MIKE CHINOY, CNN SR. ASIA CORRESPONDENT: And I'm Mike Chinoy. I've just returned from a swing through Southeast Asia where I put together a series of reports about Islamic extremism and terrorism connections in the region. From Malaysia to Singapore to Indonesia, investigators have uncovered what appears to be an elaborate terror network connected to Usama bin Laden's al Qaeda. In this broadcast, we'll spell out those links and consider the implications of this new and worrying development.

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CHINOY (voice-over): In a region where Islam has long been gentle and tolerant, the drumbeat of jihad is alarming governments and turning Southeast Asia into a new front line in the war on terrorism.

NOORDIN SOPIEE, INSTITUTE OF STRATEGIC STUDIES: It's a tremendous threat, a tremendous danger. They have links in many countries. I think we know they are also a small group of people. You know, they're a drop in the bucket. But, you know, in this war, small drops in buckets can poison the whole well.

CHINOY: In Malaysia, Singapore and the Philippines, investigators have made dozens of arrests in recent weeks, uncovering a web of connections between Southeast Asian militant groups and operatives from al Qaeda.

The authorities in Singapore say 13 men arrested for plotting to blow up the US embassy and other western targets were members of an al Qaeda- linked group called Jemma Islamia with ties across the region.

TAN BOON HUAT, SINGAPORE MIN. OF HOME AFFAIRS: The members of the group have indicated that there are links with Malaysian terrorist groups and links with Indonesia as well.

CHINOY: Singapore and Malaysian officials believe the mastermind of the group is Abu Bakar Basir, a hard line Indonesian-Islamic cleric who lived in Malaysia for many years and is wanted by police there. Still at large here in Indonesia, he has repeatedly praised Usama bin Laden but denied any role in terrorism.

Below him, according to an organization chart released by Singapore's Home Affairs Ministry, is a Malaysia-based regional shura or council with cells operating in Singapore, Malaysia, Indonesia, and apparently, the Philippines, where police in mid-January arrested an Indonesian man named Fatua Raman Al Goz. He's suspected of being the key bomb maker for the Singapore plot. It turns out he studied for four years at an Indonesian religious school run by suspected terrorist leader Abu Bakar Basir.

From links uncovered so far, the Malaysian connection also appears critical. A Malaysian cell reportedly arranged military training in Afghanistan for Singapore militants and helped them acquire explosives.

BARRY DESKER, INSTITUTE OF DEFENSE & STRATEGIC STUDIES: You had at least four -- four tons of ammonium nitrate which was obtained and stored in Malaysia. You had connections between radicals in Malaysia and in Singapore, because they went up to Malaysia before going to Afghanistan.

CHINOY: It's also known that in 2000, two of the terrorists who hijacked the jet which hit the Pentagon, Khalid Almihdar and Nawaf Alhazmi, along with Zacarias Moussaoui now on trial in the US, on September 11th related charges also visited Malaysia.

There are also persistent reports of al Qaeda seeking to exploit the continuing violence and instability in Indonesia, the world's largest Muslim nation, to forge new alliances and perhaps set up bases for fighters fleeing Afghanistan.

(on-camera): There is much that authorities still don't know. Investigations are continuing across the region. And increasingly, the focus of investigators has turned to Malaysia, a sophisticated, modern nation that Islamic radicals appear to have used as a key transit point and staging area for attacks in the region and beyond.

(voice-over): In Kuala Lumpur, they sip cappuccinos, wear miniskirts, and work in gleaming skyscrapers. In the rural province of Kelantan, men and women have separate supermarket checkout lines -- the contrast reflecting a fundamental tension in Malaysia, a predominantly Muslim yet tolerant nation that radicals seek to turn into an Islamic state.

SOPIEE: Religious extremism is a very serious threat indeed in a multi-racial, multi-cultural, multi-religious state.

CHINOY: In recent weeks, the threat has increased. The Malaysian authorities have arrested nearly 50 men accused of membership in the Islamic extremist organization, the KMM.

KHAIRY JAMALUDDIN, ASST. TO DEPUTY PRIME MINISTER: The KMM wants to establish an Islamic state through extra constitutional means by overthrowing the government through violent means.

CHINOY: Among those detained is Malaysian businessman Yazid Souffat, who appears to have links to al Qaeda. According to well-placed sources, two years ago, Yazid met in Kuala Lumpur with two of the men who crashed a plane into the Pentagon. He also met here with Zacarias Moussaoui, who's now on trial in the US on September 11th related charges and signed an introduction letter from a Malaysian firm that helped Moussaoui obtain a US visa.

In addition, Yazid reportedly ordered four tons of ammonium nitrate from another Malaysian company -- the chemicals, which have not been found, apparently intended for use in bomb attacks on western targets in Singapore.

And there's the Afghan connection found especially in religious schools like this one, where graduates often go on for further study in other Islamic nations.

(on-camera): By some estimates, at any given time, as many as 2000 Malaysians are studying at madrasas or religious schools in Pakistan. Before September 11th, at least some of those students were also traveling to Afghanistan where, under the Taliban, the line between Islamic instruction and military training for a jihad or holy war was often a blurry one.

(on-camera): At this particular school known as Daral Onwar, one of the leading teachers who fought the Soviets in Afghanistan is among those detained as a suspected terrorist. But he's also the son of Malaysian opposition leader Nick Aziz, whose PAS party wants to turn the country into an Islamic state.

"I can think of no other reason why the government arrested my son," Nick Aziz told me, "but to undermine the PAS party."

As the evidence accumulates, however, public support for PAS and for radical Islam is shrinking, but that bomb-making ammonium nitrate is still missing. As one senior diplomat here said, "Thinking about that keeps me awake at night." Mike Chinoy, CNN, Kuala Lumpur, Malaysia.

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PEDROSA: We'll take a break at this point, but when we come back...

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CHINOY: ... a closer look at al Qaeda's plans for terror in Singapore.

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PEDROSA: Welcome back to this special edition of INSIDE ASIA. You don't normally associate the quiet green and peaceful city safe as Singapore with terrorism.

CHINOY: In recent weeks, however, the authorities there have uncovered a plot with direct links to al Qaeda that has put many people on edge.

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CHINOY (voice-over): The Yishun subway station in suburban Singapore, an ordinary place in an unremarkable neighborhood, until it turned up on a videotape found in a bombed out al Qaeda safehouse in Afghanistan, the smoking gun in a terror plot that has shaken this gleaming city state and highlighted the danger of Islamic extremism now confronting Southeast Asia.

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HASHIM BIN ABAS, JEMMA ISLAMIA: US military personnel will be dropped from the bus, and they will walk towards the MRT station. And it is one of the buses -- one of the regular buses that carry the military personnels from Sembawang to the Yishun MRT station.

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CHINOY: The chillingly dispassionate voice on the tape belongs to a 40-year-old Singaporean engineer named Hashim Bin Abas, one of 13 members of a clandestine extremist group called Jemma Islamia, arrested recently for plotting to blow up American and western targets here.

FRANKLIN LAVIN, US AMBASSADOR TO SINGAPORE: This plot was a very complicated plot. It was cold-blooded in that it would have involved or could have involved hundreds of civilian casualties, hundreds of local Singaporeans. So there's no moral constraints.

It represented a fair amount of technical and financial support, so this wasn't just three or four local folks who had some bad ideas. But these are people who had support from overseas, from al Qaeda presumably.

CHINOY: According to the Singapore authorities, Jemma Islamia had three operational cells here known as Fiyas. The first, Fiya Ahug, planned to bomb a shuttle bus carrying US servicemen to the Yishun subway.

(on-camera): From the drop-off point behind me, according to the tape, the plotters anticipated their targets would move along this sidewalk to the station ahead passing this area where bikes are parked. The plan apparently was to conceal explosives around here and set them off as the Americans walked by.

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ABAS: And this is the bicycle bay as viewed from the footpath that leads toward the MRT station. You will notice that some of the boxes that are placed on the motorcycle, these are the same type of boxes which we intend to use.

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(voice-over): With Singapore a key US ally, its harbor, naval and air bases provide critical supplies and logistical help to US forces moving from the Pacific to the Indian Ocean in Southwest Asia, this first cell also planned to attack American ships in Singapore harbor.

A second cell, Fiya Moussa, reportedly targeted the Paya Lebar air base which regularly hosts US fighters. This cell also planned to detonate truck bombs filled with ammonium nitrate smuggled in from Malaysia at the now heavily guarded US embassy and the embassies of Australia, Britain and Israel, while a third cell known as Fiya Ismael targeted American companies here. The authorities believe the plot bares the unmistakable imprint of al Qaeda.

HUAT: In addition to the videotape and debriefing notes which were found in Afghanistan, eight of the detainees admitted or said that they had been to Afghan al Qaeda camps for military training.

LAVIN: They received financial support, presumably, from al Qaeda. There was all sorts of co-ordination and planning. We know trade craft, some of the very complicated steps they have to make and find assemble their bombs and their weapons. This came from al Qaeda.

CHINOY: Fifteen percent of the people in this multi-racial, multi- religious nation are Muslim -- the rest, Chinese and Indian. The government has long justified its strict limits on political freedom here on the grounds that it was necessary to preserve ethnic harmony. Even though most Muslims shun militancy, the discovery of home-grown extremists has been a rude shock.

DESKER: We had always assumed that Singapore was sterile and safe. But right under the noses of the population in Singapore, there was a group which was hell bent on creating chaos.

CHINOY: But Zulfiker Mohammed Shariff , who runs a small Muslim rights group and was a friend of one of the 13 accused Singapore terrorists, says enough Muslims here feel alienated from their pro-western government to explain why a handful would resort to violence.

UNIDENTIFIED MALE: If it's only confined to the US military targets, then we'll say that within the Muslim community itself, we will say it's justified. If it's only the US military targets, that's justifiable.

UNIDENTIFIED MALE: Well, my wife worked in the World Trade Center and had been down in that area for many years.

CHINOY: The plot has unnerved Singapore's large ex patriot community. At the comfortable home of Joanne Blakemore, head of the local American Association, terrorism dominates the coffee table discussion.

JOANNE BLAKEMORE, AMERICAN ASSOCIATION: I think the first reaction was shock, because everyone here in the American community feels like they're living in the safest place in the world.

CHINOY: But as the Singapore authorities pursue their investigation, the plot has brought home the uncomfortable fact that, in an age of terrorism, no place is truly safe.

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PEDROSA: This special edition of INSIDE ASIA continues after a short break.

CHINOY: When we return, a look at Indonesia, homegrown terror, possible al Qaeda links, and a battle for the country's very soul. Stay with us.

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PEDROSA: Hello, again. We're back with a special edition of Inside Asia about terrorism in Southeast Asia. As investigations in this part of the world go forward, Indonesia -- huge, chaotic, the world's largest Muslim nation -- has become the focus of increasing attention.

CHINOY: Religious harmony used to be the norm across Indonesia under the stern rule of former president Suharto. Since his ouster in 1998, conflict between Christians and Muslims has engulfed several regions of the archipelago creating what many fear could be a breeding ground for terrorism.

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CHINOY (voice-over): Arriving in Poso is like driving into a ghost town. This picturesque corner of Indonesia's Sulawasi Island now a battleground in a religious war that has terrified the locals, and because of the involvement of Islamic extremists, worried policymakers as far away as Washington.

In the sweltering heat, Herman leads me to what's left of his house, destroyed when he and other residents of this Christian village were driven out by gangs of armed Muslims.

"We used to live comfortably in this house," he tells me, "but when the attackers came, we ran for our lives. This is what I found when I came back.

A few minutes drive away, the Suria DePoochra family who are Muslims are clearing away what remains of their home -- the terror here carried out by Christian mobs.

"They came with cans of kerosene and set the house alight," says Mariam Suria DePoochra. "We fled with only the clothes on our backs.

It past three years, hundreds have died and tens of thousands have fled their homes in a conflict fueled by the arrival of Muslim economic migrants in this predominantly Christian region.

(on-camera): In this atmosphere of religious hatred and fear where in many communities we found more destroyed buildings than intact ones, there is now a new worry: concern that Poso could become a haven for operatives of Usama bin Laden's al Qaeda terror network.

(voice-over): This man is a holy warrior for Lakcar jihad when he and several hundred other fighters from what the US describes as Indonesia's most dangerous radical Islamic group arrived here last year who changed the context of what had been a bitter but local conflict.

"If the Muslims are attacked or intimidated," the young fighters told me, we are here to provide physical defense."

Laskar jihad's founder and Islamic teacher named Ja-far Umar Thalib fought the Soviets in Afghanistan. He says he's met Usama bin Laden but claims to have rebuffed offers of help from al Qaeda.

JA-FAR UMAR THALIB, LASKAR JIHAD LEADER (through translator): "Yes, we were approached by al Qaeda last year, a Saudi who claimed he was sent by Usama bin Laden. He offered us financial aid and physical training. But when he insulted our local clerics, we told him to leave or we'd kill him."

CHINOY: Despite the denial, there have been reports of a Laskar jihad training camp in the jungles near Poso, which Indonesia's intelligence chief says may have been used by al Qaeda fighters.

Even with the Indonesian army patrolling the streets, Laskar jihad operates openly here, its brand of militant Islam striking a responsive chord among Poso's beleaguered Muslims, raising fears this lawless region could become a sanctuary for international terrorists.

(on-camera): Whether that happens will depend in large part on how effectively Indonesia's government deals with the threat of terrorism. But in a country with huge social and economic problems and an unstable political system separating internal politics from external terrorism cuts to the heart of Indonesia's very identity.

(voice-over): They are Indonesia's self-appointed morality police, the Islamic Defenders Front, radical vigilantes out to cleanse the country of what they see as western-style decadence: drinking, gambling, nightclubs.

Some of these places were misused and became centers for crime and moral deterioration, the group's spokesman, Ahmed Shabri Louves, told me. "As the people's leaders, we are entitled to protect our people."

But Ulil Abshar and his colleagues don't accept that. At the Liberal Islam Network, which runs a radio station and a Web site, they're trying to counter the radicals.

ULIL ABSHAR, LIBERAL ISLAM NETWORK: This radical group is a very, very serious problem that we should deal with in the future.

And this is a new challenge for the Muslim.

CHINOY (on-camera): The Islamic Defenders Front and the Liberal Islam network are two extremes in an ethics struggle now underway here in Indonesia, a struggle to define the very soul of the world's biggest Muslim nation.

(voice-over): For decades, most of Indonesia's 220 million people have practiced a mild and tolerant form of Islam and accepted a secular government. Since the ouster of strongman, President Suharto, four years ago, however, the country has been ravaged by political chaos, economic crisis, and communal violence, which has spawned numerous Islamic groups who believe religion is the answer to Indonesia's problems.

Such views have left President Megawati Sukarnoputri in a dilemma, one made more acute by pressure from the US and Indonesia's Southeast Asian neighbors to crack down on Islamic militants.

RIZAL MALLARANGONG, POLITICAL ANALYST: The danger is the impression if Megawati crack the military down, Megawati will become anti-Islam.

CHINOY: In many ways, Indonesia's challenge mirrors that confronting the entire Islamic world.

ABSHAR: The challenge for the Muslim is to reconcile the Islamic tenet with the new challenge of democracy and even riot.

CHINOY: It's a daunting challenge, and the future of Indonesia in many ways is riding on the outcome.

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PEDROSA: Mike, that's a pretty sobering picture that you've painted. What was most striking to you as you conducted your investigations?

CHINOY: Well, one of the things that really struck me was the profile of the people who had been arrested in Singapore and Malaysia as part of this whole network and how similar they appear to be to the people who carried out the September 11th hijackings. Of all the dozens of people arrested, they're all relatively young, well educated, sophisticated. They're not the sort of oppressed peasants from the rice paddies. These are sophisticated citizens of the countries they live in, very much like the al Qaeda hijackers in September. In fact, one of the men in Malaysia who's at the center of this investigation was actually educated in the United States.

And I think for all of these governments, that's a very, very worrying phenomenon, that people who are products of their system are so openly turning against it and willing to resort to such extreme measures.

PEDROSA: So where do you think things will go from here?

CHINOY: Well, I think there are a couple of key issues. One, obviously, is the investigation that is going ahead. Even though there are dozens of people in jail, certainly, the impression we got is that there may well be other cells out there in all of these countries that the links -- and we have hardly touched on the Philippines with their connections there and Indonesia, Malaysia and possibly still in Singapore. So there may be more to come, and that's very worrying.

The other issue is that it appears, from everything I could see, that the radicals are products of issues in their own countries, that in Singapore, for example, the people who became part of this network were people who were disaffected because the Muslim-Malay minority are only 15 percent of the population, and they have issues with the Singapore government similarly in Malaysia. So all of these governments are going to have to deal with the domestic alienation of certain segments of their own Muslim population as part of the broader issue of dealing with terrorism because the alienation is what makes them susceptible to overtures from groups like al Qaeda.

PEDROSA: And that's our program for this week. If you have any comments or suggestions for our program, do e-mail us. Our address is cnn.asia@cnn.com. We're looking forward to hearing from you.

CHINOY: From all of us on the team, thanks for watching. We hope you'll join us again next week for another edition of INSIDE ASIA.

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