"Today, Al-Qaeda's top leadership is most likely based in Pakistan, along with top Taliban leaders, both Afghan and Pakistani," said the report 'From AfPak to PakAf: A Response to the New US Strategy for South Asia' prepared by the Council on Foreign Relations.
The "Talibanisation" of Pakistan's Pashtun belt is gradually moving eastward into settled districts, creating new terrorist safe havens in once-tranquil locales such as the Swat valley, said the report authored by Daniel Markey.
"Pakistan's non-Pashtun extremist and sectarian groups, some of which were historically nurtured by the state as a means to project influence into India and Afghanistan, also have the potential to prove deeply destabilising," it added.
Further groups like the banned Jaish-e-Mohammed or Jamaat-ud-Dawah are well resourced and globally interconnected. Some appear to retain significant influence within state institutions and enjoy public sympathy, in certain cases because of the social services they provide, the report said.
It said over the past two years, the security environment in Afghanistan and Pakistan has taken a significant turn for the worse. The spread of militancy, whether by terrorists connected with the Al-Qaeda, the Taliban of Mullah Omar or Baitullah Mehsud, criminal gangs, narco-traffickers, or sectarian extremists, among others, has destabilised the Pashtun belt in southern and eastern Afghanistan as well as western Pakistan.
"At the same time, a range of other violent actors from Punjabi anti-Indian extremists to Central Asian warlords-operate in the non-Pashtun areas of Pakistan and Afghanistan," the report said, adding Pakistan and Afghanistan offer these groups an unusually hospitable environment, one that complicates and magnifies the danger.
"The geographic proximity of Pakistan's nuclear program to these sophisticated terrorists and the recent history of illicit transfers of material and know-how also pose a unique threat," it said.
The report said fragile state institutions, weak leadership, and inadequate resources limit the ability of Islamabad and Kabul to fight militancy in the near term or to foster moderation over the long run.