MUNICH (Agencies) - Afghan President Hamid Karzai called cross-border terrorism one of the greatest threats confronting his country and said improved ties with Pakistan were helping to combat the problem. Speaking Sunday to a gathering of world leaders and top security officials, Karzai praised new US administration's more regional approach to fighting terror and welcomed President Barack Obama's appointment of Richard Holbrooke as a special representative to Pakistan and Afghanistan. "Security can ... not come to Afghanistan, or to the region, or to the international community without better coordination with our neighbours," Karzai said. He also repeated his call to integrate moderate Taliban back into Afghan society, inviting them to participate in fall elections. "We will invite all of those Taliban who are not part of Al-Qaeda, who are not part of terrorist networks, who want to return to their country, who want to live by the constitution of Afghanistan, who want to have a normal life, to come back to their country," Karzai said. "Our neighbours are suffering with us," Karzai said, citing the November terrorist attacks in Mumbai, India, as well as the violence in Pakistan. But, he said Afghanistan's diplomatic ties with its neighbours are getting stronger. "There is greater understanding with Afghanistan and its neighbours in the region," Karzai said, a message reinforced by Pakistani Foreign Minister Makhdoom Quershi, who spoke of a 'new era of understanding and cooperation between Afghanistan and Pakistan'. Karzai called for a process of reconciliation with the Taliban, and urged foreign forces in his country to do more to halt civilian casualties. With elections approaching in August, Karzai also denied that Afghanistan was a narco-state or a failed state and insisted that vast progress had been made over the last seven years. Karzai raised eyebrows in November when he said he would protect the fugitive leader of the insurgent Taliban, Mullah Omar, in return for peace whether his international partners liked it or not. He insisted though that the extremist leader, who is wanted by the US, would have to accept the Afghan constitution, a pro-democracy document drawn up after the US-led forces ousted the Taliban regime in 2001. Karzai also renewed calls for international troops fighting the Taliban to do more to avoid civilian casualties, which have also served to damage his popularity among Afghans. Marine Corps Gen James Jones, Obama's national security adviser, said that was news he was very happy to hear. "Working relations between Pakistan and Afghanistan ... have to be effective if we're going to solve this problem," Jones said. "We've learned over time that problems in Afghanistan are not just uniquely confined to one country - it's a regional problem set."