Bali, Indonesia Indonesia's government, reeling from a bomb attack that killed at least 180 people, acknowledged for the first time Monday that al-Qaida is active on its soil setting the stage for a possible crackdown on extremists.
Stocks plummeted in the capital Jakarta, and markets sank elsewhere in Southeast Asia. The downward trend continued today in Indonesia.
The U.N. Security Council unanimously condemned the bombings on Monday night calling the attack "act of international terrorism."
Tourists fled the country, but many Americans said they were planning to stay, contrary to State Department advice and despite warnings U.S. interests could be the next targets.
The car bomb Saturday at a nightclub packed with foreigners on this resort island is likely to harm more than just the economy and tourism. Since the Sept. 11 attacks, and despite U.S. pressure and the discovery of an al-Qaida-linked terror network in neighboring Singapore and Malaysia, Indonesia has insisted there is no threat of violent extremism on its soil.
The turnaround came after a Cabinet meeting Monday in Jakarta, when Defense Minister Matori Abdul Djalil said: "We are sure al-Qaida is here.
"The Bali bomb blast is linked to al-Qaida with the cooperation of local terrorists," he said.
President Megawati Sukarnoputri is likely to face growing demands to arrest high-profile suspects whose continued freedom has astounded law enforcement officials in other countries. Whether she can do so without provoking extremists and possible further attacks is an open question.
In Washington, President Bush had strong words for the Indonesian leader, saying he planned to talk to her about the need to crack down on terrorism.
"I hope I hear the resolve of a leader who recognizes that any time terrorists take hold in a country it's going to weaken the country itself," Bush said. "And there has to be a firm and deliberate desire to find out find the killers before they kill somebody else."
Security Minister Bambang Susilo Yudoyono said there were signs terrorists were planning attacks against industrial sites, including ExxonMobil's Arun liquefied natural gas plant in Aceh and the Caltex refinery in Sumatra.
"We will increase the security alert in those areas," Yudoyono said.
On Bali, there was no visible evidence of a higher security presence or stricter controls at the airport, though police insisted an elite unit had been deployed.
The FBI and Australian detectives joined the hunt for the killers. Investigators from Scotland Yard were on the way, and Germany said it might send experts.
Suspicion has fallen on Jemaah Islamiyah, a group that Singapore says is based in Indonesia and is linked to Osama bin Laden's terror network. But the group's leader denied involvement.
"All the allegations against me are groundless. I challenge them to prove anything," Abu Bakar Bashir said. "I suspect that the bombing was engineered by the United States and its allies to justify allegations that Indonesia is a base for terrorists."
Indonesia has refused to arrest Bashir, saying he has committed no crimes and that an anti-terrorism law has not been passed by Parliament.
Underlying the reluctance is a fear that arresting Bashir could provoke a backlash against the nascent democracy in the world's most populous Muslim nation, and that providing the military wider powers to deal with terrorism could herald a return of human rights abuses.
Jemaah Islamiyah is believed to have 4 tons of ammonium nitrate, a chemical used to make the Oklahoma City truck bomb, purchased by a suspected Malaysian member who the Malaysian government says allowed two of the Sept. 11 hijackers to use his apartment in 2000.
Americans ordered out
The U.S. Embassy ordered all nonessential staff and dependents to leave Indonesia, and said other Americans in Indonesia should consider leaving.
"We're now registering people for the flights out starting tomorrow," embassy spokesman Stanley Harsha said early today.
A pair of explosions, one from a car bomb, tore through a maze of bars, restaurants and nightclubs Saturday night at Kuta Beach, a haunt for surfers and young vacationers. The open-air Sari Club was turned into an inferno. Little remained of it Monday.
Government officials said 181 people died, although hospital workers put the total at 190. More than 300 people were injured.
A third American, environmental consultant Steven Brooks Webster of Huntington Beach, Calif., was confirmed dead Monday. One Americans is still reported missing: attorney Jake Young, who was to soon join his family in the Kansas City, Mo., area.