DAVOS, Switzerland (CNN) -- Unless more is done to tackle growing extremism in countries including Pakistan, Afghanistan could once again fall into terrorist hands with dire consequence for the region and the world, the country's president warned Friday.

Hamid Karzai addresses the opening session of the World Economic Forum on Wednesday.

Hamid Karzai said "misguided policy objectives" of unnamed countries or organizations were continuing to fuel violence in Afghanistan, although he was confident al Qaeda chief Osama bin Laden was no longer within its borders.

Speaking in an exclusive interview with CNN on the sidelines of the World Economic Forum in Davos, Switzerland, Karzai also reluctantly accepted his image as "a puppet of America" but he shied away from accepting reported U.S. doubts that NATO troops lacked the training to combat the Taliban.

Asked if he agreed with a recent assessment by U.S. Defense Secretary Robert Gates reported in the L.A. Times that NATO forces lacked the necessary skills, Karzai said he was not able to comment, but the fight needed to be more focused in Afghanistan and beyond.

"I believe there has to be a bigger effort, a more robust effort concentrated on the right objective," he said.

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"The fight against terrorism is not in Afghanistan, a very small part of it may be in Afghanistan, the bigger part is in the sanctuaries where they get trained where they get motivated that is where we should go and unless we do that this vicious circle will keep going." Watch Karzai address the issue of bin Laden »

He said the Taliban were being funded partly by opium poppy crops, thriving due to the failure of efforts to eradicate them, from religious extremists and a "combination of criminals, misguided policy objectives and folly".

However he rejected claims al Qaeda or the Taliban, which ruled Afghanistan until it was ousted by the U.S.-led invasion of 2001, received funds from Saudi Arabia.

Karzai expressed concerns over growing terrorism in neighboring Pakistan, where President Pervez Musharraf faces mounting opposition to quit amid spreading militant violence.

"The problem is growing, the problem has grown, unfortunately, of terrorism in Pakistan," he said.

"I was concerned, I remain concerned but I had a very fruitful talk with president Musharraf last time. From that respect I hope there is more recognition of dangers there and of the dangers of the future of both countries and the region.

"Based on that I hope there will be a stronger effort in Pakistan and the region, and help from the rest of the world."

He added: "It is one thing to recognize facts, it but it is another thing to work at it, to get at and remove it and defeat it and destroy it."

Assessing progress in his own country, Karzai said things were improving despite ongoing violence.

"It is better than last year, some parts of the country are much better than last year. Some parts of the country are not better than last year.

"And actually, the parts of the country that are not good are shrinking in size, and the parts that are getting better and better are expanding in size, so the overall situation in the country is a most definite improvement."

On Osama bin Laden, Karzai insisted the fugitive terrorist mastermind would eventually be caught, even though he continued to elude coalition forces.

"I wish I knew where he was so we could go after him. No absconder, no man running away from the law will be able to hide forever, some day we'll catch him. (He is) not in Afghanistan. He has no place to hide in Afghanistan."

On his perceived image as an impotent leader in thrall to the U.S. administration, Karzai, said he was willing to shoulder insults in return for U.S. assistance.

"Me a puppet? My God.

"Anyway, Americans have helped Afghanistan tremendously. The American people have a feeling for Afghanistan a very, very great feeling.

"The U.S administration has helped Afghanistan and if we are called puppets, or if I am called a puppet because we are grateful to America, then let that be my nickname.

"The truth is that without the United States in Afghanistan, Afghanistan would be a very poor, miserable country, occupied by neighbors and al Qaeda and terrorists." E-mail to a friend

CNN's Becky Anderson and Barry Neild contributed to this report.

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