By ALAN PERROTT
As the death toll from the Sari Club bombing quickly rose, accusations were being directed at terrorist groups in Indonesia, the world's most populous Islamic nation.
And in Bali, tourism officials said the bombings might sound the death knell for their industry.
"This is at the very heart of Bali's tourist district, it is simply disastrous for us," said the chairman of the Bali chapter of the Indonesian Hotel and Restaurant Association (PHRI), I Gede Wiratha.
The island resort has for decades been a taste of tropical paradise for overseas tourists, including thousands from Australia and New Zealand.
But a Bali hotel owner and a PHRI vice-chairman, I Made Mastra, warned that the blast would have widespread ramifications for the rest of the nation's tourism industry.
"What is clear is that this spells doom for the future," he said.
"Bali was one of the safest places in Indonesia. Not any more."
President Megawati Sukarnoputri's Government has been under increasing pressure from the United States, Singapore, Malaysia and the Philippines since the September 11 US terror attacks over its attitude to terrorism.
Indonesia has long been considered the weak link in Southeast Asian efforts to crack down on radical Islamic groups in the region such as Jemaah Islamiya and the Laskar Jihad.
Jemaah Islamiya is an Islamic extremist group operating throughout Southeast Asia, and is thought to have strong links to the al Qaeda network. Its goal is the establishment of an Islamic state comprising Malaysia, Singapore, Indonesia and the southern Philippines.
Fifteen Jemaah Islamiya extremists, including several trained in al Qaeda camps in Afghanistan, were arrested in Singapore in December last year, accused of planning attacks on the US and Israeli embassies and British and Australian diplomatic buildings.
The group's three suspected leaders are all Indonesian.
Malaysia, the Philippines and Indonesia signed a pact to fight terrorism this year.
Malaysia and the Philippines have arrested suspected Jemaah Islamiya terrorists but no such arrests have been made in Indonesia.
The Laskar Jihad is a paramilitary group calling for jihad (holy war) against Indonesian Christians.
The group has been heavily involved in fierce fighting in Indonesia's Moluccan Islands.
In February, Singapore senior minister Lee Kuan Yew said terrorist group leaders were co-ordinating region-wide activities from Indonesia, bringing angry denials and demands for proof from the Megawati Government.
The Singaporean Government claims arrested Jemaah Islamiya members have said they are led by Islamic cleric Abu Bakar Bashir, who is based in central Java, and another Indonesian known only as Hambuli.
Singapore also claims it has passed on all the information it has on the group, but says Indonesian officials want further proof before they will act.
Indonesian police have questioned Bashir, but have not detained him.
This month, Bashir lodged a defamation complaint against Time magazine with Indonesian police, claiming accusations against him are part of a US smear campaign against himself and Islam.
Last month, Time quoted a CIA report linking Bashir to an Arab who had allegedly confessed to planning attacks against American embassies in Southeast Asia.
The Arab, Omar al-Faruq, reportedly claimed Bashir bombed Jakarta's largest mosque in 1999 and tried to spark retaliation by blaming Christian extremists.
Yesterday, Indonesian police cleared Bashir of any involvement in another violent act, a botched grenade attack near the US embassy last month.
The police suspect the explosion resulted from a debt dispute that got out of hand, rather than an act of terrorism.
The Straits Times newspaper says that after the grenade explosion, the US threatened to withdraw its diplomatic staff unless Jakarta took more direct action.
Such international pressure has been rising since the 10 Association of Southeast Asian Nations countries signed an agreement with the United States in August.
The countries have agreed to share intelligence, block terrorist funds and tighten borders.
This get-tough message was reinforced by a visit to Indonesia by American Secretary of State Colin Powell.
He carried with him ideas and initiatives to expose and deal with terrorists, and the carrot of renewed military ties with the United States which were cut in 1999 after Indonesia was implicated in rising violence in East Timor.
New Zealand is also trying to find a role in reducing Indonesia's internal tensions.
Last week Foreign Minister Phil Goff offered to provide a broker in the conflict between Indonesia and the independence movement in West Papua, formerly known as Irian Jaya.
The Papuan population of Melanesians and Christians fear they are about to be overwhelmed by tens of thousands of Muslim Asians who are being encouraged to leave crowded neighbouring islands.
At the same time, Australia is casting nervous glances at its northern neighbour, the most likely source of retaliation for its outspoken support of President Bush's crusade against terrorism.
Foreign Minister Alexander Downer has said months of intelligence-gathering co-operation this year has shown clear links between extremist Indonesian groups such as Jemaah Islamiya and al Qaeda.
Such concerns were heightened when Australian power stations and the Lucas Heights nuclear reactor were placed on maximum alert last week after a US warning of possible al Qaeda attacks.
The alert came after an alleged al Qaeda tape recording was broadcast in Qatar last week, threatening new attacks against American targets.
Australian Federal Attorney-General Daryl Williams told the Sydney Morning Herald that US advice suggested the tape might have been made by Osama bin Laden.
Mr Williams said the US had warned Australia, Britain, France and Germany of possible attacks against power production and transmission stations or similar targets.
And he said a non-specific threat was directed against Australia, Great Britain and the US last December.
One Indonesian politician yesterday said he could not discount the possibility that the Bali bombing was aimed at Australians, who favour the Kuta Beach area.
Alvin Lie, a member of the National Mandate Party, also said Parliament was warned last week of attacks within Indonesia if the US acted against Iraq, and added his voice to those claiming the Indonesian Government was dragging the chain on acting against internal terrorist groups.
He says Jakarta's failure to tackle terrorism will further weaken the country's economy and discourage investment and tourism.
Indonesia is an archipelago crammed with about 225 million people divided by religious tension and more than 300 local languages and cultures.
These tensions were raised by the Asian financial crisis of the late 90s which led to the collapse four years ago of President Suharto's Government after it had ruled for 32 years.
Yesterday's attack has serious implications for Indonesia's most popular tourist destination, a favourite holiday spot for Australians and Japanese which also attracts about 10,000 New Zealanders each year.
Indonesian police General Da'i Bachtiar has called the bombing the "worst act of terror in Indonesia's history".
It wasn't a unique act. In June, a bomb was exploded in front of a nightclub in Jakarta's Chinatown, injuring five people. Two other bombs, one in front of another nightclub, were disarmed.
The Bali bombing also came hours after a small bomb exploded near the Philippine consulate in the port city of Manado on the central island of Sulawesi. Three window panes were broken, but no one was injured.
What is surprising is that the latest bombing happened in Bali, "the Island of the Gods", which has been spared much of the turmoil striking other regions of the country and is considered a haven.
Indonesia is 95 per cent Muslim, but the three million people living on the island perched at the eastern end of Java are predominantly Hindu.
Bali often behaves as a separate state within Indonesia. Its mainly indigenous population has more relaxed attitudes to alcohol and Western behaviour than is often found in the other Muslim-dominated regions.
Balinese officials are expecting a drop-off in tourist numbers and the economic impact of the bombing.
About 6000 tourists cancelled holiday plans to visit the island after the September 11 attacks and subsequent threats by militant Islamic groups to sweep Americans from their country.
These cancellations stalled a slow recovery after tourist numbers dropped from 5.2 million to 4.6 million between 1997 and 1998 when Suharto was kicked out of office and violent internal divisions emerged throughout the country.
The numbers improved to 4.7 million in 1999 and 5 million in 2000 but collapsed again after last year's attack on America.
Kuta, where the deadly bomb blast occurred, is the epicentre of the tourist trade. It is filled with hundreds of restaurants, cheap hotels and gift shops. Almost every night the streets are filled with tourists dancing and drinking.
Bali has long been a popular tourist destination because of its sprawling beaches, scenic rice terraces and its culture, which dots the island with hundreds of temples.
Many of the world's jetsetters have residences in Bali, a green island despite its three million people. Many others stay in the island's super luxurious hotels.
Its most loyal clients come from Australia, a few hours away by plane. Kuta is very popular with Australian surfers.
The island is Indonesia's top tourist destination. A total of 1.42 million tourists entered the country directly at Bali's international airport last year.
But many of the 3.5 million other tourists who entered the country from other destinations in Indonesia that year also visited Bali.
Indonesian officials have repeatedly insisted that Bali is safe to visit, saying the island's Hindu culture has no links with Muslim radicals blamed for much of the violence in other parts of the country.
Foreign embassies had also only urged caution for their citizens visiting Bali, though saying the island was relatively safe and secure for foreigners.
This quickly changed after yesterday's attack.
Foreign Affairs advice to New Zealanders
* Travellers should defer travel to Bali
* NZers in Bali should keep a low profile and remain calm
* Foreign Affairs Hotline: 0800 432 111
Feature: Bali bomb blast
Pictures from the scene of the blast
Further reading
Feature: Indonesia and East Timor
Related links
Terror comes to paradise
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