Updated 9:17 AM ET October 14, 2002

By Dean Yates and Joanne Collins

BALI, Indonesia (Reuters) - Indonesia linked the al Qaeda network to the Bali bomb explosions that killed 181 people, conceding for the first time Monday the group was operating in the Muslim country.

And in a sign that an investigation into the blasts was making progress, police said they had names of individuals connected to the attacks.

Defense Minister Matori Abdul Djalil told reporters the blasts were the work of professionals.

That is why, he said, "I am not afraid to say, though many have refused to say, that an al Qaeda network exists in Indonesia."

"I am convinced that there is a domestic link with al Qaeda," he said. Djalil's comments appear designed to head off criticism from Indonesia's neighbors that it is not doing enough to combat terrorism.

Frustrated that months of warnings fell on deaf ears, those neighbors have piled pressure on Jakarta to finally clamp down on Islamic militants suspected of being behind the attacks on nightclubs along Bali's Kuta Beach packed with foreign tourists.

The United States ordered all non-essential diplomats and all family members -- about 300 people -- to leave Indonesia.

Monday, distraught relatives leafed through photographs in a Bali morgue to identify loved ones.

Australian survivors of Saturday's explosions began streaming home through Sydney airport, some clutching surfboards and souvenirs as they fell sobbing into the arms of family and friends.

"It was like a war broke out. It was just fear," Leigh McGrath, 22, told reporters at Sydney airport, recalling the car bomb outside the Sari nightclub. "I don't think there will be many people going back to Bali."

Hundreds more frightened and injured tourists headed for Bali's airport to catch flights home. A few were in wheelchairs, others on crutches and swathed in bandages.

TERRORISM DANGER IS "REAL"

Bali police spokesman Yatim Suyatmo told Reuters investigators "have names that would lead in some directions to solve this case."

"There are names which are linked (to the explosions) who could give information," he said, without giving any details.

Indonesia's foreign minister underlined an apparent hardening of resolve in Jakarta by telling reporters there was "no doubt" the country faced a terrorist threat.

"This has to be realized by all of us, including our political elites, that the danger is real and potential here," Hassan Wirajuda said after a meeting with foreign ambassadors.

The worst act of terror since September 11, 2001 fanned fears that Osama bin Laden's al Qaeda -- dispersed from Afghanistan after the World Trade Center attack -- was regrouping.

Predominantly Muslim Malaysia said it would closely watch nightspots popular with Westerners. The Philippines, battling a Muslim insurgency, put its police force on a nationwide alert over fears of further attacks in Southeast Asia.

Indonesian police are getting help from overseas experts, including the U.S. Federal Bureau of Investigation and Australian investigators. The Australian Federal Police said on Monday it has sent 44 bomb and body identification experts to Bali.

Diplomats were watching for any moves against the Jemaah Islamiah group. Southeast Asian nations have rounded up scores of its members and have warned that others have gone to ground in Indonesia.

They identify one key leader as militant Muslim cleric Abu Bakar Bashir, who runs a religious school in central Java.

Bashir, who has consistently denied links to Jemaah Islamiah or terrorism, said he had heard reports he might be arrested.

Asked for his view of the Bali blast, he said: "It was a brutal act. I condemn such actions." Sunday, he had blamed the United States for the attack.

STOCK MARKET HAMMERED

The Jakarta stock market dived more than 10 percent and the rupiah currency slumped, partly on fears that foreign investors will flee the world's fourth most populous nation.

"We're finished," said Aburizal Bakrie, chairman of the Indonesian Chamber of Commerce and Industry.

"Our defense to convince people that doing business in Indonesia is safe is finished."

Ordinary Indonesians were stunned at the carnage on the "island of the Gods" -- a Hindu enclave in a moderate Muslim nation that had been cocooned from the violence and unrest that has engulfed the country since former strongman Suharto was toppled nearly five years ago.

"Innocence Lost," mourned a headline in the Jakarta Post.

Kuta is a playground for Australians who flock to its beaches for the sun and surf, and they took the brunt of the casualties. A total of 13 Australians were confirmed dead and 225 were unaccounted for.

A large number of Indonesians were among the 181 dead, many of whom have yet to be identified.

Other nationalities among the dead and more than 300 wounded were Singaporeans, Britons, Americans, Swedes, Swiss and Dutch.

The revelers in the Sari nightclub included rugby teams from around the region competing in an annual 10-a-side tournament.

Three members of the Singapore Cricket Club's rugby team were confirmed dead, of a squad of 17 mostly British expatriates. Five were still missing and four team members were in hospital in Singapore.

Simon Quayle, coach of the Kingsley Senior Football Club, an amateur Australian Rules football team from Western Australia state, told reporters: "Realistically we expect most, or at least half, of all the blokes, to be located somewhere in that morgue."

Australia declared a national day of mourning for what one politician called the worst loss of Australian life since World War II.

"What happened at the weekend claimed our own in great numbers, and on our own doorstep, and touched us in a way that we wouldn't have thought possible a week ago, or even three days ago," Prime Minister John Howard told parliament.

"It is inevitable that in the wake of what occurred in Bali over the weekend that the thought of Australians will turn to the potential vulnerability of our own soil, our own mainland."