Several significant recent events need to be flagged. As a sequel to the US attack on a Pakistani post on June 11, 2008 we had Karzai's threat to invade FATA and President Bush's endorsement of the Karzai threat and now the implementation of Mr Gates's suggestion of a joint investigation is being done albeit with some media reports trying to explain the US attack. Without a doubt there has been a surge in the level of violence in Southern Afghanistan and the attack on the military parade and the Kandahar prison were a qualitative and significant up gradation of the militancy " this has prompted the Afghans to blame, without any evidence, Pakistan's ISI for the attack on the parade and to talk of 'Pakistanis and Arabs' among the dead in the fighting around Kandahar. There has also been an escalation in the violence in FATA and Swat areas with killings of 'peace committee' members, kidnappings of security personnel, attacks on military and food supply convoys, burning of schools, raids as far 'inland' as Peshawar and the destruction of a ski resort. There has been heavy and continuous inter-tribal fighting in three areas of FATA. In an article in The New York Times dated 24th June Carlotta Gall has discussed the 'leaderless drift in Pakistan four months after the elections'" an opinion that is being echoed in the Pakistani media as they report the wrangling over the judges issue and the Presidency. The national budget and the provincial budgets have been presented and are being debated amidst economic decline, growing inflation and increasing poverty. The Prime Minister has held a high level conference to evolve a strategy for counter insurgency. An operation has been launched to clear the space within and around Peshawar in the Khyber Agency and as a reaction the militants have abandoned all peace talks. Each one of these events has fall out and implications. There have been media reports suggesting that the US attack on the Pakistani post was in response to militant movement from FATA into Southern Afghanistan that was either being facilitated or ignored by the post. There has long been a perception on the US/NATO side that there was collusion between Pakistan's FC and the 'Taliban' from sanctuaries in the FATA. The Joint Investigation Committee is the best bet for a thorough investigation and its report could be discussed in the US-Pakistan Strategic Dialogue later this year. It is important that the misperceptions that create disconnects be cleared up. The Afghan reaction to the events in Afghanistan and their suspicions about the involvement of Pakistan as a state has grave implications and can seriously damage a vitally important bilateral relationship. Pakistan has rejected the allegations as 'baseless' but the matter needs to be thoroughly discussed bilaterally with the Afghans providing detailed and conclusive evidence, if any, to support their contention. According to the Foreign Office all Afghan refugees in Pakistan are to be repatriated by end 2009 " hopefully the process will start much earlier because Pakistan's efforts have never been appreciated.. The G-8 have pledged substantial funds for the Pakistan-Afghanistan Border Areas " it is important to have a credible governance structure on the ground to indicate absorption and utilization capacity. A stable US-Pakistan relationship based on shared perceptions and strategies thus becomes the bed rock for any sustainable development especially because the US continues to support democracy and development in Pakistan. The surge and qualitative change in the pattern of violence in Southern Afghanistan and corresponding activity in Pakistan's FATA, Swat and Western border areas is obviously interlinked"the two way street that Mr Karzai mentioned. Pakistan is treating this destabilization as a serious counter insurgency problem that has insidious linkages within Pakistan and outside Pakistan with the potential for expansion beyond FATA. The fact that the main supply route to Afghanistan through Pakistan can be interdicted is a serious challenge to the writ of the state. Based on his Iraq experience and military expertise General Petraeus thinks that there is no military solution to Iraq and that only a stable political government can muster the resolve and support for a counter insurgency strategy. This is also true for Afghanistan as Marvin Weinbaum has argued in a recent article highlighting the fact that the major difference is that democracy in Pakistan is in the critical phase of getting established against formidable challenges and odds. This is where the US can decisively influence events through considered rather than hasty decisions. The prolonged phase of endless political bickering over issues that seem trivial against the looming economic and security threats is the reason for the talk about the 'leaderless drift' in Pakistan. The 'drugs and weapons economy' and the lack of capacity in Afghanistan influence the entire situation negatively with US/NATO presence fuelling grievances. The US GAO has highlighted the failure to build capacity in Afghanistan and the fact that only 'two out of 105 Afghan Army Units have operational capability.' The Prime Ministers conference to evolve a counter insurgency strategy is a positive and long awaited step. The contours of the strategy for FATA have yet to be spelt out but it seems that the multi-pronged strategy relies on dialogue and development aid to resolve issues with the local Governor having planning, coordinating and implementation authority. Military force is to be used as a last resort and once the military is called in and the situation is handed over to them then the military will be the lead agency with all other agencies subordinated to them. The military will have to be kept fully informed because no military wants to step in when a point of no return has been reached. The evolving civil-military equation becomes a critical facet of the evolving political scenario. The military also has to coordinate with US/NATO/ISAF forces in Afghanistan. The military has delinked itself from politics and any role in governance. It is now the government that has to forge policies, have full ownership of those policies and define what the military's role is to be at the implementation level. It would be a pity if the planning, organizational and structural strengths of the military institution and other strategic assets are not used at all stages of the strategic decision making process. The situation in Swat, Pakistan's one time tourist haven, is the responsibility of the NWFP government and the general perception is that in the interest of peace it has agreed to the militants' demand for Shariah law, compensation to those who suffered in the military operations, return of all those in custody for violence, the removal of all check posts and the establishment of an Islamic University. The peace agreements are still fragile and it is too early to comment on the final outcome but there is a discernible trend among the militants to resort to violence to enforce their control and then deny responsibility by blaming 'miscreants' " this has serious implications especially because Pakistan has now clearly stated that it will not allow its territory to be used for any trans border activity. This is the reason behind the operation currently under way in the Khyber Agency of FATA " the government had shown great patience before launching the operation with para-military forces. Governance and law enforcing capacity in the future will be critical factors because time will not be on the government's side. The fact that the militants have backed away from peace negotiations and have threatened reprisals in the major cities makes this doubly important. The national budget has been presented and approved. The general opinion is that this is the best that could have been done starting from a serious socio-economic base line created by external shocks to a declining economic situation. The perception is that with the reliance on additional revenue generating and fiscal control measures there is the risk of shortfalls that would raise inflation and deficits. This would have inevitable consequences on an already stretched social fabric. Seen in the context of political instability and the threats to security the year ahead seems critical. International credit rating agencies have already downgraded Pakistan and the 2008 Failed States Index by Foreign Policy places Pakistan ninth after Iraq, Afghanistan and six African states with almost all instability indicators in the above 8 points range (10 being the worst) except the economy which rates 6.2. In a globalized networked world where image is based on realities it is important for governments to be on top of situations through timely decisions and continuous interaction rather than belated reaction. Policies and blueprints for their implementation have to transcend political expediencies and instabilities in crucial sectors like economy, energy, agriculture, development and security. This highlights the importance of a National Security Strategy that orchestrates all the elements of national power and their policies"the economy will probably have center stage in any such strategy but economy to work needs a secure environment. A comprehensive national counter insurgency and security strategy has to be part of this overall national strategy. It is only through such an exercise that the criticality of the US-Pakistan relationship will be understood by both, and this can become a starting point for developing national consensus on this strategic relationship. Pakistan will also be able to decisively articulate its commitment to international norms and regimes and to its bilateral relationships with all its neighbors. The fading perception that Pakistan has resilience and recovery capacity must be rebuilt and reinforced by admitting the gravity of the crisis situation that we face and by bringing in a sense of urgency at all tiers of the government and the private sector. In a 'greater region context' Pakistan has to remain aware of the events shaping up in the Middle East as the US-Iran stand off continues and Israel conducts exercises that send clear signals of capacity. The writer is former Army Chief who now heads Spearhead Research Organisation Web: www.spearheadresearch.org