The hostage drama in Bannu, on the border with the tribal area where Tuesday's clashes occurred, ended peacefully after five hours when the hostage-takers were allowed to flee to avoid bloodshed.

The incident underscored the government's fragile grip on Pakistan's borderlands near Afghanistan, where crime is rife and security forces are struggling to contain rising Islamic militancy.

Islamic insurgents have stepped up attacks against government troops and officials in the tribal regions, where scores of militants and troops have died in clashes in recent weeks.

In fighting with militants on Tuesday, one soldier was killed in South Waziristan, a rugged region along the border with Afghanistan, the army said in a statement. Twelve insurgents were arrested in the area, it said.

In the neighbouring North Waziristan region, four members of the paramilitary Frontier Constabulary were injured when assailants fired several artillery rockets at a military base, said a local intelligence official who spoke on condition of anonymity because he was not authorised to make media comments.

In another incident, a single rocket exploded near a base in Miran Shah, North Waziristan's main town, the official said. One soldier was wounded.

The mounting violence in the northwest has contributed to the growing unpopularity of President Pervez Musharraf, who returned early on Tuesday from a European tour. After talks with British Prime Minister Gordon Brown on Monday, Mr Musharraf insisted his US-backed policies to fight religious extremism were working.

He also played down the importance of the kidnapping.

'It was incidental that those criminals entered the school,' the president told a news conference. 'It has been resolved peacefully.'

Police said the half-dozen gunmen seized control of the school near the town of Bannu after a botched attempt to kidnap the government health chief. The gunmen threatened to kill the children, teachers and themselves if anyone attacked.

After negotiating with tribal leaders, the men released the captives and handed over their weapons. In return, they were given safe passage from the area.

Pakistan's government has struggled to control the tribal regions since the start of the war in Afghanistan in 2001. A series of peace deals struck in 2005 and 2006, under which tribal leaders were supposed to police the lawless area in return for a withdrawal of troops, quickly broke down.

US officials criticised the deals, saying they allowed al-Qaeda to regroup and provided a secure rear base for resurgent Taleban fighters in Afghanistan. Osama bin Laden and his top deputy, Ayman al-Zawahri, are also believed to be hiding in the border zone. -- AP