Chapter One - A close look at the intelligence picture

I want to make the observation at the beginning that I am persuaded from what I have seen publicly that there was no Pearl Harbor herethat is, there was no clear warning which, if identified and acted upon, would have provided an opportunity to prevent the Bali bombing. To that extent, I do not believe it is accurate to describe what happened in Bali as an intelligence failure in any sense. On the other hand, I do think, from what we know publicly, that some important lessons can be drawn from what happenedabout the intelligence capacities we have in relation to terrorism, the relationship between intelligence and policy and some of the policy operations we have in relation to terrorism. [2]

No specific intelligence

1.1 Whatever the differences in nuance, perspective and accent that might have characterised the assessment product delivered by Australia's intelligence agencies before 12 October 2002, all are emphatic that there was no specific intelligence that gave prior warning of the blast.

ONA was progressively building its understanding of terrorism in Southeast Asia in the years leading up to the attacks in Bali. But at no stage did ONA receive intelligence material indicating that Jemaah Islamiyah was planning to mount an operation in Bali.[3]

[U]nfortunately [ASIO] just did not have the intelligence available to us which could have prevented 12 October.[4]

The intelligence failure in Bali was the failure to identify the transition of Jemaah Islamiyah into a terrorist organisation some time after 1996. It was not on our radar screen as a terrorist organisation before December 2001. And, combined with the differences within Indonesia about JI, there was insufficient time before Bali to do what might have been able to have been done if JI had been identified as a terrorist threat a year or two earlier. We will never know if earlier identification would have made a difference.[5]

I certainly know that, when walking around our agencies after the Bali bombing, you got a real sense of the anguish of our analysts: Was there something more we could have done? It is just extraordinarily difficult.[6]

1.2 Corresponding to the Australian intelligence agencies' certainty that they possessed no material providing prior warning of the Bali attack has been DFAT's unequivocal affirmation of the appropriateness and relevance of its Travel Advisories and their commensurability with the reported level of threat:

We can see no point where the settings in our South-East Asian advisories were inconsistent with those threat assessments. We have also undertaken comprehensive searches of the assessments and reports provided during the period under review by other agencies, including particularly ONA. While this material was helpful to us in ensuring appropriate references to the regional risk of terrorism in the travel advisories, we can see no analysis among these many reports indicating signs of a potential attack in Bali.[7]

1.3 The Committee addresses the issue of the appropriateness and commensurability of DFAT's Travel Advisories in a separate section of this report. The focus of discussion here is the nature and extent of the 'intelligence failure', and a survey of what information was known. Unfortunately the phrase 'intelligence failure' is itself a problematic expression with which to launch a discussion. It is ambiguous to the extent that it can convey both a simple, uncontroversial failure to anticipate and event because of lack of information, or a culpable failure to anticipate an event through slipshod intelligence gathering and poor analysis. The Committee is here referring to the former.

1.4 Perhaps the strongest statement of intelligence 'failure' was made to the Committee by the Director-General of ASIO (Mr Dennis Richardson).

[I]f as fair mindedly as you can you have a look at Bali, I personally believe there was the failure of ASIO, the failure of the Australian intelligence community, the failure of regional intelligence communities and others to identify the transition of JI into a terrorist organisation before late 2001and I do not make that comment lightly. I think that should have happened. That is not hindsight. We are paid to identify things like that, and we did not. Therefore, if you are looking, that is one area that I think stands out.[8]

1.5 The Committee is in no doubt that the agencies have been painstaking in their review of pre-Bali intelligence, and accepts without question their advice that they could find nothing which specifically pointed to an attack in Bali on that fateful October day.

A specific threat in this context is the availability of specific information about a particular group, a particular target or a particular activitythat is, that we have firmer evidence about the nature of a particular forthcoming event, and that is what would convert that into specific intelligence about a specific threat. But in most cases we are talking about knowledge of groups of like-minded individuals or groups who have formed together to conduct particular activities. We see indications about their planning, but we do not see any specific indications about the timing, the nature or the location of a particular activity.[9]

1.6 The Committee has not been able to itself examine the classified material available to the agencies pre-Bali. Even if it had access to such material, the Committee is not well equipped to make assessments of it as 'intelligence'. Such an examination, however, was undertaken by the then Inspector General of Intelligence (Mr Bill Blick). The unclassified summary of his report stated at paragraph 27 that:

Even with the benefit of hindsight and knowledge of possible and likely perpetrators, the inquiry could not construe any intelligence, even intelligence not mentioning Bali, as possibly providing warning of the attack.[10]

1.7 Mr Blick repeated in evidence to the Committee 'that that there was no intelligence that could, either then or with the benefit of hindsight, have been shown to point to the likelihood of an attack of that kind.'[11] The Committee has no reason to (and does not) call into question Mr Blick's conclusions. The Blick report is discussed in more detail below.

Beyond specific intelligence

1.8 There is no such thing as 'perfect intelligence' and it would be foolish to expect, and wrong to require, a 100 percent success rate by any intelligence agency. Intelligence is an extremely complex business, and it simply cannot be expected that specific intelligence is always somehow 'just out there' waiting to be discovered. The search for 'specific intelligence' remains, of course, a core task, because in the absence of the kind of empirical evidence that it implies, intelligence judgements are more difficult to make. Such absence also makes it more difficult to criticise any failure to anticipate an event.

1.9 For the Committee, statements about there being no specific intelligence warning of the attack on Bali - and an 'up front' admission of failure concerning one particular, albeit important, development - risk conveying to the ordinary reader an overly simplified picture intelligence processes and outcomes. It may, for instance, imply that there will be specific intelligence of a terrorist act, when such intelligence is rarely available. The current Director-General of ONA (Mr Peter Varghese) responded to this matter in the following terms:

I fully agree with the characterisation of intelligence as a complex and somewhat difficult task. By its very nature, we are trying to find an explanation for things that do not always lend themselves to a very clear explanation, so we are always dealing with hypotheses that are, almost by definition, going to be a little bit short of 100 per cent clear. I would not agree that the concept of no specific intelligence is misleading or misrepresents things. I think it is a useful concept in looking at the issues that this committee is looking at. What is behind that is the very reasonable question that people could ask about whether the intelligence community had information which, if acted upon, could have prevented what happened in Bali. In that context, the reference to the absence of specific intelligence is actually very important and, far from misrepresenting things or being misleading, it is highly relevant to what you are doing.[12]

1.10 On the matter of the place of 'specific intelligence' in the way an agency produces its advice, the Committee found instructive some comments made by former ONA Director-General Kim Jones about his agency's perspective on Bali as a potential terrorist target. During a general briefing on regional terrorism, and in response to a particular question by Minister Downer about possible terrorist targets in the region, ONA nominated as an example, and among other locations, Bali. Mr Jones stated that the nomination of Bali as a potential terrorist target was not because there was specific intelligence about an attack on Bali. It was an 'analytical judgement' based on 'an analysis of the factors at play in the region'. [13]

1.11 Also relevant to this discussion is the following statement by the British government, included in its response to the inquiry conducted in the UK about pre-Bali intelligence and UK agencies' effectiveness:

It is rare for reliable intelligence to contain specific information about imminent threats on which action may be taken, such as preventing the attack by disrupting the terrorists, or deterring the attack or its consequences by taking defensive security measures.'[14]

1.12 If specific intelligence is rare, it seems to the Committee that it is more appropriate especially for consumers of intelligence - to focus on the product emerging as considered analysis of the agencies rather than on the facts that might or might not lie behind it. It is in the arena of 'analytical judgements' that intelligence agencies carry out their most important work, and it is the task to which the talents and time of analysts should be most consistently applied and most productively directed.

1.13 And so it is that intelligence is not - as some may believe and as a certain reading of Mr Richardson's 'failure' statement may unintentionally convey - simply a matter of searching for or discerning that key or specific piece of information that suddenly makes all the difference, pointing one in the right direction, or enabling all the dots to be joined and the plot to be revealed.

1.14 The Committee explored with intelligence experts on a number of occasions the issue of 'specific intelligence' and the relationships between data, information, evidence and the analysis and assessment of it. The following exchange usefully illuminates the considerations at work facts and judgements - in developing an intelligence report.

Senator BRANDISI do not want to go on too much about it, but some of the non-professional witnesses we have had, if I can call them that, seem to think that this is pure empiricismthat the quality depends on whether we know the relevant facts. But it is not a factual inquiry. It is not even primarily a matter of empirical data; it is a matter in which the quality of the assessmentas you say, Professor Babbageis even more important than the availability of data which, as I said a moment ago, will of itself have a range of quality. Do you agree?

Prof. BabbageI certainly do, and I suspect my colleague does too. We have been in and around the intelligence community for many years. Frankly, perhaps there is not a more fundamental point I should emphasise than this: there is a real difference between data, or pure information if you like, and intelligence. Intelligence is analysed and has judgement. It draws on professional expertise to make judgements. That is the difference. You can have data points for everything from radar detections to whatever. They will only tell you that an aircraft was detected here, going along this line and that was it. Intelligence will tell you that that was actually almost certainly a fighter aircraft coming from this base and going to that base and it was probably gearing up for this sort of exercise or whatever. That is the difference: it has put in the judgement. A quality, high-grade intelligence organisation has the best analysts and also manages those analysts. The data streams are very important, of course, but if you do not have the quality analysts you are not really in the game.[15]

1.15 Similar themes were echoed throughout the discussions, which brought home clearly to the Committee the distinctive features of intelligence work, and the skills and qualities that analysts must possess if they are to be effective.

A good analyst will look at a historical development; they will look at where a situation has evolved from and they have to try and anticipate where it is going[A] good analyst has to try and piece together imperfect information to make a judgement on what is likely to happen in the future. Of course that is a very difficult task, but that is what the analyst is paid to do.[16]

1.16 In the words of a former Secretary of the Defence Department when giving evidence before the parliamentary committee inquiring into intelligence leading up to the invasion of Iraq: 'Assessments are, finally, matters of judgement'.[17] Similar words were echoed in the comments of ASIO's Dennis Richardson:

I think the best thing an organisation like ASIO can do, and the best thing I can do individually, is to be prepared to make a judgement call and to be accountable for those judgement calls. This might sound a bit odd, but I have accommodated the thought that I could end a public service career in disgrace because of a bad judgement call. We live in an environment in which, in the event of a bad call, the blame will be thereand it is pretty unforgiving. That is the way it ought to be, because you are talking about matters of public safety. I think, again, once you have crossed that psychological barrier and once you have accommodated the thought that you have a lot riding on your judgement calls, and you could end up where you would prefer not to be as a result of them, that makes it easier to make those judgement calls.[18]

1.17 The Committee considers that while there was 'no specific intelligence' relating to the Bali atrocity - what is nevertheless relevant as a consideration is what ONA's Kim Jones called 'analytical judgements' arising from a comprehensive and contextual examination by agencies of the 'factors at play'. To include a consideration of these elements avoids delivering a somewhat reductionist account and helps to provide a more instructive re-visiting of the pre-Bali intelligence story.

1.18 In any event, the Committee considers that Mr Richardson may be judging himself and the other intelligence agencies by an impossibly high standard. This view was articulated by one well-informed observer in the following terms:

We have to be realistic about what even a well-funded and very capable intelligence system can deliver It is unrealistic to expect that our intelligence agencies can provide us, reliably and with great specificity, with warnings of terrorist attacks before they occurfor example, that an attack will occur on the following day at the following place. I therefore place the bar somewhat lower than Dennis Richardson did in his appearance before this committee, where I think he described the failure to identify Bali as an intelligence failure. I very much respect the conceptual and professional framework in which Dennis made that observation, but it seems to me that it is unrealistic of us, as consumers of the intelligence product, to expect that kind of service out of intelligence agencies. That is not a reflection of the quality of our intelligence agencies but of the nature of the intelligence business.[19]

1.19 The Committee concurs. The intelligence business is not well understood by many people, including decision-makers, and the Committee sees merit in a brief exploration of some important features of this somewhat arcane activity.

What do we understand by 'intelligence'?

1.20 Strategic intelligence is defined by one eminent writer on these matters as 'the acquisition, analysis and appreciation of relevant data'[20] a definition which is more or less replicated in most accounts.

1.21 Even a quite superficial dip into the literature about 'intelligence' is sufficient to become acquainted with its basic characteristics as an arena of activity in which ambiguity and ambivalence, information and disinformation, operational and policy requirements, blind spots and flashes of insight, all jostle with one another as analysts seek to extract coherence out of chaos.

1.22 One witness spoke of 'the great lottery that is the intelligence business'.[21] As analysts gave evidence to the Committee, that sense of its chancy, challenging essence was never far away, and the painstaking nature of the tasks they described conveyed to the Committee the complexity which is the daily grind of an analyst's work.

1.23 Intelligence is a business in which a host of facts and factors credible and doubtful, contextual and specific, probable and improbable are gathered together and winnowed, pulled apart and re-assembled, played with and argued over until a final 'product' or piece of advice emerges.

1.24 As Mr Richardson himself insisted to the Committee: 'It cannot be a game of lowest common denominator or lazy consensus and, as far as possible, should not seek to say all things to all people.'[22] It is, in the words of another analyst, ONA's David Farmer: 'a considered analysis of all the information available.not speculation.'.[23]

1.25 Another noteworthy perspective was delivered to the Committee by ASIO's Dennis Richardson during a discussion about what counts as proper standards of the 'objectivity' of evidence in making intelligence assessments.

I have a personal view in respect of the word objective. I do not know where objective is. We are human beings and I do not think it is possible for humans, given the human condition, to do anything outside their own minds, and if it is inside your mind and you are making a judgement then by definition it is subjective. One and one is two. That is an objective statement, mathematically shown, but where you are coming into judgements I think this word objective is difficult. I just have a pet view on that.[24]

1.26 The Committee believes that it is important to keep these considerations in mind as one examines the pre-Bali intelligence picture. They are considerations which apply not only in the Bali context. They have been identified more generally as applicable to any intelligence activity.

1.27 The following statements about intelligence from authoritative writers on these matters also resonate with the Bali experience:

In the real world, intelligence is invariably ambiguous. Information about enemy intentions tends to be short on detail. And information that's rich in detail tends to be short on intentions.[25]

Intelligence failures are not only inevitable, they are natural.[26]

Unambiguous threat is not an intelligence problem; rather the challenge lies in the response to fragmentary, contradictory and dubious indicators. Most such indicators turn out to be false alarms.[27]

1.28 Another important consideration is the relationship between intelligence and policy formulation. This, too, is a problematic relationship not adequately captured by the simple assertion that 'intelligence' and 'policy formulation' are discrete functions, or that 'intelligence agencies do not give policy advice' however desirable that latter state of affairs may seem to be.

1.29 The problematic nature of the intelligence-policy relationship is pointed to by Betts's observation that 'perfecting intelligence production does not necessarily lead to perfecting intelligence consumption.'[28] He goes on to discuss the difficulties for intelligence agencies when a decision-maker or leader is strongly committed to a policy position; the decision-maker 'tends to resent or dismiss critical [strategic estimates] and to cling to the data that support continued commitment.'[29]

1.30 The separation of intelligence and policy-making is a traditional conundrum for governments and their bureaucracies, as there are both costs and benefits to 'minimising the intimacy between intelligence professionals and operational authorities.'

But, although the personnel can be segregated, the functions cannot, unless intelligence is defined narrowly as the collection of data, and analytic responsibility is reserved to the decision makers. Analysis and decision are interactive rather than sequential processes

The ultimate causes of error in most cases have been wishful thinking, cavalier disregard of professional analysts, and, above all, the premises and preconceptions of the policy makers. Fewer fiascos have occurred in the stages of acquisition and presentation of facts than in the stages of interpretation and response. Producers of intelligence have been culprits less often than consumers. Policy perspectives tend to constrain objectivity, and authorities often fail to use intelligence properly.[30]

1.31 In the Committee's view, any examination of the pre-Bali intelligence picture, fraught as it is with both the benefit and the impediment of hindsight, must proceed in the full awareness of the above listed quirks and qualities of both the production and consumption of intelligence.

The state of intelligence pre-Bali

The central challenge of intelligence gathering has always been the problem of "noise": the fact that useless information is vastly more plentiful than useful information.[31]

1.32 ASIO's Director-General (Dennis Richardson) explained to the Committee how ASIO collected its intelligence on regional security issues from a wide variety of sources, both open and secret.

Our information relating to threats to Australian interests in Indonesiaand that is the focus of our interestcomes from publicly available information, diplomatic reporting, the reporting of other members of the Australian intelligence community and from information shared with us by the agencies of other countries. It also comes from information shared with us by the Indonesians themselves.[32]

1.33 The Committee accepts Mr Richardson's view that the failure of intelligence agencies (across the region, not just Australia) to adequately appreciate in a timely way the transition of Jemaah Islamiyah from extremist group to terrorist organisation was a key factor in Australia being unable to at least better anticipate, let alone prevent, the Bali atrocity.

The period between JI becoming known in a terrorist context in late 2001 and October 2002 was spent seeking to find out as much as possible about JI and identifying and mapping JI as closely as possible. Names certainly became available. However, detailed connections between names, detailed identification of cell structures, detailed identification of intent and plans was not available. When names did become available, yes, work was done, butin respect of these people or individuals that were identifiedunfortunately we had not reached a point where we could have prevented Bali.[33]

There was simply not a pattern of information. Unfortunately, there was not a lot of intelligence available on JI between December of 2001, when it was identified as a terrorist entity, and the attack in Bali in October 2002. There was not a lot of intelligence.[34]

1.34 Mr Clive Williams, a leading terrorism expert, explained further the kinds of difficulties under which Australian agencies were labouring during this period.

After October 2001 and the December 2001 arrests in Singapore, the Singaporeans produced a white paper, which put a lot of information in the public domain. At the same time, they also passed a lot of information to Indonesia in particular. But Indonesia and Thailand were in denial about the existence of JI. They tended to see JI more in the light of Laskar Jundullah, Laskar Jihad and those sorts of organisations, despite the fact that they had been involved in this bombing planning for Singapore. I think that was a fundamental weakness in the regional systems. It is not so much a weakness in our system; it was a weakness in the systems of the regional countries, because we were ultimately going to be reliant on them for producing the [human intelligence] that would have given us the information that Dennis Richardson was talking about. That just did not happen.[35]

1.35 But from the testimony provided to the Committee it seems clear that in the two or three years before Bali, Australian intelligence agencies had become increasingly concerned about the threats posed by regional extremists and a burgeoning international terrorism, and some extra effort had been made to apply more resources to addressing it. This represented something of a shift from the Cold War focus of earlier years.

If you went back five years [to 1997-98] and you looked at all of these organisations, but particularly ONA and DIO, the primary assessment organisations, you would find their involvement and focus on intelligence relating to terrorism was really rather modest, I would suggest. This was a product, quite frankly, of the international security situation and the intelligence priorities that had been set right through the Cold War. Then after the Cold War, of course, there were significant modifications.[36]

1.36 Intelligence relevant to the threats in SE Asia began to be assembled and communicated to government at regular intervals. The Committee is aware that debate has ensued, especially within the community of intelligence observers and academics, about the adequacy of that intelligence, and the assessments derived from it.

1.37 Notwithstanding that debate, it seems that government agencies were in little doubt about the regional terrorist threat emerging over the last few years. Whether, prior to 11 September 2001, it had received sufficient attention in terms of the priorities being set by the government's peak intelligence committees is a different question.

1.38 As early as April 1999 ONA had coordinated a National Assessment dealing with transnational Islamic terrorism and Osama bin Laden and their implications for Southeast Asia. A conclusion of the assessment was that the main danger to Australian interests remains collateral damage from attacks on US or UK targets, including in the Asia-Pacific region where bin Laden had some capacity.[37]

1.39 ASIO made a major contribution to that assessment, noting that 'while there was little doubt bin Laden had followers and contacts in many countries, including in Southeast Asia, in early 1999 the nature of these relationships is not clear.'

The possibility of such links continued to be explored particularly with the formation of groups such as Laskar Jihad and the Islamic Defenders Front in Indonesia and the activities of the Abu Sayyaf Group and Moro Islamic Liberation Front in the Philippines. Hizballah activities in the region were also being investigated.[38]

1.40 In the Department of Defence, the then Joint Intelligence Organisation had created, in 1989, a counter-terrorism cell with three military staff, growing to six staff prior to September 11.

Their principal tasks were to analyse the modus operandi, the capabilities and the operational links of terrorist groups and individuals, to analyse regional counter-terrorism capabilities and also to analyse terrorist incidents to help inform Special Forces training. So we did have a well-established counter-terrorism capability through the 1990s.[39]

1.41 During 2000, several other reports were produced by the relevant agencies, with ONA advising, for example, that 'the security apparatus that had held militant Islam in check has been gradually dismantled and Islamic jihad groups, such as those now operating in Maluku, could become a permanent threat to communal harmony elsewhere in Indonesia and a menace to elected civil authority'.[40]

1.42 In August 2000, DIO noted the extent of al-Qaeda's reach into the region, reporting that it 'does have the potential to influence terrorist action elsewhere in the world through its support and encouragement of proxy terrorist organisations'.

1.43 At the close of 2000, an ONA Research Report noted that:

...As a consequence of Indonesia's weak condition and rising lawlessness, militant groups are becoming more assertive; they could increasingly turn to terrorism [The] risk is growing that international Islamic terrorists could use local militants to set up in Indonesia networks through which to extend their influence.[41]

1.44 On Indonesia in particular, ONA convened in early 2001 a meeting to inform collectors of the higher priority ONA was giving to the assessment of radical Islam in Indonesia and its external links. A number of further meetings with collectors on this subject were held. In response, collection agencies made a concerted effort to increase coverage of Islamic extremists in the region.[42]

1.45 ONA had also embarked with its US counterparts on a joint research project exploring in greater depth the nature and evolution of radical Islam in Southeast Asia, leading to a report which was issued just before the 11 September 2001 attacks.

Work on the project substantially enhanced ONA's understanding of the external influences on Islam in Southeast Asia and in particular of the influence on Indonesian extremists of fundamentalist religious ideologies and concepts, such as the global Islamic jihad, emanating from the Middle East. Specifically in relation to Indonesia the project concluded that, while there was not a prospect of the emergence of an Islamic state in the near or medium term, of more immediate concern is the potential for growth of Islamic militancy and international Islamic terrorism, especially given the difficulties Jakarta is likely to face in restoring law and order and in engineering an economic recovery. [43]

1.46 DIO's Frank Lewincamp was quite emphatic before the Committee about the degree of effort being applied to counter-terrorism issues in the region.

[We] did report extensively on the growth of radical and extremist Islam in the region consistently and well before September 2001. For example, in May 2001 we indicated that Indonesia provided fertile ground for extremist groups with diverse motivations and international connections. Certainly there was some debate about al-Qaeda and the extent of its influence and presence in the region, but there was clear agreement across the community about extremism and the capacity for terrorist attacks within South-East Asia.[44]

1.47 The attack on the World Trade Centre's twin towers in New York on 11 September 2001 galvanised an even more intense effort by Western intelligence agencies, including Australia's, to tackle terrorism as a transnational, global phenomenon and to acknowledge that non-state players had established themselves as a major threat to national and regional security.

1.48 During September 2001, intelligence reports tended to highlight threats of demonstrations and civil unrest directed at US and other Western interests. This was also the tone of DIO reports until the end of 2001, while ASIO reports seemed to focus more on the risks of terrorist activity. At this stage, JI was still not known to Australian agencies as a terrorist group, whereas the extremist group Laskar Jihad had been receiving not a little attention.

1.49 On 27 September 2001 ONA issued a report which came to be much cited during the course of this inquiry and is discussed in some detail later in this Report. It included such statements as:

The threats by Muslim extremists of violence against the citizens and assets of the US and its close allies must be taken seriously. At the very least, increasingly hostile anti-Western protests and harassment of Westerners are likely.

The extremists' threat to respond violently to US retaliation against al-Qaeda must be taken seriously; they have a history of resorting to terrorist methods.

Militants may target Australian citizens and interests, using as a rallying point alleged anti-Islamic sentiment in Australia

No sign that Laskar Jihad plans to target tourist hotels on Lombok or Bali, though extremists see them as havens of Western decadence.

Even so, a tourist hotel in Bali would be an important symbolic target, damaging Indonesia's standing and its debilitated economy.[45]

1.50 In the aftermath of September 11, Australia's intelligence collection agencies refined and redoubled their efforts. In its coordinating role, ONA convened special meetings of collectors to provide guidance on terrorism collection priorities. Those requirements were discussed and refined at 13 meetings of the National Intelligence Collection Requirements Committee between the 11 September 2001 attacks and the Bali bombing on 12 October 2002. [46]

From late 2001 [the collection agencies] successfully developed a range of new sources which provided assessment agencies with a better picture of the extent and nature of extremist networks in Southeast Asia. Despite this enhanced effort, significant gaps in our understanding remained.

During visits to regional posts by ONA analysts, embassy staff were informed of the higher priority being accorded by ONA to reporting on Islamic militancy and extremism in Southeast Asia.[47]

1.51 Following September 11, ASIO made what it called 'dramatic resource reallocations':

We devoted our resources overwhelmingly to counter-terrorism, and there was some work that we simply ceased doing in order to do that. That is where our focus remains to this day.

1.52 On 28 September 2001 ASIO raised the assessed threat level for Australian interests in Indonesia to HIGH. The decision to raise the threat level to HIGH was based on:

• publicity in Indonesia about the arson attacks on mosques and other Islamic institutions in Australia following 11 September 2001

• reporting indicating that a number of Islamic groups in Indonesia were taking a unified approach against US-led actions directed at al-Qaeda

• these groups regarded Australia as a soft target alternative to the US and had begun a campaign to portray Australia as anti-Islamic.[48]

1.53 The announcement of the deployment of Australian forces to Afghanistan on 17 October 2001 was deemed by ASIO to have raised Australia's profile as a terrorist target, but in the absence of specific information indicating a threat, the announcement itself did not, in ASIO's view, change the threat of terrorist attack in Australia or against Australian interests abroad.[49]

1.54 Of greater concern to ASIO was Osama Bin Laden's 3 November broadcast referring to 'crusader' forces and mentioning Australia by name. ASIO considered the statement to be of 'particular significance' and issued a Threat Assessment on 9 November 2001 which noted that:

• .the statement must be seen within the context of UBL statements since 1996, which consistently have laid down general markers for subsequent terrorist action.

• apart from sporadic references to the United Kingdom, previous statements have referred to the US and its allies. UBLs specific reference to crusader Australian Forces thus represents a significant upgrading of Australias profile. Looked at against UBLs track record, ASIO considers this statement will have force, and significance, for at least the next 18 months.

• the statement will be seen as particular encouragement for individuals or groups in Indonesia who are followers of UBL, and who may have the capability to commit violent acts. More importantly however, UBLs al-Qaida network does have the capability and means to carry out an act of terrorism in Indonesia. The only question in respect of Australian interests there, is one of intent. In this context, since at least 1998, UBL has been explicit in stating there is no distinction between military personnel and civilians; both Australian Official representation in Jakarta and other identifiable Australian interests certainly would be seen as extensions of the Australian crusader forces.[50]

1.55 In early November 2001 a grenade was thrown into the grounds of the Australian International School in Jakarta.[51] The Committee does not know who was responsible, but it represented a clear indication that the threat to Australian interests in Indonesia had increased.

1.56 ONA informed the Committee that over this period, United States agencies had become quite rapidly convinced that there were significant links between al-Qaeda and regional and domestic radical Islamic groups in Southeast Asian countries. Amongst the factors that led them to such a conclusion was evidence given in a trial in Spain of al-Qaeda operatives to the effect that there was an al-Qaeda training camp in Poso on Sulawesi. ONA was unsure, and set out to try and verify the US's conclusions.

With no convincing corroborative evidence available to Australian agencies of the involvement of international terrorist organisations in training camps in eastern Indonesia, ONA tasked Australian collection agencies to explore this issue thoroughly. Despite this effort, significant evidence was not uncovered, and ONA observed in a report of 29 November 2001 that claims that international terrorist camps existed in Indonesia are yet to be substantiated.[52]

1.57 On 29 November 2001, an ONA report included a reference to Bali in the context of intelligence about the activities of Laskar Jihad.

Thisdealt with communal conflict in eastern Indonesia andnoted that Laskar Jihad says it will establish a presence in Lombok as a platform for ridding Bali and nearby islands of non-Muslim communities. This was a reference to Laskar Jihad targeting mainly Indonesian Christian communities rather than tourist hotels or other Western targets, and of course Laskar Jihad was not responsible for the Bali bombing.[53]

1.58 By mid-December 2001, a significant new factor had entered the scene with the receipt by Australian agencies of information emerging from investigations into the Singapore bombings and what they revealed about Jemaah Islamiyah.

1.59 The JI factor stimulated a new surge of intelligence activity.

[F]rom December 2001 we and others worked very hard to get on top of JI and a lot of progress was made. Also, ASIOs judgements, as detailed in our submission to the committee, were well founded.[54]

1.60 As part of this renewed effort, ONA finalised a substantial, 89-page, report:

reviewing what was known of 146 different organisations. In its introductory section, the report observed that if the ideology of Islamic radicalism in Indonesia has been remarkably consistent over the past half century or more, external influences have increasingly inspired and shaped the radicals' behaviour. Many younger Indonesian Muslims have been attracted to the ideas of Osama bin Laden and like-minded theologians who have preached the legitimacy of engaging in jihad or violent struggle for international causes. These external influences have also inculcated a belief that it is legitimate for Indonesian Muslims to engage in jihad anywhere within Indonesia's borders.[55]

1.61 DIO's relatively more benign earlier assessments of the risk of terrorist attacks became less so from the beginning of 2002. A 6 January report declared that SE Asia offered 'a range of soft and symbolic targets for anti-Western Islamic terrorists' and that the most 'vulnerable and numerous of Western interests in the region are tourists and expatriate business people'.[56]

1.62 An interesting contextual perspective was provided to the Committee by a leading expert on terrorism, Mr Clive Williams.

I think in 2002 there was perhaps a failure to pick up on the growing anger among Indonesian Muslim extremists about the US-led war on terror and the Israeli occupation of the West Bank and Gaza. I think people are becoming more aware of the latter point because of the Arabic media that is being beamed into the region from the Middle East. People are much more aware now of the situation of the Palestinians, and it is being presented in a way which is, of course, sympathetic to the Palestinians.[57]

1.63 On 16 January 2002, ONA and ASIO published a joint report based on information flowing from the Singapore arrests. This report said that:

• Southeast Asian Islamic extremists have established cells in the region and, with al-Qaeda involvement, planned terrorist attacks against Western targets in Singapore.

• [I]t isn't known when before 1999 the JI first made contact with outside terrorists, but this contact appears to have marked the group's transition from militant organisation into terrorist group.

• A good deal of information on the nature of the regional operations of Jemaah Islamiyah and its historical evolution was contained in this report.[58]

1.64 Notwithstanding the al-Qaeda connection identified from the Singapore investigation, DIO doubted in February 2002 that al-Qaeda had active operation cells beyond the Singapore-Malaysia-Philippines footprint.

[T]he evidence from the Philippines, Singapore and Malaysia shows that while the JI cells probably received technical assistance from al Qaeda, and were inspired by UBL, they were not in themselves al Qaeda-controlled cells. However, there must be individual associations between JI members and al Qaeda.[59]

1.65 However, DIO's 21 February report did state that:

we cannot discount the possibility [of operational terrorist cells] as detection of cells is likely to be difficult...Groups such as JI recruit and indoctrinate within a cellbased framework of prayer and discussion groupsBecause of their inherently covert nature, these groups present a difficult intelligence target (as the discovery of JI in Singapore indicates)...Weapons and explosives expertise is freely available in the region, and high-interest individuals can be difficult to track within high volumes of illegal people movements. However, covert groups throughout the region will be conscious of heightened surveillance since 11 September, and the arrests in Singapore, Malaysia and the Philippines. They will refrain from actions likely to attract the attention of security forces in the near term.[60]

1.66 In April 2002, ONA analysts participated in a US-sponsored seminar focused on the likely future of al-Qaeda after the fall of the Taliban. The consensus that emerged was that terrorist activities were likely to be dispersed, with al-Qaeda contributing to operations in various parts of the world.

1.67 One of a number of scenarios canvassed in the final stages of the seminar on the range of al-Qaeda capabilities some years hence included the possibility of a terrorist attack on tourist facilities in Bali; this was not based on specific intelligence indicating such an attack was being planned or contemplated.[61]

As part of that seminar we had a scenario planning exercise to try and identify where al-Qaeda would be in the future. We broke up into a range of groups to investigate certain aspects based on the scenarios of al-Qaeda being successful or unsuccessful and centralised or decentralisedThe group I was involved in had the decentralised and successful scenario. To build a case for our argument, we actually used the scenario of al-Qaeda elements linking up with terrorists in South-East Asia and attacking Bali as a means to describe that particular scenario.[62]

1.68 Over this first half of 2002, the agencies became more confident that al-Qaeda had links into Indonesia, with ONA saying that al-Qaeda had:

a presence in Indonesia which gives it the capability to conduct terrorist acts in and from Indonesia. But the extent and nature of al-Qaeda's presence are unclear and hard evidence remains elusive.[63]

1.69 It is clear to the Committee that during the first half of 2002, the agencies were putting considerable efforts into clarifying and understanding the nature of JI's modus operandi, and in trying to properly assess the danger that JI and other extremist groups posed for Australian interests in Indonesia. Information was invariably incomplete; there were different understandings feeding into the agencies about the nature of radical Islam and how it might manifest itself, particularly in Indonesia. Anxieties fuelled by worse case scenarios were juxtaposed against reassuring assessments from other respected sources. The agencies' efforts necessarily involved considerable debate, as analysts wrestled with what was becoming a flood of information to be interpreted, contextualised and assessed.

1.70 ONA conveyed to the Committee the intensity that infused these debates and discussions in the first few months of 2002.

[We, ONA] were concernedthat [our clients] understood the grounds on which we were shifting our judgement, in which the question of local capability in Indonesia was terribly important. The real shift that occurred in our thinking was that up until March or April of that year we were uncertain in our own minds as to the distinction to be drawn between the two thingsal-Qaeda operating in Indonesia with some local assistance as distinct from a local capability. That issue was never entirely resolved, butwe were concerned there was a local capability in Indonesia that was not necessarily reliant on al-Qaeda. Our concern was to try to untangle the issue and separate the two things out.[64]

I think one of the great discoveries for us [ONA] was the extent to which in South-East Asia we were in fact dealing with a home-grown movementone that certainly had links with al-Qaeda but was not necessarily an implant, as we had originally thought. We were very concerned to get those sorts of perspectives across, to the point, in fact, of being accused on occasion of being a bit zealous about it.The suggestion was that we were losing perspective a bit and seeing communists under beds or whateveryou know, reds under the beds or whatever the usual jargon you get on these sorts of occasions is.This was a pretty hard message to sell at the time, becauseit flew in the face of conventional wisdom about Islam in South-East Asia and in Indonesia in particular.[65]

1.71 In early May 2002, the Standing Advisory Committee on Commonwealth/State Cooperation for Protection against Violence [SAC-PAV] sponsored a conference at the University of Tasmania entitled Globalising Terror: Political Violence in the New Millennium. It was attended by government officials, academics and visiting international experts on terrorism.

1.72 Australian intelligence agencies were keen to enhance their understanding of the regional terrorist threat, and this peak level conference provided a rare opportunity to hear from internationally recognised experts. Presenters delivered a range of perspectives on, and in some cases considerable detail about, the rise of international terror, and the threat posed by al-Qaeda in particular. Some of the advice delivered at that Conference proved quite prescient in terms of the Bali atrocity.

The modern worldprovides terrorist groups with a plethora of potential targets. These include commercialdiplomatic and military [targets]and the vast array of people and facilities associated with the burgeoning tourism industry

Another important dimension of targets is the ongoing historical importance of psychology and symbolism. The sociologist Clifford Geertz has coined the term 'cultural centres' to describe those elements of societies that are viewed as of symbolic importance (consciously or not).[A]ttacks on these may have repercussions far beyond the mere physical destruction caused

In terms of bombing targets there is a well discernable trend for attacking the softer vulnerabilities of liberal democratic states, primarily those of a social and economic nature.[66]

1.73 The May 2002 Conference also provided the occasion for Dr Rohan Gunaratna to speak to a major report he had prepared about al-Qaeda. Entitled The Bomb and Terror: trends and possibilities, Dr Gunaratna's report delivered a detailed account of al-Qaeda's jihad-inspired terrorism, the 'uncompromisingly distinctive' characteristics of the group, and the reach of its worldwide network.

1.74 Gunaratna's report provided some information about JI's leadership in SE Asia, noting that the January 2002 testimony of captured al-Qaeda operative (Javanese born Fathur Rohman al-Ghozi) 'revealed in far greater detail than had ever been imagined before a huge network of trained al-Qaeda operatives and sympathisers at work in South East Asia, about which more will doubtless be learned in the months and years ahead'.[67] Gunaratna also described JI's spiritual leader (Abu Bakr Bashiyar) as the cleric who was 'most vocal, always exhorting the people to join the jihadand utterly opposed to compromise'.

1.75 By June 2002, ONA had reached a point where the agency 'felt it desirable to draw to the Government's attention by means other than written reports its conclusions on the existence of a regional extremist network with connections to al-Qaeda'.[68]

1.76 To that end, ONA officials sought a meeting with Foreign Minister Downer.

This briefing took place in two sections on 18 and 19 June 2002. At the briefing, ONA set out the intelligence on the nature of the domestic, regional and international radical Islamic movements and its conclusions on their interconnections and the potential for terrorist activity. The discussions focussed broadly on the terrorist threat in the region and that from JI in particular.[69]

1.77 The Committee explored at some length in its hearings the details of the meeting with Minister Downer, and these appear elsewhere in this report. Of relevance here is ONA's description of the threat that they sought to convey to the Minister.

We were trying to make the impact on the minister of our knowledge up until then and explain the danger of the organisations and explain our developing concepts of the way in which these organisations were planning and were capable of carrying out operations.We did not know exactly what they were doing but we knew that there was no shortage of explosives available to them in Indonesia and, indeed, elsewhere in South-East Asia. Much, but not all, of the briefing was confined to Indonesia. In South-East Asia we knew there was no shortage of explosives and no shortage of weapons. We made these points clear. We said that basically they had the intention, they had the capability, and getting access to the kinds of equipment they needed would be no problem.[70]

1.78 In the Committee's view, the minister would have been left in no doubt, after the 18-19 June 2002 briefing, about the seriousness of the risks to Australian interests in Indonesia posed by JI. The group had the intention, the capability and importantly the ready access to explosives that would enable them to conduct an attack with potentially devastating consequences.

1.79 By the end of June, with more information progressively available from detainees, ONA had developed 'a better understanding of the relationship between al-Qaeda and like-minded or sympathetic groups in Southeast Asia'. For ONA it confirmed that 'al-Qaeda has a longstanding presence in Indonesia.'[71]

1.80 In its 27 June 2002 report, ONA said that 'al-Qaeda is actively supporting extremists who are prepared to conduct terrorist acts in support of global jihad while advancing their own agendas; in particular, al-Qaeda has been active in fostering a relationship with Jemaah Islamiyah (JI).'[72]

1.81 A week later, ASIO issued a statement in relation to QANTAS operations in Jakarta and Denpassar. It stated the following:

The general threat to Qantas interests in Indonesia cannot sensibly be differentiated from the general threat to Australian interests in Indonesia; currently assessed as HIGH.

Australias profile as a potential target of terrorist attack by Islamic extremists has been raised by our involvement in the War on Terrorism

Islamic extremists in the region have shown a capability and intent to conduct terrorist attacks, including against aviation interests

They have also shown great flexibility in regard to location, method of attack and type of target

ASIO is unable to specifically comment on the areas around Denpasar and Jakarta airports other than to note that Islamic extremists associated with Jemaah Islamiyah (JI) ) and/or al-Qaeda are known to have transited both airports in the past.

Senior Indonesian JI figure, Riduan bin Isamuddin, also known as Hambali, was involved in Oplan Bojinka. He is still at large in Indonesia. Another senior JI member, Mas Selamat bin Kestari, who threatened to hijack an aircraft and crash it into Changi airport fled Singapore after escaping arrest and is likely to be in Indonesia with other JI members. Given the JI presence in Indonesia, neither Jakarta nor Bali could be considered exempt from attack.[73]

1.82 At the same time, DIO issued an assessment focussing not on JI and terrorist attacks, but on Laskar Jihad (LJ) and Laskar Jundullah (LJL). The assessment pointed out that these groups' primary focus was on domestic issues and that they had not generally targeted Western interests.[74]

1.83 The intelligence agencies seemed clear in their understanding of the different kinds of threat posed by the various extremist groups.

I would repeat: we had the threat level to Australian interests in Indonesia at high. That was all of Indonesia. .We could not separate out Bali from the rest of Indonesia. We were very conscious of the terrorist threat posed by JI and we were very conscious that it could pose a threat quite differently to Laskar Jihad.[75]

1.84 On 26 July 2002, ONA issued two separate reports. The first included advice that 'reports of planned terrorist violence in Southeast Asia are coming more frequently'; that 'no good estimate yet exists of al-Qaeda's strength in Southeast Asia. But it is likely to grow'; and that 'suicide attacks have not been part of militants' modus operandi in Southeast Asia. But that may be changing.'[76]

1.85 In the second report, ONA said that 'we have no collateral for but cannot dismiss reports that Indonesian Islamic extremists intend to launch attacks in Indonesia in August and in Southeast Asia in September.'

1.86 The report went on to say that 'protests in support of Islamic law, attacks on Christians, raids on brothels and nightclubs, bomb attacks, or terrorist attacks on US or other Western targets are all possible.'[77]

1.87 The increasingly frequent reports of planned terrorist violence, and threats to target Western embassies obtained from the custodial interviews of al-Qaeda operative Umar Faruq, triggered DIO to publish a number of products warning of increasing evidence of capability and intent to mount terrorist attacks against Western interests in Indonesia.

1.88 DIO's report on 5 August 2002 drew attention to JI, advising that there was

an increased threat of a terrorist attack against Western targets, possibly in August...Despite uncertainty over the credibility of sources, contradictory information and a general lack of detail, remnants of the regional extremist organisation, Jemaah Islamiyah (JI), continue to possess the capability and intent to undertake future attacks...Extremist organisations with an international or regional agenda, such as JI and Indonesian Mujahidin Council (MMI) which shares an overlap in leadership and ideology with JI pose a greater threat to foreigners in Indonesia than do domestic extremist groups.[78]

1.89 Similar advice was also issued four days later by ASIO, warning that Indonesian-based Islamic extremists may be planning a series of coordinated actions across Indonesia in the August/September period.

The nature of the action was not well defined but appeared likely to range from demonstrations to terrorist attacks. ASIO assessed the threat of terrorist attack against Australian interests in Indonesia remained HIGH and noted the following:

• The reports suggested Western interests, principally US, but also British and Australian, were among the intended targets.

• The information was fragmentary, uncorroborated and of unknown credibility. Some aspects possibly reflected circular reporting of earlier discredited threats.

The number and nature of the reports, however, taken in the context of the raised threat in Indonesia, collectively warranted updated threat advice[79]

1.90 The de-briefing of al-Qaeda operative Umar Faruq had clearly delivered valuable information into the hands of the intelligence agencies. According to ONA's 13 September 2002 report, Faruq's disclosures 'reinforced earlier reporting that al-Qaeda has access to the extensive Jemaah Islamiyah (JI) network criss-crossing Southeast Asia.'

1.91 The disclosures also added to 'the persuasive evidence that has accumulated in recent months that al-Qaeda has a longstanding presence in Indonesia and close relations with local extremists.'[80]

1.92 DIO reports at this time retained their focus on JI, but spoke of DIO's doubts about JI's organisational robustness and capability, and suggested that JI was reliant upon external assistance to execute anti-Western attacks. DIO noted, however, JI's 'connections with regional extremists', its 'flexibility' and its capacity to 'draw onregional connections and transnational associations to al Qaeda to pursue anti-Western attacks in future'.[81]

1.93 In what subsequently proved to be a prescient assessment of unconfirmed reports of the possibility of a JI attack against Westerners, DIO reported on 26 September 2002 that:

We assess that local JI capability will restrict any attack to small arms or improvised explosive devices. Although this might obviate mass-casualties, if timing and location come together a large number of casualties could result.[82]

1.94 With the advent of October, intelligence reports and security assessments continued to assert a high level of generic threat - to speak of JI, the possibility of attacks, and of the risks to Australian interests but not of any definitive or specific threat. It remains the case, though, that ASIO had first assessed the threat to Australian interests in Indonesia at HIGH almost a year earlier, in December 2001. Thereafter, the intelligence services delivered intensified reporting on terrorism and JI in particular, and the collective effect was a constant updating of threat advice, and increasingly robust assessments of risk.

1.95 The final reports to emerge before the Bali bombing were issued by ONA and ASIO on 10 October 2002.

1.96 The ONA report said that despite some recent arrests, substantial numbers of terrorists remain free in Southeast Asia, capable of and intent on further attacks. The report noted recent arrests but observed that terrorists in the region were proving they could stage small attacks, listing some recent incidents.

1.97 The report went on to say that further similar attacks are on the cards including against US targets in Indonesia. It noted that weapons and explosives are still easily available in Southeast Asia, and that many potential attackers with the requisite skills remain active. The report also said key JI leaders, who have even bigger plans, including those who plotted the Singapore operation, are still free.[83]

1.98 On 10 October 2002 ASIO issued a Threat Assessment against the background of statements by Osama bin Laden on 6 October 2002 and by Ayman al-Zawahiri on 8 October 2002. The assessment advised that the statements suggested that somewhere 'another large scale attack or attacks by al-Qaeda are being prepared'

1.99 The ASIO assessment noted that:

• The attacks may be imminent

• Both bin Laden and al-Zawahiri talked of targeting key sectors of the US economy but attacks may not be limited to traditional financial or economic interests

• The planned attacks may not necessarily be in the US and could be against US interests abroad, including against US allies

• No information on the timing, location or method of the attacks was available

• No information specifically related to Australian interests but Australias profile as a potential terrorist target had increased since 11 September 2001.[84]

1.100 ASIO stated in its submission to the Committee: 'We do not know whether the statements by bin Laden and al-Zawahiri foreshadowed the Bali attacks'.

1.101 In any event, the Bali attacks dramatically changed the dynamics and perspective of many in the Australian intelligence community. In the words of ASIO's Dennis Richardson:

I can assure youthe threat tolerance threshold for collectors and assessors and decision makers has lowered. What that means is that collectors are more sensitive to material which at another time they might not have given as much credence to: assessors are and decision makers are. That compression of the threat tolerance thresholdor the risk tolerance threshold, however you want to put ithas led to a real dynamic change in the way things work and the speed at which things work and just the amount of information pushed into the system and what that has meant for people.[85]

Concluding remarks

1.102 In the Committee's view, since the year 2000 and certainly during the 10 months immediately preceding the Bali bombing, Australian intelligence agencies had, by the middle of 2002, developed a reasonably sound appreciation of:

(a) The growth of Islamic extremism in SE Asia and the movement into and across the region of people associated with terrorist groups, or with experience in the conflict in Afghanistan.

(b) The extent to which extremists in the region, including in Indonesia, were becoming increasingly influenced by, or had links with, al-Qaeda.

(c) The reluctance and/or incapacity of the Indonesian government to crack down on extremists or to acknowledge the presence of international terrorists and the potential for networks to develop.

(d) The high level of generic threat that existed to Westerners and Western interests, and that Australians were clearly not immune.

(e) The threat was directed not only at Western economic infrastructure and diplomatic interests, but also at so-called 'soft' targets, and that this threat was posed by groups with both the capability and intent to mount attacks against such interests and targets.

1.103 The evidence to the Committee indicates a regular sharing of information between the main collection and assessment agencies, and DFAT officials, and some significant joint ventures in terms of trying to develop a common understanding of the rise of regional extremism and the terrorist threat.

1.104 The analyses and assessments produced by the individual agencies showed some variation from each other as is to be expected, and as is consistent with the notion of contestability of advice and the independent exercise, by each agency, of its own judgements about the material before it.

1.105 In hindsight, the Committee considers that, of the assessments produced by ASIO, ONA and DIO, those of ASIO and ONA seem to have been more congruent with what eventually happened in Bali on 12 October 2002. It seems that DIO's reports generally conveyed a somewhat more benign view of the direct threat to Westerners in Indonesia, and of JI's capacities, if not its purposes and intent. However, as noted above, a DIO report of September 2002 commented on the potential for mass casualties from improvised bombs if 'timing and location' came together.

1.106 In essence, the Committee considers that in the months leading up to Bali, the intelligence landscape was far from barren. On the basis of what they had discovered in December 2001, and what they learned rapidly thereafter, agencies were in no doubt that a high terrorist risk had emerged in the region.

1.107 While there was no specific intelligence warning of the attack on Paddy's Bar and the Sari Club (or indeed anywhere) in Bali at that time, Australian agencies were possessed of enough intelligence, and had undertaken sufficient analysis, to warrant their making reports to government assessing the threat to Australian interests in Indonesia as high.

1.108 This was also the level of threat conveyed to QANTAS when the airline sought advice from ASIO in mid-2002. As noted earlier, ASIO told QANTAS that neither Jakarta nor Bali could be considered exempt from attack.

1.109 On the basis of all that has been set down above, the Committee reiterates its view that the statement 'There was no specific intelligence warning of an attack on Bali' does not exhaust the account of the pre-Bali intelligence story. It is important to elaborate that account by reflecting on what was known, and what was feared, about the capabilities and intentions of extremists and of groups like JI that had mutated from extremist to terrorist organisation some time before 2001.

1.110 There seem to be two main tasks for the Committee in reviewing events leading up to Bali. One is to determine whether the reports of the intelligence agencies were commensurate with the actual level of threat that existed, and how, if at all, it might have been possible to better anticipate JI's attack on Bali. The second is to determine whether actions or decisions taken by government in response to agencies' advice were commensurate with the level of threat conveyed in the reports from ASIO and others.

1.111 In making such determinations the Committee is acutely aware of the fact that it is making its determinations in hindsight. In the case of task one; it is all too easy to conflate the limitations of intelligence with the limitations of intelligence agencies. In task two it is all too easy to examine decisions and actions through the prism of the Bali atrocity, shaped as it is by grief, anger, frustration, despair and loss.

1.112 There is a crude argument to the effect that, because the Bali bombing was successfully carried out by JI, the Australian intelligence agencies' assessments were self-evidently not commensurate with the level of threat that actually existed. It seems to the Committee, however, that the intelligence agencies were carrying out analyses and delivering assessments that were optimal within the bounds of the information and evidence available to them.

1.113 Recall that the Indonesian government had persistently refused to crack down on extremists, or to admit the presence of terrorists on their soil. Indonesia had demonstrated considerable reluctance to co-operate with Western agencies desperate to assess and disrupt the growing network of international terrorism, especially that inspired by Osama bin Laden and al-Qaeda, and fuelled by a diaspora of fighters after the fall of the Taliban.

1.114 Before the Bali bombings, agencies such as ASIO had nowhere near the analytical resources that subsequently have been made available to them. Much of the intelligence collection relied on electronic forms of eavesdropping, with effectively no human intelligence opportunities available on the ground. The cell-based and dispersed nature of terrorist groups made it virtually impossible to winkle out information about their activities and plans.

1.115 Despite the practical and jurisdictional limitations under which agencies were working, the Committee is of the view that the intelligence picture, while more sketch than completed canvas, nevertheless conveyed an appreciable image of the high threat that was increasingly menacing Australian interests not only in Indonesia but elsewhere in the region.

1.116 The Committee acknowledges that there had been debate within and between agencies about the nature and severity of the threat posed by Islamic extremist groups and their becoming a vehicle for international terror in the mode of al-Qaeda. But the Committee does not regard such debate as detrimental to intelligence assessment. Indeed one might expect better illumination on such issues by the light of sparks being struck than by the warm glow of consensus.

1.117 There have also been claims that Australian agencies were not as assiduous as, nor shared the sense of urgency of, their American counterparts in attending to the terrorist threat to Westerners in Indonesia. The Committee is not satisfied that such claims are justified.

1.118 In any event, the assessments and reports coming out of ONA, ASIO and DIO in the months leading up to Bali should have left no-one in any doubt that the risks to Australian interests in Indonesia posed by groups with an avowed intention to attack Westerners, including Australians, were high. This is precisely the threat assessment that was extant from September 2001 onwards, and throughout 2002 was constantly reinforced and elaborated upon by intelligence reporting.

1.119 For example, the persistent assessment by ASIO, set at HIGH from 28 September 2001, was set according to the criterion 'Current intent and capability to attack Australia's interests are established circumstantially, but not confirmed by reliable intelligence.'

1.120 This assessment was the highest setting available to the agency short of it assessing that there was 'Current intention to attack Australia's interestsconfirmed by reliable intelligence.'[86]

1.121 Moreover, the raising of the level to HIGH came before other important factors began to further elevate Australia's profile as a terrorist target, notably the announcement of Australia's deployment of troops to Afghanistan, and the speech by Osama bin Laden which referred to 'crusader Australian forces.' It also came before the revelations about JI's transformation into a terrorist organisation, and before information extracted from the custodial examination of al-Qaeda operative Umar Faruq that confirmed al-Qaeda's substantial and long-standing links with JI.

1.122 In short, from the time that ASIO initially raised the threat level to Australians in Indonesia to HIGH in September 2001, there was:

(a) A recurring elevation of Australia's profile as an ally in the War on Terror, and

(b) A consistent expansion of the range, depth and credibility of evidence that Australians in Indonesia were at increasing risk of being terrorist targets.

1.123 In the Committee's view, in the year or so leading up to Bali, the production of intelligence and associated threat assessments constituted a flow of sufficient frequency, volume and intensity of warning, that consumers of that intelligence, and in particular DFAT with its heightened focus on terrorism, should have been in little doubt that an explicitly anti-Western terrorist attack of some kind would eventuate and that Australian interests, including soft targets such as tourists, could not be considered immune from that risk.

1.124 Whether the risks to Australians in Bali itself, as distinct from other Indonesian locations, were sufficiently appreciated in threat assessments and articulated in travel warnings is a matter that the Committee addresses elsewhere in this report.

The Blick Report

1.125 Although the Committee did not have access to the classified material that informed the Australian intelligence agencies' assessments at the time, the Committee is in no doubt that there was no specific, actionable intelligence related to the bombings of 12 October 2002. This was consistent evidence of the intelligence agencies and was the conclusion reached by the statutorily independent Inspector-General of Intelligence and Security, who did have access to all the relevant material.

1.126 The Committee questioned Mr Blick in detail both about his findings and the nature and methodology of his investigation. The very first question asked of Mr Blick was whether he detected 'any direct, circumstantial or conjectural evidence that could have given the Australian government and the authorities any inclination of what happened in Bali'.[87] He replied:

The answer to that is no. I said in my report that there was no intelligence that could, either then or with the benefit of hindsight, have been shown to point to the likelihood of an attack of that kind.[88]

1.127 Mr Blick told the Committee that in compiling his report he surveyed 'many thousands' of intelligence reports.[89] He explained his methodology in the following terms:

[W]hat we did was to, first of all, examine what ONA had done in the aftermath of the attack, which was to make inquiries of the other agencies about whether they had any intelligence of this kind, and then in effect decide what extra inquiry needed to be done to ensure that each agency was working from the same brief. We convened a meeting of members of the agencies who would have expertise in their systems. We agreed on, firstly, a time frame that we would look back to and we decided that there was no point looking back beyond 11 September 2001 and, secondly, we agreed a common series of search terms for their computerised systems. That meant that of the order of 170 search terms were, over the period of the inquiry, put into the various systems.We used words such as the obvious onesBali, terrorism and so onand then the various names of possible terrorist culprits. You would appreciate that at that stage there were not quite so many identified as there have been now, but there were a lot of them. They were all put into the systems as well.

Then what happened was that in each of the agencies a team was set up consisting of officials of the agencies with expertise in their systems, and they interrogated their databases and came up with lists of documents of possible interest. We then surveyed those lists and decided which ones out of those were of significant possible interest and needed to be looked at further. That was complemented by work within the agencies themselves to, in effect, do their own searching of that kind and suggest documents to us that might be worth looking at.

Obviously, in some agencies there were far more documents than there would have been in others. There was a lot of duplication because, for example, ONA and DIO basically get most of the documents that are available to some of the other agencies because they feed into their own assessments...Indeed; the agencies were assiduous in attempting to identify anything that might possibly be relevant.[90]

1.128 The Committee asked Mr Blick whether there was any possibility that an agency may have come across some information that they perhaps did not wish to reveal, and whether the audit process used by the investigation team would have picked that up. Mr Blick replied:

I am certain it would. One of the fail-safes, if I can put it this way, is that a large amount of this information would not be restricted to one agency, so any agency which chose to deliberately conceal something would always be at risk that it would turn up somewhere else, and then obviously we would want to know why. I am sure I can be absolutely confident that, had there been that sort of material, it would have been found. As I alluded to in an answer to a previous question, if you take ASIO for an example, ASIO had an interest in establishing whether there was any of that kind of information that went way beyond my inquiry because it wanted to catch the people who had done this and assist in the investigation into the incident.[91]

1.129 The Committee explored with Mr Blick the question of whether there was anything the intelligence agencies might have done that they did not do in the period before Bali that might have lessened the risk of an intelligence failure.

That certainly goes way beyond the terms of reference that I was asked to work under and, if I can say so, would go to the whole issue of how intelligence agencies collect material, what their capacity isin this case, in South-East Asiaand a range of issues about competence and professionalism that I would not see myself as qualified to either inquire into or comment on. I would not have seen myself as having that kind of brief and, indeed, I would not have seen myself as being able to carry that kind of brief.

I was not asked to do an efficiency audit of the agencies.

I was not asked to examine the efficiency of the agencies in collecting and utilising intelligence. I could obviously, if I were so inclined, give you an answer about whether I think they are good at it, but that was not something that was within my terms of reference.[92]

1.130 In any event, Mr Blick indicated that he would not be well placed to conduct an efficiency audit.

So if the government wanted an efficiency audit done and it thought that the Inspector-General of Intelligence and Security was an appropriate person to do it then it could be asked of the inspector-general. If the government asked me to do that, I would probably say to the government, Why dont you get somebody who knows something about efficiency audits?[93]

1.131 Under questioning, Mr Blick affirmed that, in his view, there was no 'systemic failure' and that there were no issues of significance related to the 'structure' of the intelligence agencies. He observed:

I would hesitate to ever suggest that structures are always right at any particular point in time, but that comment should not imply that I think there is anything that I could point to that is wrong. I think it would be a brave person who would say we have the structure right and that is the way it should be, without far more study of a deliberately focused kind into that issue.I think the only thing that contributed to a failure to alert the government to the possibility of an attack in Bali was the absence of intelligence pointing to it.So the structures were, in a sense, irrelevant to that, if I can say so.[94]

1.132 The published summary of the Inspector-General's report stated that ASIOs threat assessments during the period appropriately reflected the risks suggested by the available intelligence, and that assessments by other agencies also contained realistic appreciations of the risks to Australian interests from actions by extremists. The Committee agrees with this assessment.

1.133 The Blick report was silent on the commensurability between DFAT Travel Advice and ASIO threat assessments. Mr Blick explained that 'DFAT travel advisories were not within my terms of reference. Therefore I have not made a study of them, so therefore I do not have a view'.[95]

1.134 The Committee regards it as unfortunate that Mr Blick's terms of reference did not include the requirement to assess the commensurability of travel advisories with threat assessments, as this is precisely the point at which the quality and utility of travel advisories is most forcefully tested.

1.135 Mr Blick also pointed out that, as Inspector-General of Intelligence and Security :

I do not have the statutory capacity to look at what DFAT does; whereas I do have the statutory capacity to look at what the other agencies doI guess what I am saying is that the government could ask me to do something in relation to any agency, but I could not do it under the Inspector-General of Intelligence and Security Act.[96]

1.136 As explained by Mr Blick himself, the terms of reference under which the Inspector-General operated did not require him to examine areas such as the formulation and accuracy of threat assessments, and their relationship to, and commensurability with, the travel advisories issued over that period. The Committee does not doubt in any way the professionalism and efficiency of the officials carrying out these duties within their respective agencies.

1.137 Because the Senate Committee has not had access to the original intelligence, it has not been able to assess for itself whether the published threat assessments were congruent with the intelligence available. As well, given that such an assessment was also outside the terms of reference of the Blick inquiry, there is little the Committee can do to prevail against public criticism that this aspect of ASIO's work has not been subject to independent scrutiny.

1.138 This difficulty has not been overcome by the July 2004 report of the Flood inquiry which, by its own account, 'did not inquire into ASIO per se because that would not have been justified by the terms of reference. For this reason, domestic security and intelligence arrangements are not the focus of this [Flood] report'.

1.139 Again, the Committee can only assess the commensurability of Travel Advice against what were the published threat assessments or what was otherwise revealed publicly to the Committee by the agencies. Nor was the Inspector-General required to make such a judgement. The Committee concedes that, under these circumstances, whatever the Committee might say is unlikely to be enough to satisfy those who insist that such assessments are impeded by lack of access to the detail of the intelligence reporting.

1.140 In the UK, the statutory Intelligence and Security Committee conducted an inquiry into the Bali bombings which covered all key issues, including:

• Whether terrorism in Indonesia was a sufficiently high intelligence collection priority;

• Whether any intelligence was overlooked;

• Whether the Security Service made the correct threat assessment on the available intelligence;

• Whether Travel Advice accurately reflect the Security Service assessment; and

• Whether Travel Advice was effectively communicated to the public and the travel industry.

1.141 The British government instructed the Intelligence Co-ordinator in its Cabinet Office to ensure that all intelligence was made available to the statutory Committee.

1.142 The Senate Committee has endeavoured to discharge its terms of reference thoroughly, and believes that it has done so to the full extent of the evidence presented to it. The Committee has made every effort to ensure that the relevant government agencies were given every opportunity to place their views and judgements on the public record, and to respond to the array of questions, concerns and allegations that have animated the public debate since Bali.

1.143 However the Committee is mindful of the fact that it has been unable to have access to the underlying intelligence assessments which gave rise to the threat assessments and travel advisories constructed by DFAT on that basis.

1.144 Further, the Committee is also mindful of the fact that the only previous inquiry conducted into these matters by the Inspector General of Intelligence and Security (IGIS) did not have any terms of reference empowering IGIS to examine the correlation between underlying intelligence assessments, threat assessments, and travel advisories

1.145 For these reasons the Committee is of the view that the country's future arrangements in these areas may be advantaged by an independent commission of inquiry with specific terms of reference to address these and related matters.

Recommendation 1

1.146 The Committee recommends that, with a view to ensuring the country's future arrangements between intelligence assessments, threat assessments and travel advisories are optimal, consideration should be given to the establishment of an independent commission of inquiry with specific terms of reference to address these and related matters.

Misleading commentary about intelligence

1.147 During this inquiry the Committee's attention was drawn to reports in the media and elsewhere claiming that certain information was available to the Australian authorities that should have alerted them to the Bali attacks. It is important that these claims are addressed and resolved as far as possible, and to that end the Committee provides the following advice.

1.148 The Asian Pacific Post out of Richmond, British Columbia, on 26 June 2003 reported:

American spies identified two Bali resorts as terrorist targets months before Islamic radicals bombed two neighbouring night spots and killed over 200 peopleA partial list of the Indonesian targets provided...identified the Sahid Bali seaside resort on Kuta Beach and Hardrock Hotel in Bali as targets. One of those is less than 500 metres from the actual targets and was damaged by the bombing.The American report called Combined Analysis of Potential Foreign Strike Zones was completed in September 2002 and the executive overview of the report warns against any public release of the document as it would create misdirected liability, public hostility and mass anxiety. The report is meant to be shared with allies by the US liaison officers.

1.149 According to the Inspector-General of Intelligence and Security (Bill Blick) the so-called Combined Analysis report 'was a forgery. It seems to be clearly established that there was no such report emanating from any official source'.

I obviously took a pretty significant interest in this because it came some time after my report and appeared to disclose material that I had not been aware of. So, in common with a number of other people who were also taken by this new information, I instituted inquiries. The last thing I remember seeing about that was an official statement saying that detailed investigations had confirmed that there was no such document. I would just add that, had there been such a document, it is inconceivable that it would not have been available to Australian agencies and it would have therefore been available to me in the course of my inquiries.I myself have not been able to establish it [was a forgery] in the sense of one being a police officer, for example; but I have no doubt whatever that that document did not emanate from an official source.[97]

1.150 Mr Blick's testimony was supported by a letter to the Committee from the Director-General of ASIO (Mr Richardson). In that letter Mr Richardson advised that:

All relevant Australian agencies have searched their records and can find no evidence that any such document was ever received; and

The United States Department of State advised the Australian Ambassador in Washington on 27 June that the claim was 'thoroughly researched' and that there was 'no evidence to suggest that such a document was produced by the US Government.'[98]

1.151 Mr Richardson provided to the Committee a copy of the 27 June 2003 letter from the US Assistant Secretary of State (James A Kelly) to HE Michael Thawley (Ambassador of Australia). As well as confirming that the US Government had not produced the alleged document, the letter from Mr Kelly also stated that 'it has consistently been our policy to share information relating to possible terrorist threats to Australian citizens. I reaffirm...we had nothing to indicate a specific threat of attack or danger of attack in Bali'.

1.152 Mr Richardson elaborated his views about the US State Department response in the following terms:

In my view, the letter is stating quite clearly that the state department has researched the claim, including with other US government departmentsI can confirm that we found no evidence to suggest that such a document was produced by the US government. I can say no more than that. I did not see those words as weasel words; I saw it as a straight statement. Just for the committees information, as to my understanding of what was in the Asian Pacific Post of 26 June 2003, I am advised that there was, some months before that, a very similar report in the Canadian press. The Canadian authorities checked that out with the United States at the time and got the same answer, and also the Canadian authorities could find no evidence in their system of any such document.[99]

1.153 A related press report was one that appeared in the Sydney Morning Herald of 15 July 2003 claiming that in March 2002 Jabarah, who was a Canadian student and a senior JI lieutenant, was captured in Oman and turned over to US custody. The Herald report says:

Within two months he was telling all he knew about JI and al-Qaedas operations in the region.As a result, Washington put intense pressure on the Indonesian government to crack down on JI. This climaxed in early June with the US persuading President Megawati Soekarnoputri to agree to arrest a senior al-Qaeda operative, Omar al-Faruq

By July last year Australian intelligence had received briefings on Jabarahs interrogation. His reference to JIs planned attacks on Westerners in bars and nightclubs, especially in Indonesia, could not have been overlooked.[100]

1.154 Inspector-General of Intelligence and Security (Bill Blick) told the Committee that 'to the extent that there was reporting arising from interrogations and to the extent that that reporting related to threats to Australian interests and Western interests generally in Indonesia, I saw it'.[101]

1.155 The key assumption made by the authors of the Herald report was that any briefings received by Australia in July about Jabarah's interrogation did in fact include a statement about 'planned attacks on bars and nightclubs'. The Herald report was wrong in that respect.

1.156 The Committee investigated the Herald claim in an in camera hearing with the relevant intelligence agency.

1.157 Australia asked for and received in May-June 2002 a report from the Canadian Security Intelligence Service which provided background on Jabarahs involvement with al-Qaeda. That report made no reference whatsoever to planned attacks on bars and nightclubs.[102]

1.158 Australia continued to seek access to Jabarah, who had passed from Canadian to US custody. Neither access to, nor further information about, Jabarah was available to Australian authorities - at least part of the reason being legal procedural difficulties related to his prosecution. Eventually, Australia received a number of reports detailing interviews with Jabarah, most having been conducted in May 2002.

1.159 These reports were received by Australia several weeks after the Bali bombing.[103] It was in one of these reports that the comment about the plan to attack nightclubs was made. The relevant section of the report read as follows:

The last contact the source [Jabarah] had with Hambali was in mid-January 2002 in Thailand. At that time Hambali discussed carrying out attacks with his group. His plan was to conduct small bombings in bars, cafes and nightclubs frequented by westerners in Thailand, Malaysia, Singapore, Philippines and Indonesia. Hambali also stated that he had one ton of PETN explosives in Indonesia. The source [Jabarah] did not know who would carry out the bombings or when.

1.160 The Committee considers that if such information had been available to Australian agencies in the middle of 2002 it may well have led to a more explicit warning to Australian travellers about the dangers of congregating in clubs and bars. It may also have led Australia's intelligence agencies to strengthen their reporting about the vulnerability to attack of tourist spots such as Bali. It remains the fact, however, that this information simply was not available to Australia in the lead-up to the attacks on Bali.

1.161 The information that emerged from the Jabarah interrogation did not produce specific details about the timing and location of attacks on clubs and bars, and to that extent delivered no specific intelligence about Bali. However, knowledge of such a declaration of intent to attack bars and nightclubs would have added considerable weight to Australia agencies' assessment that soft targets were likely to be included on JI's 'hit list'. This in turn would most likely have prompted agencies to re-evaluate the risks to Bali and other tourist sites, and to strengthen travel warnings.

1.162 Towards the end of its inquiry, the Committee was confronted with another controversy arising out of comments in a report published by America's Rand Corporation. Entitled Confronting the "Enemy Within", the report examined the domestic intelligence bureaus in the UK, France, Canada and Australia with a view to informing the debate in America on the advisability of creating 'a dedicated information collection and surveillance body that operates outside the existing structure of the FBI'.[104]

1.163 Page 49 of that report included the following paragraph:

In the United Kingdom, MI5 has been accused of ignoring the threat posed by al Qaeda Equally in Australia, regional analysts following the movements of JI charge ASIO blatantly disregarded threat assessments that, if followed, could have prevented the October 2002 Bali tragedy.

1.164 The footnote to the last sentence referred to interviews with people in 'The Intelligence Corps, AFP', the 'Institute of Defence and Strategic Studies, Singapore' and an article in The Age of 8 January 2003. The Committee wrote to Dr Chalk, one of the RAND Report authors, asking for further details. The Committee's letter included the following:

You will appreciate that such a criticism of ASIO is a serious one, and the Committee assumes that you are satisfied that there are solid grounds upon which to base it. It is certainly not a report that this Committee takes lightly.

On checking the footnote that references your statement, you cite interviews with 'The Intelligence Corps, AFP, Sydney' and the 'Institute of Defence and Strategic Studies, Singapore'. The Committee is unclear about the first citation. The Committee is not aware of an AFP 'Intelligence Corps' in Sydney. Could you clarify the reference? Could you have meant the ADF?

The Committee will, in any event, contact the AFP Sydney office to see whether it can shed any light on this matter. If indeed AFP officers have grounds for claiming that ASIO blatantly disregarded relevant intelligence concerning threats to Bali the Committee would like to hear from them.

You also cite a report in The Age of January 8, 2003. It relies heavily on, and quotes extensively from, an article in the January 2003 issue of The World Today the magazine of the Royal Institute of International Affairs. The Committee is aware of the kinds of issues and arguments canvassed in that article. The article is clearly a legitimate contribution, at a fairly general level, to the debate about the rise of international terrorism and the new challenges posed for national and regional security and counter-terrorism strategies in SE Asia and Australia.

The Committee notes from its website that The World Today declares itself to be a carrier of "stimulating argument from policy-makers, journalists and academics" and advises its contributors that "[t]he challenge is to make ideas attractive to a broad range of readers - from schools and businesses through the diplomatic and political worlds to academia."

This is a perfectly proper endeavour for a magazine, but in the Committee's view, any serious critique of the intelligence efforts of Australian agencies would need to delve considerably deeper into the matters canvassed in The World Today, and discern what hard evidence was being relied upon to support the judgements being made by the authors.

1.165 Dr Chalk responded promptly to the Committee's letter saying that the reference to the AFP was incorrect (it should have been the ADF), that he would not reveal his sources, and that he considered The World Today as a reputable and suitable publication upon which to draw. Dr Chalk also pointed out that he was not making allegations against ASIO, he was simply reporting what others had said to him.

1.166 The Committee regards the allegations that ASIO 'blatantly disregarded' warnings that 'could have prevented' the Bali bombing to be totally without foundation. The Committee is not aware of any approaches made by Dr Chalk to either the AFP or ASIO to seek a response from those agencies to the allegations, either prior to or since the publication of the RAND report. The Committee considers that these allegations, especially given the prominent media coverage of the RAND report that resulted from their inclusion, may have caused unnecessary grief to the families of Bali victims, and undermined public confidence in ASIO.

1.167 The RAND authors are perfectly entitled to publish their views, and to report the views of others. However, it cannot have escaped their notice that allegations of the type they were reporting were not inconsequential. Their failure to balance those allegations, for example by making reference to the findings of the widely-publicised Blick report - which examined all the pre-Bali intelligence material and concluded that there was no specific intelligence warning of the attack - was an omission that does not reflect well on the authors.

Meeting with Minister Downer, June 2002

1.168 The content and outcomes of a meeting between ONA officials and the Minister for Foreign Affairs (Mr Downer) in June 2002 were examined in some detail during the Committee's inquiry.

This [ministerial] briefing took place in two sections on 18 and 19 June 2002. At the briefing, ONA set out the intelligence on the nature of the domestic, regional and international radical Islamic movements and its conclusions on their interconnections and the potential for terrorist activity. The discussions focussed broadly on the terrorist threat in the region and that from JI in particular. [105]

1.169 Over the first half of 2002, Australia's intelligence agencies had become more confident that al-Qaeda had links into Indonesia, with ONA saying that al-Qaeda had:

A presence in Indonesia which gives it the capability to conduct terrorist acts in and from Indonesia. But the extent and nature of al-Qaeda's presence are unclear and hard evidence remains elusive.[106]

1.170 ONA had reached a point where the agency 'felt it desirable to draw to the Government's attention by means other than written reports its conclusions on the existence of a regional extremist network with connections to al-Qaeda'.[107]

1.171 According Dr Bill O'Malley, one of the ONA officials conducting the briefing:

We were trying to make the impact on the minister of our knowledge up until then and explain the danger of the organisations and explain our developing concepts of the way in which these organisations were planning and were capable of carrying out operations.We did not know exactly what they were doing but we knew that there was no shortage of explosives available to them in Indonesia and, indeed, elsewhere in South-East Asia. Much, but not all, of the briefing was confined to Indonesia In South-East Asia we knew there was no shortage of explosives and no shortage of weapons. We made these points clear. We said that basically they had the intention, they had the capability, and getting access to the kinds of equipment they needed would be no problem.[108]

1.172 When asked by the Committee how the minister reacted to this advice, the DFAT note-taker who was present (Mr Paterson) replied:

The minister was quite concerned by this advice and that led him to ask a question. He asked, What were their objectives in South-East Asia? The answer he got specifically, according to my notes, was: To destabilise local governments to allow Islam to gain more hard-line adherents. He then asked, What are the targets? The ONA analyst responded, Principally Indonesian Christian targets, and made the judgment that local rather than Western targets were possibly more likely, but then went on to say that Western targets were also possible. That was when the illustrative examples were given of the US or Australian aircraft in Indonesia, in Bali, Singapore and Riau. [109]

1.173 Another ONA official present at the briefing told the Committee that:

Within the brief itself we covered a range of possible targets. Hotels, nightclubs, airlines and the airport in Denpasar were all covered. We did not do those specifically because there were Australians there; it was because they were seen to be very viable targets for Jemaah Islamiah.[110]

1.174 ONA's written submission to the Committee described how the briefing unfolded.

Towards the end of the briefing session, in response to a question from Mr Downer about possible targets, Bali, Riau and Singapore were assessed to be attractive targets for Jemaah Islamiyahwhich was identified as the primary regional terrorist threat. This judgement was not made on the basis of any specific intelligence but was the result of analysis of terrorists probable capabilities and likely intentions. International hotels, nightclubs and airlines/airports were assessed as being high on terrorists target lists.

Notes taken at the meeting by a DFAT officer indicate that Mr Downer then asked whether consular advice should be changed. According to the notes ONA responded that there was no specific intelligence.[111]

1.175 Mr Bill Paterson, the DFAT official who was present at the meeting, confirmed to the Committee that he took notes of the conversation and described the relevant part of the meeting in the following terms:

The conversation went on, with the ONA analyst pointing out that Western targets such as in Singapore were also possible. Expanding on that, the ONA analyst said that the possibility of attacks on US or Australian aircraft in Indonesia could not be ruled out, or Bali or Singapore.At that point, Mr Downer, in a general way to those present, in effect said, Well, I wonder whether that means we should be changing the consular advice, to which the ONA analyst replied that there was no specific intelligence to warrant that.[112]

1.176 Mr Paterson's actions following the meeting are discussed below.

1.177 One of the ONA officials present at the meeting (Mr Farmer) told the Committee:

I do not recall anyone actually saying that there was no evidence. But the focus, for my part, was on briefing the minister on the information and my views at the time. The rest of the discussion I listened to and participated in to a degree, but I have no reason, as I said, to discount what was written in the [DFAT officer's] notesthat there was no evidence. If that was the note taken from the meeting, then I have no reason to question it.[113]

1.178 ONA insisted to the Committee that ONA officials would not have ventured an opinion as to whether travel advisories should be changed. ONA's then Director General, Mr Kim Jones, told the Committee:

No. I would like to say that I do not think we would have expressed a view on the desirability of changing the travel advisory or not because we are not experts in that field and we are not across the factors that are fed into such a judgement. It is quite possible that that question was addressed not to us but to others in the room. Certainly it was the case that there was no specific intelligence. I have no reason to doubt that we would have said there was no specific intelligence.[114]

We would not make a suggestion on travel advisories, because we simply are not competent to make those sorts of judgements. All we could say is that we had no specific intelligence.[115]

1.179 Another ONA analyst, Dr Bill O'Malley was also at the briefing. He stated to the Committee:

These are notes of [DFAT's] Mr Paterson. I think they say simply that there was no specific information. As I recalland this is a recollection; we are talking almost two years after the eventsomeone in ONA said, Thats not really our business; that is to say, We dont do travel advisories. My understanding is that someone would have said, We dont do travel advisories, and someone else would have said, We have no specific information. Who said that, either among our contingent or among other people in the room, I simply cannot recall. I know that I did not.[116]

1.180 While the two ONA officials, Mr Farmer and Dr O'Malley, claim not to have made the remarks, nor remember who did, DFAT's Mr Paterson seemed more certain about the details of what was said and by whom. He was also the only official who had taken notes of the meeting.

My recollection of that meeting is that [Minister Downer] asked the room as a whole, Should we be thinking of changing the consular travel advice? He did so in an illustrative way and to no-one in particular. That is my recollection. At that point, my recollection is that Mr Farmerand I am pretty sure it was Mr Farmersaid, There is nothing specific in intelligence which would warrant that. He did not say, No, we shouldnt be changing the travel advice. He simply said, There is nothing specific in intelligence which would warrant that.[117]

1.181 The Committee accepts that the accounts rendered by all officials present at the meeting were presented to the Committee as being to the best of their recollections, and in Mr Paterson's case, as also reflected in his notes. Mr Paterson's evidence, because of the contemporaneous record he made of the briefing, must be regarded as the most reliable.

1.182 Mr Paterson's evidence is that the minister addressed the question about changes in consular advice 'to the room as a whole'. It was not appropriate for the Minister to seek policy advice from ONA, nor for ONA to have given it, if indeed it did. (The written notes simply say 'ONA: nothing specific' and it is disputed whether ONA proceeded to indicate whether that fact did or did not warrant a change to the consular advice.) Particularly with respect to travel advice, ONA has no expertise in that area, and DFAT has made it abundantly clear to the Committee that ASIO, not ONA, is the agency upon which it relies to provide security threat assessments for input into Travel Advice.

1.183 Also, the minister did not specifically direct the DFAT official present to seek further advice from the Department as to whether the consular advice should be changed. Mr Paterson properly discharged his duty as note-taker by reporting the details of the briefing back to the relevant DFAT division on the following morning.

I was at that meetingto follow up any issues that need following up and to convey back to the department the general sense of ONAs advice. That is in fact what I did.

My recollection is that it was quite late that evening and other officers had gone home...

I briefed the South and South-East Asia division the following morning in some detail about the nature of the discussion.[118]

1.184 Given that the ministerial briefing was sought by ONA, the country's peak assessment agency, to bring to the Minister's attention the regional terrorist threat and the threat posed by JI in Indonesia, it should not be regarded as a briefing of little consequence. Mr Paterson told the Committee that 'it certainly struck me as worth reporting back to my department and taking further'.[119]

1.185 Mr Paterson was asked by the Committee whether, during the ministerial briefing, Bali, Singapore and Riau were being identified as targets in respect of which there was specific information about potential terrorist activity, or whether those places were being referred to in an illustrative way as being the sorts of places in the region that terrorists might attack if they were to mount a terrorist operation.

1.186 Mr Patterson, relying both on his recollections, and the detail of his notes (which attached 'e.g.' to the Bali and Singapore references) replied:

It was clear to me that it was absolutely in the latter [illustrative] context.

I am absolutely adamant on this point. It was clearly just illustrative examples given by ONA analysts.

1.187 The Committee explored the nature of these examples of potential targets with the ONA officials who gave the briefing. The following exchange conveys ONA's characterisation of them:

Senator BRANDISIt is just as if I were to ask you right now, Mr Jones, which building would be targeted if there were to be a catastrophic attack on a major public building in Australia, and you would probably tell me that it could be the Sydney Opera House, Parliament House or another well-known public building.

Mr JonesI think it was more focused than that. Those judgements were based on an analysis of the factors at play in the region.

Senator BRANDISBut, as you said in both your submission and your opening statement this afternoon, ONA was possessed of no intelligence on which to build a judgement that there was a particular threat to Bali. Is that correct?

Mr JonesThat is correct. It was an analytical judgement; it was not based on intelligence.

Senator BRANDISTo use the dichotomy I adopted before, it was a speculative possibility rather than a predictive statement?

Mr FarmerNo, it was a considered analysis of all the information available. That is not speculation.

Senator BRANDISI am sorry, I do not mean speculation in a pejorative sense; I thought I made that clear. It is enough to say that you were not making a prediction that something was going to happen in Bali, were you?

Mr FarmerWe were answering a specific question as to what might be the targets in South-East Asia. We described Bali and the reasons why Bali might be a target. Then we went on and explained what potential targets there would be in Bali. At the end of that, we expressed the view that Riau and Singapore, for similar reasons, could also be seen as likely targets.[120]

1.188 The reference to Bali as an example of a target that would be attractive to JI did not go unremarked by the minister, who was prompted to ask the question as to whether the consular advice should be changed. As previously discussed, to that question the minister received the answer evidently from an ONA official - that there was 'no specific intelligence' of an attack.

1.189 As well, it seems from the evidence that ONA's views struck home with the DFAT officials present. ONA's Dr Bill O'Malley described it as 'an eye-opener for the DFAT people'.

I would like to think that the minister left the room more concerned about the terrorist threat than had been the case before. That was our intention, and I think that was the result of the meeting with him. People left the room saying, Further consultation between ONA and DFAT has to occur on this issue, because I think it was an eye-opener for the DFAT people who were in the room as well.[121]

1.190 Mr Farmer's account painted a similar picture :

He [DFAT's Bill Paterson] came out of our briefafter listening to the brief to the foreign ministerand said that a lot of this was new to him and he was concerned that we were so agitated about the issue, and he asked if we could come and brief members of his division.This was immediately following our briefing to the foreign minister. In the anteroom of the foreign ministers suite we had this discussion, and Mr Paterson asked us to come and brief members of his division.[122]

1.191 The Committee asked Mr Paterson whether the briefing was the 'eye opener' that ONA claimed.

I think it is possibly overstating it to call the testimony eye-opening for us, but it certainly represented a progression in our understanding of Jemaah Islamiah and its networks in South-East Asia. That had been a progressive thing since the foiled attempt by Jemaah Islamiah to undertake attacks in Singapore in December 2001. From that point on, our attention to the target, both in DFAT and I think it is fair to say in the Australian intelligence community, increased markedly and our understanding grew progressively.

I think agitated is overstating the case, again. Yes, indeed, the briefing did provide material that was new to me. By way of background, I should add that I was very familiar with terrorism issues in the immediate period after 11 September 2001, when I headed up the an Anti-Terrorism Task Force Some of this was distinctly new to me. I think it also represented an evolution in the assessment of ONA as well. So, yes, if not an eye-opener, if not dramatic, it certainly struck me as worth reporting back to my department and taking further.[123]

1.192 DFAT's Ian Kemish explained to the Committee the subsequent actions of the Department.

As a result ofthe debrief from Mr Paterson, on 28 June 2002, officers of the department emailed to ONA several questions going to ONAs assessment of the terrorism threat in South-East Asia and Indonesia in particular.One question we put to ONA among a range of others was: what evidence or theory is behind the idea that terrorists might target Western interests in Bali? We never received a response to this or any other of our questions. We were not particularly expecting a direct response. As I said, the idea was to provide some guidance on the issues of interest to us as a clientThe lack of response to our specific questions and the lack of references to Bali in subsequent watch reports led DFAT to concludethat ONA had no evidence to support its idea about Bali and that this idea was speculative rather than an assessment of hard evidence

The purpose of the email was not to elicit a direct response but to provide input for ONA analysts to take into account in framing subsequent watch reports. In a way, you can see the subsequent watch reports as the response

Officials of the two organisations talk all the time.I refute absolutely any suggestion that the department was being anything other than very conscientious in following up on every little reference that was made in this broad area.[124]

1.193 That the purpose of the email was 'not to elicit a direct response' but simply to provide 'feedback' or 'guidance' to ONA was reiterated to the Committee by DFAT during the hearings. But the actual request that went to ONA appears to be quite direct, and deliberately seeking a response.

1.194 The email had in its subject heading: 'Terrorism Questions'. The text of the email read:

'Given the recent developments in terrorism issues in Indonesia and the desire to bring our briefing closer in line with these developments, we (SED [South East Asia Division] and ISD [International Security Division]) have completed a list of questions which would help us update our briefing. When you have the opportunity, we would be very grateful for your response to these questions.'

1.195 One of these 6 questions was: 'What evidence/theory is behind the idea that terrorists would most likely target western interests in Bali?'

1.196 To the Committee, this question and the email as a whole - looks like a fairly direct request to ONA for some answers to particular questions that would enable DFAT to prepare accurate and timely briefings about terrorist threats - and presumably to inform, among other things, the travel advisory process. In neither tone, subject heading nor content does the email appear to convey that DFAT was merely giving 'feedback' or 'guidance' to ONA.

1.197 Notwithstanding Mr Paterson's evidence that he was assiduous in following up the matter with the relevant divisional officers in DFAT the morning after the Downer briefing, it was nine or ten days later that the email was despatched to ONA by DFAT.

1.198 On the face of it, it would be of some concern if ONA as claimed in DFAT's evidence - did not respond directly to an email headed 'Terrorism Questions', especially in mid-2002 when militant Indonesian extremism and the activities of JI were a hot regional security issue especially when ONA had itself explicitly sought to bring such threats to the Foreign Minister's attention via a personal briefing.

1.199 DFAT's Mr Kemish told the Committee that 'In a way, you can see the subsequent [ONA] watch reports as the response.' The Committee nevertheless would regard such a response by ONA as inadequate under the circumstances of a direct request going to them seeking 'evidence/theory' behind the idea that terrorists would target Bali. Moreover, watch reports do not deliver accounts of 'evidence/theory' that lies behind an assessment they are the assessment itself, the product of ONA's analysis

1.200 According to ONA's current Director-General (Mr Peter Varghese), the email of the 28 June 2002 did not go unresponded to. He told the Committee that the response took the form of a follow-up meeting with DFAT officials to address the questions contained in it:

There was not a written response provided by ONA, but there was a subsequent meeting with DFAT which covered essentially the ground that was covered in the Downer briefing and would have addressed the questions raised in the email that was sent from DFAT to ONA

[Present at the meeting]was Dick Gordonwho was then head of our South-East Asia branch, the position that Dr OMalley currently occupiesand Mr Farmer. I am advised that there were four officers from DFAT at the meeting.[125]

1.201 Mr Varghese's account was elaborated by Mr David Farmer, one of the ONA analysts present at the alleged (post-email) meeting between ONA and DFAT officials.

We gave to the officers present essentially the same brief we gave to the Minister for Foreign Affairs. We then followed up with questions that they had. The issue of Bali was raised in the same way the minister had raised it in our briefing to him. We answered the question pretty much in the same way by addressing why we thought those sorts of targets would be high on JIs list.[126]

1.202 DFAT officials, however, deny that any such meeting took place.

As far as DFAT is concerned this meeting did not happen. None of the four DFAT officers who supposedly attended the meeting has any recollection or record of such a meeting taking placeNor does a comprehensive search of recordssupport that it took place

The only possibility we can think of is that in their recollection there is some confusion with a meeting that took place on 7 June, prior to the meeting with Mr Downer. Coincidentally, all four officers supposedly in the subsequent meeting were in that meeting. We have a record of it in diaries and Mr Paterson has a very clear record of it in his notes. The suggestion that there was a meeting in response to the email that we sent is interesting, to say the least... It does not add up. I am basing my comments on investigations done by others in the department and discussions with those who were supposedly involved in the meetingI base my comments on the firm records that we have been able to unearth.[127]

1.203 According to Mr Varghese, no notes were taken by ONA officials in the course of this meeting.[128] DFAT officials also have no notes of such a meeting but for them, that simply reinforces their view that the meeting did not take place.

1.204 The Committee took the relevant DFAT official carefully through his testimony about the meeting not having taken place. The official was Mr Bill Paterson.

It is conceivable that I would not have [taken notes]I would not want to overstate the thoroughness of my personal recordsbut, given the likely content of such a meeting, I think it highly unlikely that I would not have taken some record. I have an abbreviated record of a meeting with ONA dated 7 June that was very much on these topics and broadly conforms, I think, to the nature of the meeting that was outlinedby Mr Farmer from ONA.

I keep a notebook in which I record notes of substantive meetingsMy practice is to keep a single chronological bookand there are no notes which are relevant to this subject matter.

I recall no such meeting. When asked, I checked my electronic diary records, which are retained on the departments computer system, and there was no record of my having attended a meeting on that date...If the meeting were lacking in significant substance there is the possibility I would have taken no record. In this case, I think that unlikely.[129]

1.205 According to DFAT officials' records, the only possible time for such a meeting - at which all the relevant officers could have been present and which was within the week or so timeframe following the email - would have been the afternoon of 28 June 2002. The email had been sent that morning at 11:33am. DFAT told the Committee that there were no records of ONA officers entering the RG Casey building on that afternoon.[130]

1.206 The Committee followed up this discrepancy between the evidence given by the two agencies firstly with ONA. At this hearing with ONA, the Committee had the benefit of evidence from Mr Richard Gordon, who had not yet appeared before the Committee, but who prior to his retirement had been Head of the SE Asia Branch in ONA. He told the Committee:

Yes. There were two meetings. There was one before we saw Mr Downer and, to my recollection, one subsequent to that. It was arranged in fact as we were coming out of Mr Downers office. That is my recollection.[131]

One reason that I personally recollect the second meeting is that [ONA Senior Analyst David Farmer] used, when talking to the DFAT officers, the briefing notes that he had prepared for Mr Downer. I remember them particularly because on both occasions the question of the use of powder and the amount of explosive material required to create an explosion was discussed. He cited the experience of the Oklahoma bombing...[132]

1.207 The ONA officials who stated that they had attended the disputed meeting gave the Committee some details as to who attended and where the meeting was held:

Mr Paterson, Mr Nethery, Mr Engel and Ms Millington [from DFAT were all there]. This is how I can recall that there were two meetings, because the attendance at the first meeting before the ministers brief was actually different. It was more made up of members of the South-East Asia Branch, whereas the subsequent meeting was mostly made up of officers from the international security area.[133]

In an upstairs office with windows, looking out the courtyard toward Parliament House, in the mid-to late afternoon, but I could not tell you on what date.

[A]t that stage there would be no record of ONA people in the building.ONA had a number of courier passes. ONA officerswould use the courier passes and they would not be registered. Our actual presence would not be on any of their records were they to search for them. In the same way, I think DFAT have identified that they agree there was a meeting on 7 June; I am sure that if they did a search they would not find our presence on their records for that meeting either.[134]

1.208 The Committee sought to determine whether there were any records whatsoever that ONA had that pertained to the meeting notes, diary notes (electronic or otherwise). No such documentation is available. When pressed on this absence of any such written evidence, ONA spoke about its work practices at the time.

We were in transmission mode. We were actually giving the brief rather than receiving the brief. We would not normally be taking notes in those circumstances.[135]

[C]an I say this about the whole process of recording what is said and what is not said. ONA produces formal written product which is its authoritative view on the nature of the issues that we address, and we stand by our written product. In the course of our daily working life, we have lots of conversations with lots of people who are interested in ONAs perspective and they always remain informal. They remain informal because we have a very clear process of writing down our judgements so that people can read them and make what they will of them. The idea that, every time in our day-to-day contact that we were offering perspectives on issues, we would record what we say is simply not part of our work practice and would be quite inconsistent with the way in which the office operates. I would not want the committee to have the impression that ONA is engaged in a whole lot of formal oral advice to policy makers or decision makers that goes unrecorded, because our advice is always written and is always circulated in that form. So, while it may appear somewhat surprising that we attend meetings and do not record it, it is actually not all that surprising when you look at the way in which national assessments and current assessments are actually formulated.[136]

1.209 In the Committee's view, if the meeting had taken place and if DFAT officials were advised by Mr Farmer at that meeting that Bali 'would fit the profile as a target for terrorists' [137] then weight might be added to the contention that DFAT's travel advisories during much of 2002 were not reflecting adequately the level of threat to Australian tourists in Indonesia.

1.210 According to ONA, no officials from DFAT's consular division were present at any of the meetings or briefings under discussion.

As for travel advisories, at neither the 7 June meeting, the briefing to the minister nor the subsequent meeting that we held with DFAT were any members of the consular branch present.

...Nor were they meetings about consular warning, advice or travel. That was not a subject of discussion. The question of Bali did arise, including from the DFAT question, because that was a natural question to ask. But at both meetings, as I recall, we specifically said that we had no information or intelligence on possible or specific targets, beyond the general concerns we had that Western targets of opportunity would be an issue.[138]

1.211 The Committee received further detailed documentation from DFAT including email and diary records and photos of the views from the office where the meeting was alleged to have taken place. DFAT also reiterated its evidence before the Committee at its final hearing.

As you are aware from written testimony we have provided to the committee, we have conducted quite a thorough examination of that record. Those records stand up well on these issues on two counts. One is that those records indicate clearly that the four officers whom ONA recalled participated in a meeting after the Downer meeting were in fact together at a meeting on 7 June. That is actually contrary to the ONA recollection. I should also say that those electronic records indicate very clearly that none of those officers had an arrangement for a meeting together with ONA subsequent to the Downer meeting

But, not only that, there is a record of them all meeting prior to the Downer meeting, which is what we recall. The second point I would make is that it is one of the skills that is instilled in our officers and encouraged through training from the time that they are graduate recruits to keep proper records of the conversations in which they are involved. Of course, officers do not have formal records done up of every conversation in which they are involved. But certainly a skilled DFAT officerand the ones that have been named are all skilled DFAT officerswill take personal notes of such meetings. We have already made it clear to the committee that Mr Paterson has notes of a 7 June meeting but not of a subsequent meeting. That is also true of other officers. In addition to that, one of the other officers keptit was part of his personal habita detailed set of entries in a PalmPilot. Again, that indicates that he was present for a 7 June meeting but not for a subsequent meeting.[139]

1.212 On the basis of the evidence before it, the balance falls strongly in favour of DFAT's account that the disputed meeting between ONA and DFAT took place before, not after, the ONA briefing with Mr Downer.. If, as seems almost certain, the alleged post-Downer meeting did not take place, ONA warrants criticism for failing to respond adequately to the DFAT's direct and unambiguous questions about a highly significant issue for Australians and Australian interests abroad namely, terrorism.

1.213 Although DFAT's email did not elicit a specific response from ONA, the evidence from ONA officials suggests that, on the matter of regional terrorism generally, ONA was at pains to ensure DFAT was well-informed about its thinking, and that, in turn, DFAT was keen to know more.

There was an extraordinary range of contacts with them [DFAT] during this whole period. We were in fact particularly keen, especially as our own thinking evolved, to keep DFAT abreast of it and not to rely on the impression that our written word only would have conveyed. We were quite active throughout this whole period in seeking to ensure that DFAT understood our perspectives.[140]

DFAT itself was changing. Indeed, with our [ONA's] own role in this, it was a very difficult issue for us, our not being terrorist experts but really political security analysts, in the broad old-fashioned sense of that word. Our past dealings had been more or less exclusively with the South-East Asia Branch. But DFAT was changing its arrangements for the handling of these issues and it then transferred to Bill Patersons division. I had many conversations with Bill over the phone about these issues and otherwise.[141]

We had had conversations with Mr Paterson going back some time on this issue. He is a very sensitive, very professional officer...I think he was concerned in this case over some time that we were on the same wavelengththat they [DFAT] fully understood the basis on which we were shifting our analysis of the nature of the threat. That was a process, as you would recall from our initial statement that went over a period of three to four months even. I think it was in about April [2002] that we became more definitive, as my recollection goes...[142]

1.214 Mr Paterson provided to the Committee his own account of the communications between him and ONA:

I had continuing contact with officers in ONA over the rest of the year, but it was principally on other subjects. There could have been some incidental discussion on terrorism because the work I subsequently moved on to as head of the Iraq task force later in the year meant that terrorism issues were relevant to my work. In addition, at the time of the Bali bombing I had some peripheral contact with the Bali task force headed by Mr Kemish. But it was not central to my responsibilities and I had no specific discussions with ONA directed at this topic

I would feel free to pick up the phone and ring analysts in ONA at any time. I know most of them personally and would pick up the phone and speak to them if there was an issue that I wanted to explore further, seek an additional briefing on or suggest that they might even take on as an analytic subject. [143]

1.215 While the Committee is somewhat disturbed that ONA provided to the Committee information about an alleged meeting that it could not support with suitable documentary evidence, and also insisted upon a version of events that the Committee considers to have been effectively repudiated by DFAT, it is not a core matter upon which this Committee has deliberated or wishes to pursue further.

1.216 The Committee is satisfied that ONA and DFAT appear to have developed an increasingly close relationship as the new paradigm of international security, focused on terrorism, has demanded ever greater cooperation between government agencies. The Committee also agrees that, prior to Bali, the views of ONA and DFAT were evolving in tandem, and both are in no doubt that there was no actionable intelligence that gave warning of the Bali attacks on 12 October 2002.