Pakistan's government stopped 16 months of fighting and brought relative calm to Swat - a scenic valley just an hour north of Islamabad - by cutting a truce with Taliban militants, a development it promotes as a model to deal with the Islamic insurgency in the entire region.
However, the price paid for peace may be too high and likely to discourage Western governments from making similar deals in Afghanistan.
Pakistan's North West Frontier Province's regional government ceded authority to the Taliban under the peace deal, giving them almost a free hand to impose their puritan Islamic rule on the around 600,000 people of Swat and its seven neighbouring districts.
The 17-point peace accord signed with a pro-Taliban cleric Maulana Sufi Mohammad includes measures to establish Islamic courts, a ban on music, expulsion of prostitutes and pimps from the area, closure of businesses during prayer times, and a campaign against what they call obscenity.
But it does not stop militants, armed with assault rifles and grenade launchers, from patrolling Mingora, the main town in Swat district, military troops being confined to their barracks.
Few policemen can be seen maintaining law and order in the city, which is completely under Taliban control.
Mohammad is a reformed pro-Taliban cleric who led thousands of fighters to Afghanistan following the 2001 invasion of US-led international forces. Most of his comrades died, but he escaped and was imprisoned in Pakistan, only to be released early last year.
Mohammad convinced his son-in-law, Maulana Fazlullah, to abandon his armed campaign that has turned Swat, often compared to Switzerland for its stunning landscape of mountains and meadows, into a war zone since late 2007.
Prime Minister Yousuf Raza Gilani recently defended the agreement, saying it is part of government's "three D" strategy of dialogue, development and deterrence.
Some cabinet members have proposed it should be a model for the new US policy on Afghanistan and Pakistan, which stresses the need for "reconciliation with the reconcilable elements in Taliban".
The militants have stopped executing their opponents in public, bombing girls' schools and targeting security forces - with few exceptions here and there - but Swat remains a no-go area for foreigners and even Pakistani tourists.
Hundreds of Al Qaeda-linked militants, mainly from Central Asian states, continue to recruit and train fighters for the war in Afghanistan.
"How could it be a model for reconciliation with moderate Taliban if all it produces is a Taliban rule," asks analyst and retired general Talat Masood.
"If that is how you want to resolve problems in Afghanistan, and for that matter, in Pakistan, just hand over the government to Taliban and they will have no reason for the insurgency."
Kabul, which believes the similar peace deals allowed militants to set up mini-states and sanctuaries in Pakistan's tribal region from where they launch cross-border attacks on international forces in Afghanistan, also expressed concerns.
"The Swat peace agreement is Pakistan's internal affair, but if this agreement makes enemies of peace stronger, Afghanistan cannot stay quiet," Afghan President Hamid Karzai told DPA in a recent interview.
"We hope Pakistan will take care of our interests," he added.
According to Masood, any arrangement with the Taliban is successful only if it ensures the writ of the government and consolidation of its authority, which doesn't seem happening in Swat.
He said a realistic model for eliminating militancy in the region could be found in Bajaur tribal district, where Pakistani troops brought the Taliban down to their knees by daring ground and aerial strikes.
A major tribe that supported the militants and provided shelter to Al Qaeda terrorists agreed to surrender some key Taliban leaders and stop their activities in Bajaur following a seven-month offensive that left more than 1,500 rebels and dozens of soldiers dead.
Under the 28-point agreement signed March 9, the Mamoond tribe would also ensure that Taliban fighters lay down their arms and promise to live peacefully.
There are indications that the US may be more inclined towards this route in its new Afghan-Pakistan policy.
US President Barack Obama has not ruled out talks with Taliban ready for peace, but at the same time his government plans to send 17,000 additional troops to Afghanistan, expanding its military presence to around 70,000.
The New York Times said in an earlier report that the White House was considering to expand pilotless drone attacks beyond Pakistan's tribal areas on the Afghan border to include the south-western Balochistan province, where many Taliban leaders, including Mullah Omar, are believed to be hiding.
A Pakistani official, who participated in last month's trilateral consultations on policy review between Islamabad, Kabul and Washington, said that "the US would like to talk to them (the Taliban) from a point of strength".
"Under the proposed reviewed policy, an intensive force will be used against Taliban in Afghanistan as well as Pakistan for at least one year. When the Taliban are weakened to some extent, they would be approached for reconciliation," he added.