The “marked deterioration” in Pakistan’s internal situation has serious implications on the overall security and peace of the region, the annual report of the Ministry of Defence has said. The report says that the assassination of former Pakistani Prime Minister, Benazir Bhutto, was a “serious setback” for the stability of the region.The annual report, which was tabled in Parliament on Thursday, goes on to say that with an ongoing proxy war, the “instability in our neighbourhood” could fuel “disturbances for our internal security” as well.However, the report is silent on China and merely says that a policy of “constructive engagement” is being followed to resolve border issues. Referring to Myanmar as a country of “strategic significance”, the report says that India wants to ensure a “peaceful periphery.”“The political reform and national reconciliation process initiated by the Myanmar government should be taken forward expeditiously in a broad based and inclusive manner including Aung San Suu Ki and various ethnic groups,” the report says.On the situation in Jammu and Kashmir, the report says that violence has been brought down considerably but despite assurances, terrorist activities continue to be supported from across the border.