First Bali, now Davao

Wel

come to Davao City, the most Livable City in the Philippines," reads a sign at the Davao International Airport. It's a bit of a stretch, given that Davao is the largest metropolis on Mindanao, the perennially troubled southern Philippine island. But in some ways Davao was indeed an oasis of peace in a troubled region. Tough-talking Mayor Rodrigo Duterte's official policy was that everyone was welcome in his city—even Islamic separatists and communist rebels—as long as they didn't indulge in violence or mayhem. Anyone in Davao who stepped out of line was dealt with ruthlessly—and, for the past decade, Duterte's policy worked.

Until last week, when terrorists launched a deadly attack at Davao airport. William Hyde, an American missionary, was outside the crowded terminal sheltering from the rain beneath a protective canopy. According to police, he may have been approached by a young man with a backpack, whom they identify as Montazer Sudang, a 23-year-old with apparent links to the Moro Islamic Liberation Front (MILF), the country's biggest Islamic separatist group. A large pipe bomb, either in Sudang's backpack or carried by an unidentified female accomplice, exploded with an enormous blast. When the smoke cleared, 21 people were dead, including Hyde, Sudang and the alleged accomplice; more than 100 others were injured. It was Asia's worst terrorist incident since October's Bali attack, which killed 202. "I've given all those sons of bitches their only place in Mindanao for R. and R. and what do they do?" complained a weary Duterte over a double brandy at a Davao bar the night after the bombing. "They blew it. Literally."

Most headlines suggest that the war on terror is going well. The capabilities of al-Qaeda have taken a serious hit with the capture of 9/11 mastermind Khalid Shaikh Mohammed. So, too, have the deadly intentions of Asian Islamic groups with al-Qaeda links. The MILF, which helped train foreign jihadis in the late 1990s, has been hammered by the Philippine military in the past few weeks. Foot soldiers, commanders and tacticians of Jemaah Islamiah (JI), the militant group behind the Bali blasts, have been thrown behind bars recently in Indonesia, Malaysia, the Philippines and Singapore, and its alleged spiritual leader, Abubakar Ba'asyir, is in detention in Jakarta awaiting charges and a trial.

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But the Davao attack proves that terrorists are still out there, and as dangerous as ever. Despite the crackdown around Southeast Asia since late 2001, some very troubling characters remain at large, including Riduan Isamuddin, a.k.a. Hambali, JI's operational commander; Saifullah Yunos, a.k.a. Muklis, leader of a JI cell; and Azahari bin Husin, allegedly the man who designed the Bali bombs. And those are just the most wanted—a roster that doesn't include members of sleeper cells that may be lying in wait across the region. What's more, a U.S.-led war in Iraq could be a powerful rallying issue for terrorists at large. Rohan Gunaratna, author of Inside Al Qaeda: Global Network of Terror, expects a "flood of new recruits" into radical groups if war breaks out. "That means," he warns, "that intelligence agencies have no way of knowing where they're going to come from." In other words, we may soon be facing more Balis and more Davaos.

One day after the Davao blast, a spokesman for the Abu Sayyaf group called a radio station in Zamboanga to claim responsibility for the attack. Philippine authorities immediately shot his claim down. The home turf of Abu Sayyaf, which specialized in kidnapping-for-ransom before dedicating itself to jihad last year, is far away on the islands of Jolo and Basilan, southwest of Mindanao. Some suspect that the Abu Sayyaf wanted to take the blame to sound more fearsome than it currently is—or to shield the MILF, which is in peace talks with Manila. Those talks are now stalled, intensifying the sense of instability in the region: in mid-February, the Philippine armed forces launched a full-scale military offensive (involving 5,000 soldiers and marines backed by air and artillery support) against one of the MILF's last remaining strongholds near the town of Pikit. The generals initially said they were after a band of kidnappers. But the MILF took a pounding, just weeks before more peace talks were to be held in Kuala Lumpur. Feeling betrayed, the MILF's frail 61-year-old spiritual leader, cleric Hashim Salamat, made an emotional appeal for all Muslims with access to arms to "fight until death." In a taped speech broadcast on Feb. 24 by a Cotabato regional radio station, he said, "We are pushed to the wall, we have to fight back."

Intelligence sources tell Time that Salamat had, in fact, ratcheted up his jihad campaign even before that broadcast, directing the MILF's Special Operations Group (SOG) to launch retaliatory strikes in urban areas of Mindanao. The SOG attacked military targets and power transmission towers, plunging 90% of Mindanao into darkness with one explosion in late February. Cotabato City airport was bombed, too, killing one person and injuring six. Then came the attack in Davao, which the authorities are also attributing to the MILF. They claim Sudang, the suspected suicide bomber, was an MILF member, and Mayor Duterte says Sudang's name appears in MILF documents seized by the army last month. Last Friday, police in the Philippines filed a complaint with Davao prosecutors seeking multiple murder charges against 150 members of the MILF, including Salamat.

What makes this situation so unsettling is the MILF's history of hitting back hard when it becomes desperate. "The nature of the MILF has always been particularly vengeful and retaliatory," says author Gunaratna. Following the last major campaign against the MILF in 2000, Salamat also gave an anguished call to would-be jihadis—and many welcomed his invitation. On Dec. 30, 2000, several bombs went off across Manila, killing 22 people and wounding more than 100. An Indonesian JI operative named Fathur Rohman al-Ghozi was eventually caught and convicted for possessing one ton of TNT. He confessed that his co-conspirator was Muklis, now viewed as the Philippines' most wanted terrorist.

The MILF has officially disowned the 37-year-old Muklis. But Philippine intelligence officials say the Afghanistan-trained bomber still heads the SOG, which has a record of terrorist attacks on civilians in urban areas. Sources tell Time that shortly after the beginning of the army offensive in February, Muklis, in hiding in Lanao del Sur province, was contacted by SOG personnel to plan retaliatory strikes. If this is true, it's an ominous prospect for the Philippines.

The War on Terror is going a little better in Indonesia where the Bali investigation may have seriously dented the capabilities of JI. In April, Indonesia will start the first trial in the Bali case, seeking to convict Amrozi, 40, who allegedly transported the bomb materials from Java to the resort island. And the capture of Khalid Shaikh Mohammed, JI's sponsor in al-Qaeda, should also lessen the risk of further attacks in Asia. But the most dangerous man in JI is still at large: Hambali, the group's operations chief.

Hambali helped plot the 9/11 attacks, and he met with Mohammed in Karachi in 2001 to plan a major terrorist strike in Asia—deliberations that led to the Bali bombings. "The arrest of Khalid Shaikh Mohammed does make the role of Hambali in Southeast Asia much more important," says Zachary Abuza, author of a forthcoming book about al-Qaeda in Asia. But Hambali is now clearly on the run and, according to a regional intelligence source, "that will cramp his style quite a bit." The last confirmed sighting of Hambali was in Bangkok in February 2002. Some say he's now in Java, Bangladesh, or Cambodia, where intelligence sources say he has a Cambodian Muslim wife.

Another big fish yet to be netted is Azahari, a British-educated lecturer at the Universiti Teknologi Malaysia (UTM) in the southern state of Johor. Azahari, a central figure in JI, has been identified in confessions of other plotters as the designer of the Bali bombs. "Azahari is the one that the police are really worried about," says a senior Western diplomat in Kuala Lumpur. "He's the one who has been to Afghanistan, has the al-Qaeda connection and can build bombs. That's a frightening combination."

Azahari acquired his explosives skills at al-Qaeda training camps in Afghanistan in the mid-1990s. He then returned home to Malaysia, police say, to set up JI cells. Azahari's technical prowess has made him invaluable: he wrote a 50-page bombmaking manual, a copy of which Indonesian police seized in a suspected bomber's house in Solo last December. In one of the chapters, Azahari recommends that potassium chloride be used with TNT to enhance the intensity of the blast, a characteristic of the main Bali bomb. Another chapter shows how to use a cell phone as a detonator, a method used in one of the three explosions in Bali. According to Indonesian police, Imam Samudra, the alleged coordinator of the Bali attack, named Azahari as the key bombmaker in his confession.

Azahari's old stalking ground, UTM in the sleepy town of Skudai, served in the late 1990s as a fertile breeding ground for terror. On the surface, Azahari was a dry academic, lecturing on statistics and editing the journal of the faculty of geoinformation science and engineering. In fact, he was also a recruiter for jihad. "He met students outside the campus in the name of holding lessons on Islam," says a government source. "No one suspected anything, and it was considered a good thing." The meetings, which attendees sometimes referred to as "motivation courses," actually featured diatribes against the Malaysian government and calls to Islamic activism. Students who displayed the proper ardor were sent by Azahari to Afghanistan, according to the police. After the Bali blasts, Azahari went on the run, probably fleeing to southern Thailand, although Malaysian police say he continued to use his campus e-mail account to communicate with fellow jihadis.

Even before 9/11, Malaysia had started clamping down on Islamic fundamentalism, and authorities there have so far detained some 70 suspected radicals, including five UTM academics. But they are continuing to find black sheep in other unexpected places. On Feb. 20, a former lieutenant colonel in the Malaysian Army, Abdul Manaf Kamsuri, was arrested on suspicion of having ties to JI. Abdul Manaf, a high-flying officer who won three merit awards when he graduated from Britain's Sandhurst Military Academy, served nine months in Bosnia as part of Malaysia's U.N. peacekeeping force from 1993 to 1994. Malaysian officials say that while there he befriended al-Qaeda members fighting in support of the Bosnians. After being forced to resign from the army because of his ties to Islamic radicals, Abdul Manaf kept up those relationships, traveling regularly to Pakistan and Afghanistan. He also remained closely connected to JI, Malaysian officials say. Records show Abdul Manaf was an executive at a JI-linked company named Excel Setia, and that two of its directors were JI figures who are now in detention. Police aren't yet sure of Abdul Manaf's exact role in JI or the strength of his ties to al-Qaeda, but regional intelligence sources say he could be a key link between the two terrorist organizations. (Abdul Manaf's wife declined to comment on allegations about her husband's alleged terrorist connections.)

Malaysian officials insist that Abdul Manaf's case is unique and that the armed forces are free of Islamic radicalism. However, a Royal Malaysian Air Force sergeant was arrested on the island of Labuan off Borneo in January for possible involvement with JI. And last year, police arrested former army captain Yazid Sufaat, a biochemistry graduate from a state university in California. Yazid met in January 2000 with two of the 19 hijackers who carried out the 9/11 attacks. All this suggests that terrorism might be more deeply rooted in Malaysia than previously believed.

Across the region, concludes author Abuza, "JI is down but not out. There are definitely some sleeper cells out there." As the Davao bombing demonstrated, the terrorists are hardly sleeping. Mayor Duterte, who almost completely eradicated street crime and drug dealing by meting out summary justice to ne'er-do-wells, says the tragedy at the airport has made him an overnight convert to U.S. President George W. Bush's belligerent approach to terrorism. Indeed, Duterte says he would be delighted to have G.I.s come in to take the terrorists on: "I was always against the Americans coming in. Now I'm welcoming them with open arms."

Last week, Duterte held a live, nationally televised press conference to deliver his defiant message to the terrorists. Extending the middle finger of one hand, he declared, "It's our turn now to start bombing you ... I will create hell for those criminals ... It's either I who will be killed or you, you idiots." The war on terror began in Southeast Asia just a few months after 9/11. It's far from over.