Indonesian police chief General Bambang Hendarso Danuri displays a composite police file photograph of wanted Al Qaeda-trained bomb specialist Dulmatin seen alive (L) and after he was killed (R) during a press conference in Jakarta on March 10, 2010 following official confirmation of his identiy. Dulmatin, suspected Bali bombing mastermind was killed by Indonesian anti-terrorist forces during March 9 raid in the outskirts of a Jakarta in a major blow to Indonesia's Islamic militants. AFP PHOTO / ROMEO GACAD

CANBERRA, Australia/JAKARTA, Indonesia - A suspected mastermind of the Bali bombings was killed in a police raid in Indonesia in the latest blow to an Islamist militant movement in the world's most populous Muslim country.

Dulmatin, who once trained with al Qaeda in Afghanistan, was one of three militants killed in a shootout with police at an Internet cafe and a house nearby, Indonesia's President Susilo Bambang Yudhoyono said on Wednesday.

"Today I can announce to you that after a successful police raid against the terrorists hiding out in Jakarta yesterday, we can confirm that one of those that was killed was Dulmatin, one of the top Southeast Asian terrorists," Yudhoyono said in a speech in Australia's parliament house in Canberra.

The series of police raids that led to Dulmatin's death will be seen as a coup in Indonesia's fight against Islamist radicals ahead of U.S. President Barack Obama's visit March 20-22.

But analysts said Dulmatin's emergence in Indonesia with a new group showed a worrisome ability of local militants to forge international links, including with al Qaeda-affiliated outfits.

Police shot dead Dulmatin, who they said fired at officers with a revolver he was carrying, and two others in a series of coordinated raids on the outskirts of Jakarta on Tuesday.

Dulmatin's body was identified after DNA tests and also by his chin shape, eyebrows and freckles, police said on Wednesday. The other two men killed were said to be his body guards.

Dulmatin, an electronics specialist, was a top bomb technician for the Southeast Asian Islamist militant group, Jemaah Islamiah. Authorities say he helped plan the suicide bombings that ripped apart two night clubs in Bali and killed 202 people in 2002.

He fled to the southern Philippines in 2003 and the U.S. government had a $10 million reward for his capture. The 40-year-old who was born in Central Java is said to have been wounded after escaping a raid by Philippine security forces.

Jihadist base

Indonesia's counter-terrorism unit, Detachment 88, has launched raids across the archipelago following the discovery of a militant Islamist training camp in Aceh last month.

Books on jihad, rifles and military uniforms were found during the raids in which 21 suspected members of the group were detained in Aceh and Java.

Aceh's governor, Irwandi Yusuf, was quoted by the Jakarta Post as saying on Tuesday the group planned to set up a Southeast Asian jihadist network in the Sumatran province.

Analysts said Dulmatin had the capability to succeed Noordin Mohammad Top, a Malaysian-born militant and bomb maker killed by police last year during a raid in central Java.

Top, who set up a violent splinter group of Jemaah Islamiah, masterminded a series of bombings including suicide attacks on the JW Marriott and Ritz-Carlton hotels in Jakarta last July.

Sidney Jones, an expert at the International Crisis Group, said the new group was also a splinter of Jemaah Islamiah, likely calling itself the Aceh branch of al Qaeda for Southeast Asia (Tandzim Al Qoidah Indonesia Wilayah Serambi Makkah)

Jones said that the militants were probably planning attacks but the recent arrests and deaths should have damaged their capacity to carry them out for now.

But the analyst said it was unclear if there were other Aceh-like cells and the re-emergence of Dulmatin in Indonesia showed the worrying extent of the international links Indonesia militants have forged.

"This means that there probably was far more coordination with the Philippines over the last five years than we had any appreciation of," she said.

In the Philippines, Dulmatin was last thought to be operating with the al Qaeda-linked Abu Sayyaf group, along with another Indonesian wanted over the Bali bombings, Umar Patek.

Another security analyst, Dynno Chressbon, said Dulmatin's group was believed to have supplied about 27 weapons including M-16s and AK-47s to the group in Aceh.

National Police chief Bambang Hendarso Danuri said Dulmatin's group had secured 500 million rupiah ($54,500) to buy weapons and for military training, with more money available.

Star emerging market

Since the 2002 Bali bombings, Indonesian authorities have captured or killed around 440 militant suspects, with around 250 convicted in courts and three executed by firing squad.

Indonesia's markets were calm on Wednesday, with the rupiah currency steady and stocks up about 0.5 percent.

Better political stability and security have helped attract more investment in Southeast Asia's biggest economy, although attacks in areas such as Bali have hit tourism previously.

Indonesia was one of the star emerging markets last year with stocks up 90 percent, government bonds up 20 percent and the rupiah, Asia's best-performing currency, up 17 percent.

"I think if there is an attack, it's a given. It is part of the risk of investing in Indonesia or in an emerging market," said Fauzi Ichsan, economist at Standard Chartered in Jakarta.

"That said, investors are giving the benefit of the doubt on how the SBY (Susilo Bambang Yudhoyono) government is handling the issue of terrorism," he added.

Yudhoyono said in Canberra Indonesian police would continue to hunt down militants and disrupt their operations.