This is a partial transcript of Special Report with Brit Hume, June 25, that has been edited for clarity. Click here to order the complete transcript.

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BRIT HUME, HOST: When President Bush needed a new man to take over the administration of post-war Baghdad, they chose a man recognized as a foremost authority on terrorism, the veteran diplomat Paul Bremer (search).

And based on recent events there, it would seem that a knowledge of terrorism is very much needed in Iraq, where shooting and looting have appeared at least to be more prevalent than working and voting.

For more on the situation, we're pleased now to be joined by Ambassador Bremer himself from Baghdad.

Mr. Ambassador, thanks for doing this. And let me ask you right off. The situation based on the news reports, I think that most Americans are seeing, would lead people to believe that it's kind of desperate, deteriorating, the goodwill is running out and that the danger is mounting. Is that the case and if not why not?

PAUL BREMER, IRAQ CIVILIAN ADMINISTRATOR: No, I don't think that's the case really, Brit. I think it is true that we've had a bad 24 hours. We had this horrible attack on British forces down in the south. And obviously, all of us here give our sympathy to the families of those soldiers.

We always knew we were going to have onward -- as we went on, attacks against American and other forces here and we've had them. But if you go back over the last 10 or 12 weeks, we've really come quite a long way in imposing law and order on the country. We have got prisons operating. We have got courts operating. We have got 8,000 police now in Baghdad. The situation in Baghdad is much better than when I got here five or six weeks ago.

HUME: One senses that when you got there, you were surprised by not so much by the deterioration of things that had happened since the war ended, but by the state of Iraq before. Am I wrong about that?

BREMER: There's a lot of truth in that. I think as we've started to look at the fundamental economic challenges we face now, we're finding that the devastation of the Iraqi economy before the war was really quite substantial. You had a really Stalinist kind of and operation here with huge misallocation and misappropriation of capital going on for 30 years. I visited power plants, textile factories, refineries, which are operating with machinery from the 1960s, even in some cases from the 1950s. There's just been a tremendous rundown in infrastructure, so it's going to take us quite a while to get it fixed.

HUME: Some of our correspondents there have been hearing from Iraqis that they don't understand why more western and American, in particular, contractors are not in there now doing the work of rebuilding places that were damaged, public facilities, private facilities as well. And why the contracts seem not to have been let and why the jobs that would be generated by that work seem not to have materialized. What about that?

BREMER: Well, first of all, we have put about $1 billion into this economy since I got here. A large part of that is contracts to American contractors, who are under instructions from me to let as many of the subcontract as possible to Iraqi firms.

We have certainly created thousands of jobs since we've been here and we're in the process of creating thousands more. And these are good, good steps; but we need to be realistic that fixing this economy -- it took 30 years to run it down and it's going to take some time it get it put back on its feet.

HUME: Do you sense that the goodwill that the American forces there and the whole concept of American forces being there had for a while has begun to erode or do you sense that it is enduring?

BREMER: Well, I think there is certainly some frustration with the way life is here. We have done a good job of putting back into place basic services, power, water, health care.

When I travel around and -- I was just talking to one of my political officers who was visiting one of the areas where we've had attacks in the last few days, al Rimedi. What we're hearing is that the Iraqi people are delighted that we're here. They're delighted that they were liberated. And of course, now they'd like to see a great deal of economic benefit from being liberated, and it's our job to give them that.

But it's also our job to counsel them to be realistic. It's a tough job we've got and we're putting our effort into it. We're working with Iraqis. We will succeed, but it's going to take time.

HUME: And what can you tell us about this ongoing search for the weapons that obviously has become a tremendous political controversy, particularly in Britain, but also now in the United States?

BREMER: Well, I think the secretary of defense addressed this very well yesterday. He basically said, look, the intelligence was absolutely clear before the war. It was agreed to by the last three American administrations. Parties -- people from both political parties, including President Clinton. It was agreed by the members of the Security Council in the fall. It was agreed by two separate U.N. inspection groups; the ones that was there in the early 1990's, UNSCOM (search) and UNMOVIC (search), the one that was there under Hans Blix.

There was no question that Iraq had weapons of mass destruction and we will find them in due course or evidence of those programs, as the secretary said yesterday.

HUME: Tell me about your own personal living accommodations and what you're days are like in that heat. I see you in a coat and tie and I can hardly believe of it.

BREMER: Well, I like to get dressed up for my friends at Fox.

HUME: We appreciate that.

BREMER: We -- my days here are pretty long, but everybody's days here are long. Most of the people here are now not living in this palace. They're living in a nearby hotel. Which is good, although we've had problems with power and therefore with water over the last few days. And it's -- it's not quite like camping, but it's not like living at the Ritz.

HUME: Are you living in a hotel? Where are you actually living?

BREMER: No, I'm not. I'm in a trailer here on the grounds of the compound, which has the advantage that last night it had electricity. So I had air-conditioning, but we had no water. So you know, you have to take each day as it comes.

HUME: Mr. Ambassador, thanks for taking this time.

BREMER: Nice to be with you.

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