procedural matter [cabinet approval] is over, we'll be ready to sign."

By spanning two important regions, BIMST-EC is the logical linking mechanism to bring together various interlocking pieces of the jigsaw puzzle that is Asia Surakiart Sathirathai, Thai Foreign Minister

Other countries agreed to work to calm Bangladesh's fears before the leaders of the seven nations meet in Bangkok in July.

"Of course, officials concerned will have to get together and find a way to deal with the concern of Bangladesh," said Thai Foreign Ministry spokesman Sihasak Phuangketkeow.

The free-trade pact, if implemented, would span South Asia, which has a population of more than 1.3 billion and South-east Asia, home to 500 million people.

"By spanning two important regions, BIMST-EC is the logical linking mechanism to bring together various interlocking pieces of the jigsaw puzzle that is Asia," said Thai Foreign Minister Surakiart Sathirathai at the beginning of the meeting.

Slightly better off India, Sri Lanka and Thailand plan to charge no tariffs on each others' goods and services by July 2012, five years ahead of Bangladesh, Burma, Nepal and Bhutan.

The group also discussed creating a natural gas pipeline and the possibility that Burma could build a deep sea port on its south-west coast.