Despite blows dealt to al Qaeda, including the killing of its leader Osama bin Laden, "this is not a time for retrenchment and isolation. It is a time for renewed engagement and partnership," Panetta said at the Center for a New American Security (CNAS), a Washington think tank.
Military force will never be enough to wipe out the organisation's threat, Panetta said.
The United States needs to "stay involved and invested through diplomacy, development, education, and trade in those regions of the world where violent extremism has flourished," he said.
"We must sustain and in some areas deepen our engagement in the world – our military, intelligence, diplomatic and development efforts. And over time, we also must address the religious, economic, and cultural differences that create tension and are exploited by extremists," he said.
Threats of massive US government budget cuts, especially to the Pentagon, are major concern, Panetta said.
Yet "if we turn away from these critical regions of the world, we risk undoing the significant gains they have made. That would make us all less safe over the long-term," he warned.
Said Panetta: "I frankly worry that our political system will prevent us from making the investments in diplomacy and development that we need to ensure we protect America's interests in these volatile regions of the world."
The campaign against al Qaeda "will largely take place outside declared combat zones, using a small-footprint approach that includes precision operations, partnered activities with foreign Special Operations Forces, and capacity building so that partner countries can be more effective in combating terrorism on their own," Panetta said.
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