July 13 (Bloomberg) -- Pakistani President Pervez Musharraf has failed to contain al-Qaeda and must regain control over areas bordering Afghanistan where the terrorist group is free to plan new attacks, said Stephen Hadley, President George W. Bush's national security adviser.

Musharraf's strategy of giving tribal leaders more autonomy ``has not worked the way it should,'' Hadley said in an interview with Bloomberg Television's ``Political Capital with Al Hunt,'' scheduled to air today and during the weekend. The U.S. regards the problem as a ``top priority'' and is taking steps to correct it, he said.

A classified report prepared by the U.S. National Counter Terrorism Center earlier this month concluded that al-Qaeda is growing stronger and is in a better position to attack.

The failure of Musharraf's tribal strategy ``has allowed some pooling of Taliban,'' Hadley said. ``It has allowed the reestablishment of some operational training areas. It has allowed some planning.''

The U.S. is working with the Pakistani government to thwart the latest threats, Hadley said, adding that the Musharraf government is ``beginning to take some moves that will reassert control in those areas.''

Faced with growing unrest in Congress over the perception that terrorism risks are growing, the administration is stepping up pressure on Pakistan. Richard Boucher, the U.S. assistant secretary of state for South and Central Asian affairs, told a House panel yesterday that al-Qaeda fighters have ``found more freedom to operate'' in the Pakistani border area since Musharraf agreed that tribal leaders should control the area.

Muslim Militia

Pakistan's military leader has tried unsuccessfully to control the Taliban, a Muslim militia that governed Afghanistan under a harsh code of Islamic law until the U.S. drove it from power after the Sept. 11, 2001, attacks.

Since their ouster, Taliban fighters have settled in the remote mountainous region along Pakistan's 1,510-mile-long (2,430-kilometer) border with Afghanistan. The area is largely controlled by tribal leaders, not the central government, and Musharraf agreed to limit his interference in their territory.

The Brussels-based International Crisis Group, an organization that tries to resolve conflicts, said in a report last year that the September 2006 agreement between tribal leaders and Musharraf -- called the North Waziristan accord -- helped the Taliban because it limited Pakistani army operations.

Musharraf has talked about the need to oust terrorists from Pakistan. ``Foreign terrorists are the biggest threat to our country and therefore they have to be flushed out,'' the official Associated Press of Pakistan quoted him as telling tribal leaders in Peshawar on June 26.

Iraq Violence

Turning to another front of the U.S. campaign against terrorists, Hadley said the government of Iraqi Prime Minister Prime Minister Nuri al-Maliki needs to end sectarian violence before it can achieve political stability.

``The bottom line is this: security is going to be a leading indicator; politics is going to be a lagging indicator,'' Hadley said.

The Iraqi government has failed so far to meet several political goals essential to bring about lasting stability that would enable a U.S. military withdrawal, the Bush administration told Congress yesterday.

A status report on the four-year-old conflict said the Maliki government has failed to ease restrictions on members of Saddam Hussein's Baath Party, set new local elections or guarantee all groups a share of oil revenue.

Next Steps

Hadley was upbeat about prospects for the success of the U.S. troop increase in Iraq and said military commanders, not Congress, should determine the next steps. Bush intends to revisit his strategy in September based on the recommendations of General David Petraeus, the top U.S. commander in the Middle East, and U.S. Ambassador to Iraq Ryan Crocker.

``We will have another two months operating under this new strategy,'' Hadley said. ``General Petraeus is making good use of those forces'' and ``in September he will come back and let us know where we are in terms of the reinforcement.''

The Democratic-led House of Representatives, defying Bush's veto threat and his pleas for patience, voted 223-201 yesterday to require the withdrawal of U.S. troops from Iraq by April 2008. Only four Republicans backed the measure.

To contact the reporter on this story: Brendan Murray in Washington at brmurray@bloomberg.net

Last Updated: July 13, 2007 16:11 EDT