Malaysia said today it had launched talks with Chile on reaching a free trade deal, which would be its first such agreement with a Latin American economy.

The announcement came after a meeting between Malaysian Prime Minister Abdullah Ahmad Badawi and Chile's President Michelle Bachelet on the sidelines of an Asia-Pacific Economic Cooperation (Apec) summit.

"The FTA has the potential to increase trade, investment cross flows and economic cooperation between the two countries," said a statement from Malaysia's trade ministry released in Vietnam.

"The agreement would also serve to make Chile a gateway for Malaysia's exports to the Latin American market," it said.

The FTA will be comprehensive, with liberalisation of trade in goods, services and investments, the ministry said.

The two countries agreed to study the deal at last year's Apec summit in South Korea, the results of which were tabled on Nov 8 to Malaysia's cabinet, which gave the green light.

More proactive

Malaysia has been more proactive in recent years in seeking bilateral FTAs in tandem with neighbours Singapore and Thailand.

It is currently involved in FTA talks with a number of countries including Pakistan, Australia and New Zealand and hopes to conclude a trade pact with the United States by year's end.

Chile is Malaysia's third largest trading partner in Latin America and bilateral trade was at RM893.5 million in 2005, according to the ministry.

Chile has already signed free trade pacts with a number of countries, including China, the United States, Canada, the European Union, South Korea and other Latin American nations.