But intelligence agencies know they must find 'Hambali', the nom de guerre of Riduan Isamuddin, an Indonesian cleric believed to be al-Qaeda's mastermind in the region. Bali was just the latest in a series of attacks in the region linked to the Indonesian-born militant in the past two years. Emboldened by the carnage of the attack on Kuta Beach, he is expected to try to strike again soon.

The investigators' primary task is to stop Hambali before he and his associates take more lives. There is a great deal at stake: stopping Hambali is a key test of whether security agencies can counter the newly resurgent al-Qaeda. Last year Afghanistan presented an obvious target for the developed world's military might. Now, with al-Qaeda morphing into a loose, barely connected, global network of hard-to-identify cells, security officials know that an entirely different approach is needed. The capability of the new al-Qaeda has been demonstrated not just in Bali but by recent attacks in Yemen, Afghanistan, Kuwait and elsewhere. No one doubts the importance of the task. The investigation into the Bali bombings is already showing just how hard it will be.

Last week President Megawati Sukarnoputri of Indonesia announced a joint Indonesian and Australian investigative team, helped by officers from seven countries, including Britain. But, despite vast resources, the investigators have little to go on. The force of the bomb destroyed a lot of evidence. Much of what was left was ruined by the panicking holidaymakers, rescue workers, journalists and others who rushed to the scene.

'The inquiry is in its very early days,' one senior US official told The Observer. 'There is a lot of conflicting evidence.'

The team does not even know what the bomb contained. First, the police announced that it was made from ammonium nitrate fertiliser soaked in fuel oil combined with a small amount of RDX, a rare and hugely powerful plastic explosive used only by the military. The mixture of nitrate and RDX is an al-Qaeda hallmark. But then it was said to be pure RDX sealed in the roof panels of a van. On Friday, Indonesian investigators said there was no RDX in the bomb at all.

The same confusion has resulted in announcements that four men, then seven, then 10, from Yemen, from Pakistan and finally from western Indonesia, were being sought. A retired air force officer with bomb-making experience was said to have confessed to constructing the device. Then the confession was retracted. The key evidence was supposed to be an identity card dropped by a potential bomber in the rubble of the bomb site. Fifty people have been questioned. Little, apparently, has been learnt.

However, a senior officer with the Banden Intelligen Nasional, Indonesia's civilian intelligence service, said yesterday that it believed a group of five to eight local men, led by a more senior man who had experience, expertise and a close link to the al-Qaeda leadership, had spent several months preparing the bomb. The man who led the cell, it believed, was Hambali.

Hambali was born in Sukamanah, a village in the rich farmlands of west Java, in 1966. It is here where the trail to the Bali bomb may start. It links Afghanistan, Malaysia, Singapore and his native land and reveals a huge amount about the functioning of al-Qaeda - both before the war in Afghanistan and now.

The roots of Islamic militancy in Indonesia go back to when the country won its independence from Dutch colonialists in a bitter war more than 50 year ago. As a teenager, Hambali became involved with a network of local groups known broadly as the Jemaa Islamiya (Islamic Association). It was led by older activists including Abu Bakr Bashir, the cleric whom the Indonesian government yesterday detained after huge international pressure in the wake of the Bali attack.

Although the Islamic groups were sometimes exploited by the military government that ruled Indonesia until 1998 as a means to counter the communist and democratic opposition, a bout of repression forced Bashir and his followers to seek refuge in Malaysia, Indonesia's regional rival, in 1985. From there Hambali, like so many of the 'first generation' of hardline Islamic radicals and senior al-Qaeda figures, travelled to Afghanistan to fight against the Soviet Russian forces and gain experience for the struggle in his homeland against the dictatorial General Suharto.

By 1990, according to Singaporean officials, Hambali and Bashir were travelling around Malaysia, like Indonesia a predominantly Muslim state, recruiting supporters. They aimed to build a network that would eventually allow the creation of a single Islamic state comprising Malaysia, Indonesia and Singapore. But it was Hambali, not Bashir, who first led the movement towards violence, dispatching volunteers for training in the camps run by hardliners in Afghanistan and Pakistan in the early and mid-Nineties. Other South-East Asian veterans of the Afghan war, such as the Filipino, Abdulrajak Janjalani, did the same. Between them they produced a new wave of Islamic militants in the region. Many have become the foot soldiers for the new al-Qaeda.

By 1998 nearly 20 Malaysians had been to al-Qaeda's training camps in Afghanistan. Split into two cells for security, they began to look for possible targets. Eventually the group decided to attack a bus service for US servicemen in Singapore. In mid-1999 a 'presentational' video was made in the hope of convincing al-Qaeda to fund the operation. The video was taken to Afghanistan where, in late 2001, it was found in the rubble of a house in Kabul used by Mohamed Atef, bin Laden's military commander.

The fact that the plan was cooked up by Hambali and his group is critical to understanding al-Qaeda. In 1999 activists from all over the Islamic world were requesting training and funds from bin Laden and his associates. Some were fobbed off with the bare minimum and sent home with an 'al-Qaeda distance learning package', comprising CD-Roms or videos of training techniques. But others, such as an Egyptian student called Mohamed Atta, who had a plan to hijack five planes and fly them into high buildings in America, were offered real resources.

Interrogations of Jemaa Islamiya men arrested in Singapore have revealed that the al-Qaeda leadership liked Hambali's plan. As is typical for al-Qaeda, Atef is believed to have used a Saudi Arabian charity to transfer substantial funds to Hambali. The Indonesian then used a Malaysian recruit who ran a clinical pathology company to purchase four tons of ammonium nitrate. Hambali's cache has never been found and investigators believe it may have been used in the Bali bomb.

Atef wanted a favour too: help with Atta's ambitious hijacking plan. Malaysian officials say that in January 2000 Hambali arranged accommodation in an activist's flat in the Malaysian capital of Kuala Lumpur for two of the 11 September hijackers, Khalid al-Midhar and Nawaq Alhazmi. Later that year Zacarias Moussaoui, the alleged 20th hijacker, also spent time in Malaysia, again hosted by Hambali's gang. While in Malaysia he inquired about flight schools. When he found none suitable, another recruit provided him with employment credentials that he later used to enrol in a school in the US.

One element that is typical of the new al-Qaeda is the fusion of local and international agendas. By blowing up a nightclub, the men on the ground pursue their local agenda, attacking a culture they believe threatens to pollute the Muslim youth of their homeland and weakening the government by damaging the tourist industry. Simultaneously, al-Qaeda takes another step towards fomenting a global war between Islam and the West, in which they believe there can only be one winner.

So by early 2000 Hambali was urging his followers to travel to the Molucca islands in eastern Indonesia to join a brutal, long-running conflict between Muslim and Christian villagers. He was keen to foment a miniature version of the clash of civilisations that al-Qaeda wants to provoke. Again linking the local and the international, Hambali liaised with Islamic radicals in Spain to help volunteers based in North Africa and Europe to travel to the region to train and to fight.

Though Suharto's military regime was overthrown in 1998, Hambali only returned to his homeland in October 2000. He immediately began recruiting local operatives. That Christmas, 20 bombs exploded almost simultaneously in nine Indonesian cities, killing 18 people, many of them in churches. Dozens more were defused or failed to explode. A series of suspects named Hambali as the mastermind.

Hambali, as al-Qaeda operatives are trained to do, left Indonesia for Malaysia shortly before the attacks. Six days after them, five simultaneous explosions rocked Manila, capital of the Philippines, killing 22. An arrested Indonesian told interrogators that Hambali had funded the operation and his telephone records showed calls to Hambali immediately before and after the explosions.

'It seemed as if he could strike at will,' one Indonesian intelligence official said last week.

But then police got a break. A botched armed robbery by the gang in Malaysia last summer allowed investigators to get on Hambali's trail. So far more than 50 alleged Jemaa Islamiya operatives have been detained in Singapore or Malaysia. But though his gang was rolled up, nobody knew where Hambali was, or what had become of the four tons of ammonium nitrate he had obtained.

The testimony of an al-Qaeda operative, a Kuwaiti called Omar al-Faruq, seized near Jakarta in June and currently in American custody, has not helped. Intelligence sources say he was 'not a big player'. Much of his information has been contradicted by the interrogations of the men detained in Singapore. This weekend there is still no indication of the whereabouts of Hambali or his explosives.

Indonesian intelligence sources admit he is likely to have left the country. 'We have 2,700 islands, 220 million people, not enough officers, who don't get paid much. There is no way we can close our borders,' one said. 'Hambali could be anywhere from Afghanistan to Peru.'

Courtroom one of Jakarta central court was packed. The slow ceiling fans made little impact against the tropical heat. The young men in the white and green uniforms, drawn up on the court's benches in serried ranks, sweated profusely.

They were all from the Front Pembela Islam (the Muslim Defence Front or FPI), a militant group set up in 1997. Two weeks ago the group raided a disco and some bars in central Jakarta. 'Muslims should live according to the holy laws,' said Ali Zainal Abidin, a 27-year-old law student in a white FPI shirt. 'There was prostitution and other bad things happening at these places. Where the authorities fail, then we must act.'

Abidin's simple logic masked a more complex situation. The FPI was set up with the active connivance of the military authorities to combat pro-democracy demonstrators. Many say the FPI is allowed to raid clubs, brothels and bars to scare owners into giving the police protection money. Another group, Lashkar Jihad (LJ), was even trained by the Indonesian military. Last week LJ mysteriously decided to disband itself and more than 1,000 activists returned to Java from outlying islands where they had been fighting local Christians. In Indonesia the rule of law is limited and ambiguous. With profound poverty and the disappointment of many who hoped for better lives in democratic Indonesia, that means there are plenty of disaffected young men who could easily be influenced by radicals. Under their white shirts, several FPI cadres were wearing Osama bin Laden T-shirts. A pro-Palestinian slogan had been painted on a wall near by.

The greatest defence against militancy is the deep local tradition of moderation and tolerance. Islam in Indonesia, the world's largest Muslim country, is heavily influenced by Hinduism. Many see no conflict between a belief in sea goddesses and Islam - anathema to most Middle Eastern Muslims. The two main Islamic political parties, with a combined membership of 70 million, both believe in pluralist democracy and see Islam as a means to greater social justice, not a radical transformation of society.

'The chances of modernist [hardline] Islam making any real headway in Indonesia are slight,' said Sidney Jones, an expert in local Islam at the International Crisis Group in Jakarta. Western diplomats agree: 'The radical fringe are just that. They are in no way representative.'

Late on Friday night the Indonesian Cabinet approved a presidential ordinance, which must be ratified as law within six months, allowing detention of suspects on the grounds of 'intelligence' only. The Americans now want 'serious and decisive action', said Ambassador Ralph Boyce.

The fear is that a major crackdown will provoke a backlash and build support for radicals. Others say the West has forced the government to reinstate the repressive apparatus used by the previous regime to quash opposition. Yesterday the measures were used for the first time: to arrest Bashir. However, the 64-year-old cleric was detained by police in connection with the Christmas 2000 bombings. Intelligence officials and police both said last week that there was no evidence linking him to the Bali bombing.

Whether Bashir is implicated or not, his organisation, Jemaa Islamiya, and al-Qaeda appear to have been conflated in the minds of many analysts and investigators. That means a crackdown might miss the real targets: the Bali bombers.

According to Indonesian intelligence officials, more than 300 Indonesians were trained in al-Qaeda's camps in Afghanistan. Some have joined movements such as Lashkar Jihad or Jemaa Islamiya, but many more have simply gone to ground, meeting occasionally in small groups, staying in touch with more senior men.

The local muscle for the Bali bombs included several of these people. They are looking for the man who recruited them: Hambali. In the huge South-East Asian cities, or among its islands and jungles, he is almost impossible to find.