George Bush's presidency undoubtedly was an unmitigated disaster for the United States, both internally and externally. Internally, his administration grossly mismanaged the US economy after taking it over from the Clinton administration in a fairly good shape. Consequently, the US has the prospect of the biggest ever peace-time budget deficit in its history after inheriting a budget surplus from the Clinton administration and an economy in a state of deepening recession with its GDP expected to contract by 1.2 percent in 2009. Its unemployment rate rose to 7.2 percent in December 2008 and may rise even further during the current year. Above all, his flawed policies badly divided the county. Externally, the US image has been tarnished by the Bush administration's mishandling of the so-called war on terrorism. The US invasion of Iraq was based on fictitious grounds. The Bush administration's tendency of excessive reliance on the use of force in the conduct of its foreign policy as reflected by its handling of Afghanistan and Iraq, and its doctrine of unilateral pre-emptive intervention projected the US as an international bully. Its blatant disregard of human rights in the mistreatment of the prisoners captured in Afghanistan and Iraq compromised its deeply cherished values. Its defiance of the Geneva Conventions amounted to wilful violation of its legal obligations. In short, the US under the Bush administration was seen by the rest of the world as a country on the rampage oblivious of moral considerations, political niceties and legal obligations. As the Economist recently commented, the Bush administration was marked by partisanship, politicisation and incompetence. The situation, therefore, called for a radical change, a change of direction in both the US internal and external policies. It goes to the credit of President Barack Obama that in his election campaign he captured the imagination and the intense desire of the American people for this change. Historically speaking, his victory in the presidential election was the need of the hour from the US point of view. Thus in him, the moment and the man have come together. It was not surprising, therefore, to see President Obama once again recognising the need for this change in his inaugural address by stressing that "the world has changed, and we must change with it." He promised bold and swift action to create new jobs and lay the foundation for economic growth. Heralding a major change in the US foreign policy from the days of the Bush administration, President Obama declared: "Power alone cannot protect us, nor does it entitle us to do as we please....Our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint." Earlier, writing in the July-August, 2007 issue of the Foreign Affairs, Barack Obama as a presidential candidate had aptly observed: "America cannot meet the threats of this century alone, and the world cannot meet them without America. We can neither retreat from the world nor bully it into submission. We must lead the world, by deed and by example....The mission of the US is to provide global leadership grounded in the understanding that the world shares a common security and a common humanity." President Obama has moved quickly with his nominations to fill the key posts to institute the policy changes that he has promised. There is also the talk of pushing through the Congress a stimulus package of over US$800 billion to jumpstart the economy which is sliding into depression. Within a few hours after taking over the presidency, Obama ordered the prosecutors to seek the suspension of all military trials at the Guantanamo prison. Orders were also issued by him later for the closure of the Guantanamo prison within a year, the shutting down of secret CIA prisons and the review of the 245 detainees held at Guantanamo to determine whether they should be transferred, released or prosecuted. The most important question from our point of view is how the Obama administration would deal with Pakistan, the Muslim world and the developing countries. In his inaugural address, President Obama assured the Muslim world that he would seek a new way forward based on mutual interest and mutual respect. He also held out the prospect of increased assistance to the developing countries to overcome poverty. A more comprehensive statement of the foreign policy agenda of the Obama administration issued later places Afghanistan and Pakistan on the top of the agenda by stressing that the greatest threat to the US security emanates from "the resurgence of Al-Qaeda and the Taliban in Afghanistan and Pakistan." Other issues which receive prominent place in this statement are the risks of nuclear proliferation and loose nuclear materials, Iran, energy security, Israeli-Palestinian conflict, global poverty and security in Asia. It also appears from this important document that as compared with the Bush administration, President Obama would place much greater emphasis on diplomacy and political engagement as against the use of force in dealing with important foreign policy issues. The Obama administration's decision to increase troop levels in Afghanistan and continue with drone attacks in FATA shows that it would maintain and even increase military pressure on Al-Qaeda and the Taliban. However, the appointment of the veteran US diplomat, Richard Holbrooke, as the special envoy for Afghanistan and Pakistan indicates that it would place increased emphasis on negotiations in resolving the conflict in Afghanistan. After all you don't appoint a top ranking diplomat like Richard Holbrooke as the special envoy if the focus is to be exclusively on the use of force in bringing this issue to a successful close. It also appears from Richard Holbrooke's article in the September-October, 2008 issue of the Foreign Affairs that through regional agreements Pakistan, Iran, China, India and Russia would be given stakes in any Afghan settlement. Thus, Pakistan-US relations under the Obama administration will be increasingly defined in the context of the conflict in Afghanistan and the struggle against Al-Qaeda and extremism. The US pressure on Pakistan for security in the border region with Afghanistan will increase. The good news is that the US non-military aid for Pakistan will triple providing the much needed resources for the country's economic development. The Obama administration will encourage Pakistan-India dialogue for the settlement of the Kashmir dispute primarily so that Pakistan may concentrate on fighting Al-Qaeda and the Taliban. This will lead to the resumption of the composite dialogue in due course of time as the tensions caused by the Mumbai terrorist attacks gradually wind down. But because of India's size and its importance in the US grand strategic design for Asia, it would be unrealistic to expect that Washington would succeed in persuading it to take any meaningful steps towards a settlement of the Kashmir dispute which is satisfactory from the point of view of Pakistan and the people of Kashmir. The task of Pakistan's policy makers is clearly cut out. It is in our own national interest to overcome the serious problems of terrorism and extremism which threaten internal peace and security as shown by the growing frequency of the attacks and the incidents of suicide bombing targeting security personnel, schools, shopping places, hotels and government offices. This would require a comprehensive national strategy enjoying the support of the people, the political parties and the country's security establishment. As for peace in Afghanistan, we should encourage the Obama administration to work for national reconciliation in that country through a new political dispensation which is supported by the various Afghan communities and political forces, and is endorsed by Afghanistan's neighbours. Failing that the situation in Afghanistan is likely to remain disturbed for a long time to come. The writer is a retired ambassador E-mail: