Lebanon's PM Hariri in Syria with focus on economy

DAMASCUS (Reuters) - Syria and Lebanon signed economic agreements on Sunday, signalling further improvement in ties, but did not resolve a border demarcation issue the Lebanese government views as central to asserting its sovereignty.

The deals, signed by Lebanese Prime Minister Saad al-Hariri with his counterpart in the Syrian capital, were the first since the 2005 assassination in Beirut of his father Rafik al-Hariri.

The elder Hariri was a member of parliament and a former premier whose killing heralded international pressure that forced Syria to end its 29-year military presence in Lebanon.

"We want the ties between Syria and Lebanon to form a model for an Arab common market," Hariri said at a news conference with Syrian Prime Minister Naji al-Otri.

The agreements included investment protection, pharmaceutical products, shipping, tourism and taxation.

Hariri, who also met President Bashar al-Assad, said a committee set up by the two countries to demarcate the border "has to begin its work and finish it as soon as possible."

Otri said cooperation between Syria and its smaller neighbour had to extend to security. Damascus had hinted it was concerned about infiltration by Islamist militants from Lebanon after a 2008 bombing targeted a security compound in Damascus.

Syria agreed with Lebanon in 2008 to demarcate the border, two years after a United Nations resolution recommended Syria work on the issue. Damascus has since said its technical teams were busy finishing border demarcation with Jordan and that a small Lebanese region occupied by Israel and bordering Syria complicated any demarcation.

The United States and France had demanded the border demarcation, but the issue has not prevented their ties with Damascus from improving.

Like several Middle East nations, Lebanon and Syria are a product of a deal between France and Britain that established the two countries along ethnic and religious lines in 1920, but the border was not demarcated.

Western calls on Syria mounted to demarcate the border after Hariri's assassination. A U.N. investigation implicated Lebanese and Syrian security officials in the killing. Syria denied any involvement and the younger Hariri has visited Syria several times since he became prime minister last year.

Trade between Lebanon and Syria fell to $459 million in 2009 from $495 million the previous year. The volumes are regarded as low, comprising a quarter of trade between Syria and its northern neighbour Turkey.

Syria, however, is Lebanon's only open land transport route, and Lebanese banks have spearheaded the entry of foreign banks into the Syrian market after the state relinquished its monopoly on the sector.