Musharraf, on a swing through Asia, arrived here late on Monday from India and was given a military welcome Tuesday at the Malacanang presidential palace ahead of his talks with Arroyo.
Arroyo said she compared notes with Musharraf on their respective governments campaigns against terrorism.
He believes as much as I do that when we fight terrorism, there is the military aspect and then theres the socio-cultural aspect, Arroyo told a news conference after the bilateral talks.
So on the military aspect, we agreed to enhance our intelligence exchange, Arroyo said. Its very very important in the world of international terrorism.
Arroyo said her national security adviser Norberto Gonzales is to work closely with Pakistans Inter-Services Intelligence (ISI), which has been tracking down key operatives of the Taliban after the hardline Islamic militia were toppled from power by US-led forces in 2001.
Gonzales is tentatively scheduled to meet with ISI officials in June.
In Manila, Musharraf remarked that east and southeast Asia had left South Asia behind in economic growth, remarking that our neighbourhood has remained disturbed, due to the turmoil in Afghanistan and the Kashmir issue.
He said with the improvements in Afghanistan and the warming of ties between India and Pakistan, the situation in the South Asian region should improve.
He expressed hope that Pakistan could use its strategic location as a crossroads between South Asia, central Asia and West Asia to promote economic cooperation within these regions through special arrangements and development of infrastructure.
Interestingly in Islamabad, former ISI chief Hameed Gul accused Musharraf of imposing a particular agenda on Kashmiris. I cannot accept the claim that process of talks on Kashmir is going on. In fact a particular agenda is being imposed in the name of dialogue on Kashmir.