This is a partial transcript from Your World with Neil Cavuto, January 15, 2002. Click here for complete access to Neil Cavuto's CEO interviews. 

NEIL CAVUTO, HOST: Now to the secretary of state of these United States. He's going to be taking to south Asia and Japan. He is going to be attending a conference, an international conference, on Afghanistan. He's going to be a very busy fellow over these next few days.

Mr. Secretary, good to have you.

COLIN POWELL, SECRETARY OF STATE: Thank you, Neil. Good to be here.

CAVUTO: First, sir, on to what you make of Pakistan's efforts to crack down on some of these terrorist groups.

POWELL: Well, I think President Musharraf made a very important statement over the weekend. I mean, he spoke to the Pakistani people and said that this form of extremism and terrorism has no place in Pakistani society. He's an Islamic leader who came out strongly and talked about his religion. It's a religion of peace. It's a religion of tolerance. And I think that was very impressive and the Indians took note of that.

He's also taking action. He's banned additional terrorist organizations. He's now arresting people. And he has said terrorism will not emanate any longer from anywhere in Pakistan or Pakistani controlled territory. And I think the Indian response to that speech was measured, was positive, frankly, and now the Indians are looking for action. And I think they will President Musharraf take action in the days ahead.

And so I think that as a result of his speech and the Indian reaction, we now have an opportunity to let the diplomatic and political process work to try to diffuse this crisis, and a due course, I hope, will reach a point where both sides can start to take the escalatory steps, both political, diplomatically as well as, of course, militarily.

CAVUTO: Mr. Secretary, India has expressed some regret that this crackdown on extremists hasn't extended to all guerrilla groups, particularly those of the Kashmir region. What do you make of that?

POWELL: Well, I understand that the Indians would like to have seen more done, but it's a very strong beginning. And it just didn't happen over the weekend. For some months now, President Musharraf has been speaking in these terms. But his speech over the weekend was really quite historic. And I hope we will see further action in the days and weeks ahead that will persuade everyone of his commitment to this new future for Afghanistan, a future where this kind of extremism, this kind of terrorism is no longer tolerated.

CAVUTO: You've still got a million along the respective border there.

POWELL: Yes.

CAVUTO: Any sign at all that that's easy?

POWELL: No. I mean, there are a million troops, if that's the right count, facing each other, and that always has to be seen as a dangerous situation. We are trying to find a way to make sure that no spark ignites a conflagration between these two forces.

And I think we've made progress in the last several days, but one shouldn't expect the whole situation to be resolved as a result of one speech. The Indians are looking for more action. But I think we have stabilized the situation so that we can now use diplomatic activities, diplomatic intervention to start to find a way to go down the escalatory ladder rather than up.

CAVUTO: If they come to blows, whose side do we take?

POWELL: We don't want to see them come to blows. We don't even want to think about that option. We do not want and cannot have a war in south Asia. And all of our efforts are being directed to avoiding such a war. We have good relations with Pakistan. We have good relations with India. And we will be using...

CAVUTO: But we need Pakistan a little more, right?

POWELL: We will be using those good relations to keep a war from breaking out. And this is not the time to speculatively choose sides. That's not our strategy. Our strategy right now is to work as hard as we can to keep such a war from breaking out.

CAVUTO: Sir, I'd be remiss if I didn't mention Afghanistan. It's looking to pass out a pretty big tin cup. It's looking for $45 billion over the next ten years. I mean, how doable is that and how much would the U.S. pay?

POWELL: Well, we're all going to have to contribute to Afghanistan's not even reconstruction, construction in the first instance. This is a very broken country. And everyone who's been over there comes back with the same tale. Everything is needed. Police force, a military that functions, a health care system, fresh water, housing, education, you name it.

And so, the international community has a lot of work to do. And that's the real purpose of my visit, the first purpose of my visit, to attend a reconstruction conference in Tokyo next week hosted by the United States, Japan, the European Union and Saudi Arabia, to start making real contributions. And we're also working hard to free up Afghani assets in various financial institutions around the world so they have their own money available for use. But it's going to be...

CAVUTO: But that $45 billion figure...

POWELL: Well, $45 billion is one estimate. In the first instance, we're looking for a much smaller amount, a couple of billion dollars in the first year. And the United States will make a significant contribution to that effort.

CAVUTO: Mr. Secretary, thank you so much. Best of luck on your trip.

POWELL: Thank you, Neil.

CAVUTO: The secretary of state of these United States, Colin Powell.

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