WASHINGTON, Sept 15 (Reuters) - The Pakistani military's powerful and controversial spy agency needs reform but there is no indication this is happening yet, the top U.S. diplomat for South Asia said on Monday.
"It has to be done," Assistant Secretary of State for South and Central Asian Affairs Richard Boucher said of revamping the Inter-Services Intelligence agency, widely known as the ISI.
Asked if he had seen signs of reform, he told Reuters: "No, I don't have anything in particular I would point to right now."
Despite its help in fighting al Qaeda, the ISI is viewed with deep suspicion by U.S. officials who believe it retains links to the Taliban and other militants blamed for supporting attacks on U.S. forces across the border in Afghanistan.
In July, Afghan President Hamid Karzai said Pakistani agents were behind some of the violence in his country, including a suicide attack on the Indian embassy in Kabul.
India also has blamed Pakistani intelligence agents, a charge Pakistan denied.
The spy agency is also suspected of having a hand in helping destabilize past civilian governments in Pakistan.
Pakistan's new government led by Prime Minister Yousaf Raza Gilani tried to rein in the ISI in July by placing it under Interior Ministry control, only to reverse course within days in an embarrassing flip-flop.
Gilani's six-month-old government is grappling with rising militancy in its restive northwest and public discontent over intensified attacks by U.S. missile-firing drones.
The United States has repeatedly called on the Pakistani military to do more to gain control of its lawless regions near the border with Afghanistan, where there are 33,000 U.S. troops, many of them seeking to combat a Taliban insurgency.
U.S. officials believe the insurgents enjoy safe haven in Pakistan and see no way of defeating them without greater efforts on the Pakistani side of the border.
In what has been interpreted as a sign of U.S. impatience, American ground troops on Sept. 3 made what is believed to be their first ground incursion into Pakistan since the deployment of U.S. forces in Afghanistan in late 2001.
At least 20 people, including women and children, died in South Waziristan raid, sparking outrage in Pakistan.
Asked why the new Pakistani government was more likely to act than under its predecessor, President Pervez Musharraf, Boucher replied: "It's sad to say, but the problem has become more and more acute."
Pointing to growing militant violence inside Pakistan, Boucher said "increasingly, the problem is not seen as doing what the United States wants but doing what is necessary for the future of Pakistan."
Pakistani forces have intensified offensives in the northwestern regions of Bajaur and Sat in recent days and more than 150 militants have been killed, according to Pakistani security officials.
Boucher praised the recent push, saying: "I think they have really shown a lot of determination, particularly in the last month or two."
He said combating militants in Pakistan's lawless area near the Afghan border went beyond reforming the ISI and required greater coordination among Pakistani agencies and between Islamabad and Washington.
"The whole Pakistani state apparatus, the politicians, the security, economic development folks, is it properly lined up towards a single goal, and that's beating the terrorists and stabilizing Pakistan?" Boucher said.
"As long as you have organizations, or pieces of organizations, that work in different directions, then it's harder for the government to accomplish that goal." (Editing by Kristin Roberts and Chris Wilson)