PANJWAII DISTRICT, Afghanistan - The sweet smell of life hangs over the bazaar in the centre of Panjwaii, a district that begins about 35 kilometres outside Kandahar city.

Spices and nuts overflow from fruit and vegetable carts. Donkeys laden with hay clop along the road. Rhinestones twinkle off fabrics waving in the wind.

It wasn't always this way.

On the other side of the highway, in cemetery after cemetery, poles strung with dusty flags mark the graves of hundreds of people who have lost their lives in the fighting over this crucial piece of land.

About an hour and half away by road, in the middle of the Canadian compound at Kandahar Airfield, there is a similar memorial.

A marble monument with plaques bearing the names and faces of all of 79 Canadian soldiers who have died in Afghanistan _ at least 22 of them in Panjwaii. Trooper Michael Hayakaze was killed there last Sunday by a roadside bomb.

The Panjwaii is the heartland of Kandahar province. Its return to the prosperity it knew more than 30 years ago has been a priority for Afghans and Canadians since Canada took over military operations in Kandahar in 2006.

After two years, the bazaar is only now coming back to life. The struggle is continuing in efforts to move past securing the district and jump into full-scale development.

"During the fighting, Panjwaii was empty,'' said district chief Haji Baran Shah.

"There was one baker, one butcher. And slowly, slowly people are starting to come back. But It is time to start doing more.''

The Panjwaii sits along the Arghandab River, a main waterway in the province. It is the birthplace of the Taliban _ the insurgency's leader Mullah Mohammad Omar is from here, as are several others.

It's also the home of an estimated 80,000 Afghans, the second-largest concentration outside Kandahar city.

"In 2006, people were living in desperation, in fear, in Panjwaii,'' said Mohammad Ehsan Zia, Afghanistan's minister for rural rehabilitation and development.

"People had no hope while the Taliban were still there.''

Canada's strategy in the district consists of four steps: secure, hold, stabilize and develop.

Fighting to secure the Panjwaii has been underway since June 2006, when military leaders said after a series of skirmishes that the area had been pacified.

Only two months later, Panjwaii was the scene of the heaviest fighting Canada has seen to date in Kandahar -- Operation Medusa, a lengthy campaign that saw 15 Canadian killed, dozens injured and the death of 600 to 1,000 insurgents.

The operation was declared a success in ridding the area of the large Taliban presence, but pockets of the insurgency still bubbled up in various villages and towns.

Aid agencies moving carefully

Meanwhile, aid agencies continued with the tentative steps forward they had started before the fighting.

In 2005, the Canadian International Development Agency had begun targeting funding directly at districts in Kandahar province, in addition to the national programs it had been supporting since 2001.

"We've never really left Panjwaii,'' said Sandra Choufani, a development officer with CIDA, which has allocated $100 million a year in aid to Afghanistan since 2001, with over $40 of that being spent directly on Kandahar province this year.

"It's an important district, in addition to Kandahar city, it's where most of the population is. It's natural for us to be focused in those areas.''

Aid was centred around food distribution and health campaigns, including polio vaccinations.

Throughout the first half of 2007, the military worked at holding onto the Panjwaii through stepped-up efforts to train and equip the Afghan National Army and police.

The Afghan government launched an ambitious series of local development projects through a program called Community Development Councils, or CDCs, funded in part by CIDA.

CDCs get together to make a list of projects they'd like to see in their villages, and then together with the Afghan government, fund and complete them.

There are now 40 CDCs operating in Panjwaii.

The aim of the program is to shore up support for the local government by providing development under the Afghan flag. In turn, this is supposed to decrease support for the insurgency.

"In 2006, we had to go looking for people to give aid,'' said Zia. "But now they are coming to us looking for assistance.''

Through the middle of 2007, aid and security were working in tandem, and the Afghan army was slowly getting stronger.

By the end of the summer, the military felt confident enough to pull back and let local police, who had only weeks of training, hold down the fort.

The Taliban attacked.

The police were "too weak,'' said Haji Agha Lalai, Panjwaii's representative on the Kandahar provincial council. "Seventeen, eighteen police were killed. The Taliban had all the power again.''

About one-third of the Panjwaii fell back under Taliban control.

Lt.-Gen. Michel Gauthier, commander of all of Canada's overseas missions, admitted the Canadian Forces had overestimated the success of the initial training program.

"Certainly in Panjwaii district in particular, it didn't work,'' he said on a recent visit to Kandahar. "They were not able to operate independently and to provide security in those areas.''

For the military, it was back to trying to secure the region.

The fall of 2007 saw an operation to regain the lost territory and revitalize the training program for police.

"I had just moved back when the fighting started again,'' said Nasir Ahmad, 14.

"But now I think it has gotten better.''

More training scheduled

A series of checkpoints have now been established across Panjwaii, manned by Canadian and Afghan forces, and work began on the Joint District Co-ordination Centre that would oversee security efforts in the region.

Police are also undergoing stronger, more extensive training in the coming weeks.

"Security is 90 per cent better now,'' said Maj. Gul Bacha, the Afghan National Army commander at the co-ordination centre.

The Civil Military Co-operation teams also stepped up their development efforts, building bridges, canals and starting the work for a major road-paving project.

"Now the area is in our control,'' said Bismillah Khan, the police chief in Panjwaii.

"Before, Taliban had their checkpoints in these area. But now they don't have any checkpoints. They only can fix mines somewhere.''

By mines, Khan means IEDs _ improvised explosive devices, the scourge of the Panjwaii.

Though ambushes and direct attacks by insurgents against Canadian forces are down, IED attacks continue. More than a dozen Afghans have been killed since January along with three Canadians.

IEDs are what the military term asymmetric threats. Their lethal force is responsible, in part, for stalling Canada's efforts to move past securing and holding the district.

"The stabilization and development side reinforce the secure-hold side of things. They both have to go together,'' said Stephen Wallace, vice-president of CIDA's Afghanistan Task Force.

"If you start to see a breakdown, because of asymmetrical attacks and so on, of this secure-hold combination, then that's where the stabilization and development part is pretty tough.''

Though the military is paving a stretch of road that will hopefully cut down on the number of IED incidents, villagers say the Taliban still have a visible presence in several villages.

They send night letters threatening people who work on projects linked to Canadians. A 15-year-old boy was killed in January after receiving one such letter.

"I have even seen them in my garden,'' said Musha Jan, 40, as he waited in line at a recent one-day medical clinic held by the military in Panjwaii, the first since before Operation Medusa.

"What can you do? I cannot tell them to go away.''

With threat levels still high, aid to Panjwaii remains focused on humanitarian assistance.

It is having an impact. In 2007, almost 2,000 tonnes of food was distributed and the polio eradication campaign reached more than 27,000 children under five years old each month.

But only three of the area's 35 schools are open. A one-day health clinic run by the military attracted hundreds of people, as the area only has one clinic itself.

Choufani said there are plans to expand schools and medical facilities in Panjwaii, but the local governments should be able to support them.

Zia acknowledged that while the CDCs are a good idea, funding for a second round of projects hasn't materialized in all cases.

What needs to happen, Lalai said, is for the large non-governmental organizations to get into the area to start the bigger projects like building clinics, schools and running training and teaching programs.

But the military and CIDA say Panjwaii isn't ready.

"Is it secure enough for the non-governmental organizations to be streaming into (Panjwaii)?'' asked Gauthier.

"It's not.''

As he strolled down the bazaar, Baran Shah pointed to a bombed out storefront he said was destroyed by a suicide bomber months ago.

"We leave it here to remind us of what can happen if we don't take responsibility for ourselves,'' he said.

"Of course, the better sign that we were succeeding is if someone would just open a new shop.''