The President pointed out that in the changed international environment the world has also realised that coercive diplomacy could not lead to durable settlement of lingering disputes, including Kashmir.
"The international community views Kashmir as a flashpoint in the post-2002 stand-off between Pakistan and India and feels that a peaceful resolution to the problem is imperative," he stated in his over two-hour interaction with the senior bureaucrats.
Referring to the peace process between the two countries, Musharraf said, Pakistan believes that confidence building measures and the composite dialogue should move in tandem.
On Muzaffarabad-Srinagar bus service, he said, it has been commenced to facilitate the Kashmiris to meet their divided families.
The President emphasised that the quest for Kashmir settlement could not go on indefinitely.
In his wide-ranging address, he touched upon key challenges and opportunities, the country faces today and asked the civil servants to be agents of change and serve as facilitators.
"You should not shy from even recommending amendments in the rules that impede provision of efficient services to the people - you should guarantee progress and prosperity and never let the nation down," the President urged.
Musharraf also underlined to the higher tiers of civil service to set personal example for their subordinates to emulate and adhere strictly to the policy of merit.
"You must always remember that the nation comes first, we have introduced reforms to make the system subservient to the people and now it is your duty to deliver above all considerations."
Responding to a question, he said, the local government system has introduced the much-needed checks and balances. Musharraf said, the Nazim, being an elected representative of the people, is responsible for good governance at the grassroots level and therefore, has been entrusted with administrative powers.
Dilating on the economy, the President said that having achieved significant progress in the last five years, the government was now focused on poverty reduction through a holistic strategy.
The strategy revolves around creation of job opportunities through continued growth in both agrarian and urban areas, completion of development projects, encouragement of small businesses and targeted interventions to reach out to the poor and enable them to stand up on their feet, he added.
Enumerating some of the crucial achievements on the economic front, the President said debt servicing has been reduced, development allocations have increased, exports have doubled to $14 billion this year, remittances have surged to four billion dollars and foreign direct investment has seen a marked rise in the last six months.
The government is also endeavouring to overcome price hike, and provide relief to the common man, he added.
Pakistan, Musharraf stressed, is a key member of the Islamic world and a progressive and moderate country playing an important role in the world affairs.