ISLAMABAD (Reuters) - U.S. Secretary of State Hillary Clinton announced more than $500 million in new aid projects for Pakistan on Monday, which Washington hopes will help win over a sceptical public in an ally vital to winning the war in neighbouring Afghanistan.
At the same time, she again said that both the United States and Pakistan should work harder to go after al Qaeda leaders still believed to be hiding in Pakistan's borderlands in the northwest.
"We would like to work more closely together to go after them and either capture or kill them," she told a roundtable of journalists. "I believe that they are here in Pakistan and it would be really helpful if we could get them."
It was a slightly softer repeat of statements she made last year that people in the Pakistan government knew where Osama bin Laden and other leaders were and she was puzzled over why they were not being arrested. Those comments sparked a media uproar and stoked anti-Americanism.
Clinton was in Islamabad for two days as part of the U.S.-Pakistan strategic dialogue, a series of talks aimed at strengthening the relationship between the wary allies in the struggle against al Qaeda and the Taliban.
Clinton will later fly on to Kabul for an international conference as the U.S.-led war in Afghanistan runs into mounting doubt in the U.S. Congress.
The Pakistan and Afghan commerce ministers signed a trade deal during her visit that the United States also hopes will help boost cooperation between the countries.
For Pakistan, she announced a string of new projects -- including dams, power generation, agricultural development and hospital construction -- funded under U.S. legislation passed last year tripling civilian aid to $7.5 billion over the next five years.
The projects, the first to be launched under a new aid plan, are seen as crucial to shoring up support for the U.S.-led struggle against militants in a country where opinion polls show fewer than one in five view the United States favourably.
"The opinion about the United States in Pakistan will change when the people of Pakistan see how, through this partnership, their lives have changed," said Pakistani Foreign Minister Shah Mehmood Qureshi.
Pakistan also wants enhanced market access, strengthening of its anti-terrorism resources and "non-discriminatory access" to energy and other technology.
The latter two requests are long-standing Pakistani desires for more military equipment and a civilian nuclear deal like the one between India and the United States.
Clinton said the United States would continue to look into broadening civil nuclear cooperation, but said Pakistan's chequered history on proliferation issues "raises red flags" and concerns that need to be addressed.
Pakistan and China are allegedly looking at a civilian nuclear deal.
A U.S. Embassy official said the audience was selected from various groups and individuals who have contact with the embassy, including aid contractors and grant recipients.
HISTORY OF MISTRUST
The Obama administration sees nuclear-armed Pakistan as a pivotal player in the struggle against militant Islamist groups in both countries. But the two sides are divided by a history of mistrust and sometimes diverging goals over a war that is increasingly unpopular.
Opinion polls have shown many Pakistanis doubtful about long-term U.S. intentions, citing examples of abandonment, particularly after the Soviets withdrew from Afghanistan.
U.S. officials, meanwhile, are wary of the role Pakistan is playing in Afghanistan and believe it needs to do more to fight its own homegrown Taliban militants, which Washington blames for the attempted bombing in New York's Times Square on May 1.
Pakistan and Afghanistan are both seeking to encourage some elements of the Taliban to reconcile with the Afghan government by renouncing al Qaeda, laying down their arms and taking part in the Afghan political process.
But the United States is doubtful the Haqqani network -- likely to be labelled a terrorist organisation by the U.S. State Department -- can be persuaded to do so. On the other hand, Clinton said, even they could be negotiated with if they agree to eschew violence, renounce al Qaeda and respect the political order.
"We would never reject that. We just caution, you need to enter into it very realistically," she said.
She repeated this in relation to Afghanistan and President Hamid Karzai's reconciliation plan, saying it did not mean the U.S.-backed alliance was not committed to victory
"There is no contradiction between trying to defeat those who are determined to fight and opening the door to those that are willing to reconcile," she said.
(Additional reporting by Zeeshan Haider and Kamran Haider; Editing by Chris Allbritton and Alex Richardson)
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