Testifying before the House Armed Services Committee, officials from the Central Intelligence Agency and the Defence Intelligence Agency said al Qaeda has become entrenched in a remote corner of Pakistan near the Afghan border, with Osama bin Laden himself believed to be protected by local tribal leaders.

"They (Qaeda) seem to be fairly well settled into the safe haven in the ungoverned spaces of Pakistan. We see more training. We see more money. We see more communications," said John Kringen, the CIA's director of intelligence.

But revealing the dilemma in trying to deal with the problem, Thomas Fingar, Deputy Director at the Directorate of National Intelligence said, "There is the risk of taking actions... that could lead to developments in all of Pakistan, that would increase the problem."

"There are an awful lot of potential recruits that are being engaged in the struggle in Kashmir that are held in check by the security forces in the rest of Pakistan. So it is not too great an exaggeration to say there is some risk of turning a problem in northwest Pakistan into the problem of all of Pakistan," he said.

Kringen said bin Laden was thought to be alive in the remote tribal areas of Pakistan.

"We continue to assess that Osama bin Laden is alive. We continue to assess that he's probably in the tribal areas of Pakistan," he said adding it was a challenging task to go after him because the Pakistani government does not control much of the area.

But "sooner or later you have to quit permitting them to have a safe haven there. At the end of the day, when we have had success, it's when you've been able to get them worried about who was informing on them, get them worried about who was coming after them," Kringen said.

The officials also said the peace deal with tribal leaders in Waziristan has not proved successful in combating extremism and fighting terrorists.

"We would agree that the peace deal in Waziristan has not been helpful in terms of the anti-terrorist effort.

Musharraf's rationale for that was that in the long run it would create the political space to create a more stable environment. From our assessment, we have not seen the developments go in that direction, but actually in a negative direction," Fingar said.