Massud Barzani, the president of Kurdish northern Iraq, meanwhile, praised Turkey for its "courageous" efforts to end its conflict with Turkish Kurdish rebels with rear bases in his region.

"Iraq as a multi-ethnic state is very important for us and any security threat to Iraq, we consider it a threat to us," Davutoglu told reporters in a joint press conference with Barzani in Arbil, the region's capital.

"We are your gate to Europe, and you are our gate towards the south ... to the Gulf region."

Davutoglu's visit, the first by a Turkish minister to Kurdistan, is a sign of improving ties between Baghdad and Ankara and comes as Turkey seeks to end a 25-year conflict with the Kurdistan Workers' Party (PKK) across its southern border.

Barzani gave his backing to efforts by Turkey to end the war, which has claimed 45,000 lives.

"The policy of the Turkish prime minister has begun to deal with the problems, and the leadership of the Turkish state can deal with the problem of the PKK," he said.

"Its decisions are very courageous and we support this policy."

Ankara has announced that it was working on a raft of reforms expected to give greater freedoms to the country's 12 million Kurds, but it has yet to announce details.

The government rejects dialogue with the PKK and has urged them to either surrender or face military action.

The PKK, listed as a terrorist group by Turkey and much of the international community, took up arms for self-rule in Turkey's mainly Kurdish southeast in 1984.

Davutoglu, Trade Minister Zafer Caglayan and a delegation of around 70 officials and businessmen were received at Arbil airport by Kurdish prime minister Barham Saleh and Iraqi Foreign Minister Hoshyar Zebari, himself a Kurd, an AFP journalist said.

Earlier on Friday, the group had been in the southern port city of Basra for the opening of a new Turkish consulate.

Turkey already has an embassy in Baghdad and a consulate in the northern city of Mosul, with a consulate soon to be opened in Arbil.

The delegation will move on to Mosul on Saturday.

Their visit follows one by Turkish Prime Minister Recep Tayyip Erdogan earlier this month.

Turkish-Iraqi ties have gathered steam since they formed a joint committee with the United States last November to combat the PKK. It meets every two months to exchange intelligence and coordinate security measures against the rebels.

Davutoglu also waded into the dispute over the oil-rich northern Iraqi province of Kirkuk, claimed by the Kurds as part of their autonomous region, an argument fervently opposed by Kirkuk's minority Arabs and Turkmen.

"The time has come to take the necessary steps and I call upon everyone, Arabs, Kurds and Turkmen, to start rebuilding the area," he said.