Try to find out where xml2-config is located and then provide this information to ./configure using --with-libxml2=/path/to/xml-config.
Have you tried to use the --with-libxml2 with an explicit path to xml2-config script? Like (example for my system):
./configure --with-libxml2=/usr/local/bin/xml2-config
Edit: Ninja'd by Gleb 
Hello, Glebs.
Thank you for the reply. However, there is no xml2-config directory in the system, even after installing above rpms. Are we installing the wrong ones? if yes, do you know where I can download the correct xml2 files?
<host>:/bin # find / -iname xml2
<host>:/bin # find / -iname xml2_config
Thank you.
It's not a directory, it should be executable file. And there is a dash, not underscore in it's name! I'm afraid I won't be able to provide Suse-specific instructions, but typically it's enough to install libxml2 package for the library itself and libxml2-devel package for header files and that xml2-config.
Hello Glebs,
Thank you for the reply. I have managed to download the correct xml2 file, error is resolved.
Reopening to fix resolution.
I'm glad I've managed to solve the problem!
Since there was nothing to fix in Zabbix... Closing as Won't Fix.