One of the consequences of the three-day attack on Mumbai by Pakistani-based terrorists is that "terrorism has now become deeply intertwined in the complex political nationalist agendas in India and Pakistan," according to a bleak new report released by FTI-International Risk, a Hong Kong-based risk mitigation Asian risk mitigation consultancy.

Multinational corporations and local enterprises doing business in the region "are natural targets for terrorists or insurgents," the report says.

Although Indonesia and the Philippines n particular have strengthened their counter-terrorist operations, both have a long way to go, the report continues, with Bali and other soft targets appealing to terrorist groups. It warns that while the Indonesia-based Jemaah Islamiyah and Abu Sayyaf in the Philippines have been disrupted and their safe havens have been eliminated, "the remnants of these groups may turn to kidnapping and related activities as has previously been the case."

It is South Asia, however, that remains the touchpoint, where the escalating pace and scale of attacks in major cities means that "foreigners, who are obvious and soft targetrs, are at potential risk everywhere they travel in these two countries, although the risk is much more significant in Pakistan." Indeed, just last Friday Islamic militants beheaded Pyotr Stanczak, a Polish engineer under contract with a Pakistani state oil company, after kidnapping him last September near the city of Attok in Northwestern Pakistan,. And last week gunmen abducted John Solecki, the American head of the United Nations High Commission on Refegees, in Quetta after killing his driver. His fate is uknown.

The report says that "India is poorly prepared to prevent terrorist attacks, as the Mumbai assault clearly demonstrated."

While the units involved in clearing out the terrorists, who killed more than 160 people, performed as well as possible under the circumstances, according to the report, titled "Terrorism Trends in Asia in 2009," "the hard reality is that the attack represented a critical failure of intelligence."

The attack "added to the growing realization that South Asia is now the principal crucible in the global conflict against terrorism and militant activity," the report continues. "While India is becoming increasingly drawn into this struggle, the inhospitable border regions of Afghanistan and Pakistan are the primary hot spots for resurgent militant extremist, insurgent and terrorist groups."

Unless checked, the report says, "the growing power of terrorist and militant group[s] may accelerate Pakistan's descent into chaos, which would pose a major source of geo-strategic concern, not only in the Asia-Pacific region but also for the rest of the world."

The report raises the possibility that if Pakistani authorities are unable to check rising Islamic fundamentalism and halt militant resurgence, "the United States might be tempted to intervene to secure the country's nuclear arsenal."

The report was written by the Hong Kong arm of FTI-International Risk, headed by Steve Vickers, the chief executive officer. International Risk has offices in Hong Kong, Singapore, Beijing, Tokyo and other cities.

In contrast to the fragile situation in South Asia, Southeast Asian countries have fared somewhat better, according to the report, Indonesia has cracked down on terrorist cells and the Philippines launched major offensives against insurgencies in Mindanao. In particular counter-terrorism in Indonesia has been encouraging, the report found, winning the country international praise that encouraged the US government to lift its long-standing travel warning. The Philippine government has also claimed major successes over the past 18 months, driving most of the militants into hiding in the Sulu Archipelago.

By contrast, Thai authorities "have been unable to put down the long-running Muslim separatist insurgency" in the southern part of the country "and there is concern that the violence could escalate, especially if paralysis in the Thai government continues."

The major reason for Thailand's inability to quell the insurgency, the report says, "is the inability of the Thai security services to master effective counter-terrorist and counter-insurgency skills."

In conclusion, the report says, "the major threat overhanging the region in 2008 is the potential for military conflict between Pakistan and India, especially if there were to be another major and spectacular Mumbai-style attack by Pakistan-based or organized militants."

Governments and militaries across the region, the report concludes do not have effective counter-terrorism or counterinsurgency strategies, lacking expertise, resources and effective interagency coordination to deal with the threat.