"Earlier this year, I asked my national security team to develop a plan for a network of partnerships from South Asia to the Sahel," Obama said in his address at the Graduation Ceremony of the elite military academy West Point in New York.
"Today, as part of this effort, I am calling on Congress to support a new Counter-Terrorism Partnerships Fund of up to USD 5 billion, which will allow us to train, build capacity, and facilitate partner countries on the front lines," he said.
The move came hours after Obama announced his plan to completely withdraw US troops from Afghanistan by 2016.
He said for the foreseeable future, the most direct threat to America at home and abroad remains terrorism.
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"But a strategy that involves invading every country that harbours terrorist networks is naive and unsustainable. I believe we must shift our counter-terrorism strategy - drawing on the successes and shortcomings of our experience in Iraq and Afghanistan - to more effectively partner with countries where terrorist networks seek a foothold," Obama said.
"This lessens the possibility of large-scale 9/11-style attacks against the homeland, but heightens the danger to US personnel overseas, as we saw in Benghazi; or less defensible targets, as we saw in a shopping mall in Nairobi.
"We need a strategy that matches this diffuse threat; one that expands our reach without sending forces that stretch our military thin, or stir up local resentments," he said.