"I strongly believe that all issues between India and Pakistan should be resolved amicably by engaging in a meaningful dialogue," he said during an informal conversation with members of the Indian Broadcasting Foundation here.
"On internal front, we favour dialogue with all shades of opinion," Sayeed said, referring to the separatists.
To press his point, he gave the example of Sajjad Gani Lone, leader of People's Conference, who has given up separatism and joined the mainstream by contesting the polls. He is now a minister.
Sayeed said India's relations with Pakistan have a direct impact on Jammu and Kashmir and any uncertainity hampers the development of the state.
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"Relationship with Pakistan has a direct bearing on J&K. Political uncertainty hampers state's development," he said.
Sayeed, who served as Chief Minister earlier between 2002 and 2005, said he had "set the tone" in the India-Pakistan ties during that tenure and "we had a decade-long peace in the region."
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On cross-LoC trade, Sayeed said "It is the biggest confidence building measure between India and Pakistan. But unfortunately this CBM, which has several emotions attached to it, was in a state of limbo for the past several years.
"I am a firm believer that people-to-people contact and trade across several points will help address the trust deficit across the region. Our development indices are far better in comparison to those across the Line of Control," he added.