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Indonesia for years has worked to shed its image as a hub of Islamist terrorists that stuck after the deadly Bali nightclub bombings in 2002, killing more than 200 people.

The multiple gun and bomb attacks in Jakarta on Thursday, which left at least seven people dead, will refocus global attention on the country's long-standing problem with religious extremism while also potentially representing a new type of threat.

The perpetrators of Thursday's attacks, which appeared to target a downtown mall with outlets of Starbucks and Burger King, have links to Islamic State, according to Jakarta police. Homegrown militants—who police say are behind the assaults—have now found a new rallying point.

Officials said the insurgents came from an Islamic State-linked group in Solo, a city on Indonesia's main island of Java, and had been in contact with terrorists in Syria. "We have detected communications between a Syrian group and the Solo group," Deputy Police Chief Budi Gunawan said.

Earlier attacks in Indonesia—which included the Bali nightclub bombings in 2002 that killed mostly Western tourists, two separate bombings on the J.W. Marriott hotel in Jakarta and an attack on the Australian Embassy—were carried out by Jemaah Islamiyah, a Southeast Asian terrorist group with links to al Qaeda.

Many of that group's members had studied in religious schools on Indonesia's main island of Java and received training in Afghanistan. Indonesia's antiterrorism police went a long way to dismantling the network, killing scores of militants, including the group's Malaysian leader in a shootout at a rural Indonesian farmhouse in 2009.

Indonesia also jailed Abu Bakar Bashir, an Indonesian cleric who acted as Jemaah Islamiyah's spiritual head and had founded an extremist religious school.

But the network, while much degraded, has continued to live on, according to the Institute for Policy Analysis of Conflict, an Indonesia-based nonprofit group that tracks local terrorist networks. And many of Indonesia's active militants today are linked to the same network of religious schools that fed militants to Jemaah Islamiyah, the institute said in a recent report.

Instead of training in Afghanistan, those militants today are traveling to fight for Islamic State in Syria and Iraq, according to the institute. The pro-Islamic State groups in Indonesia "have emerged from existing radical networks that have never gone away," the report said.

"They may have morphed, realigned, regrouped and regenerated but they are not new."

For President Joko Widodo, who is already grappling with a moribund economy, the re-emergence of the specter of terrorism will complicate his attempts to paint the country as modernizing nation that is open for investment. The Muslim-majority nation of about 250 million is currently working on a major revamp of foreign-investment rules designed to attract more overseas companies.

Indonesia economy is growing below 5%, slower than a decade average of 6%, as prices for commodities like coal and nickel remain in the doldrums due to China's slowing economic growth. On Thursday, Bank Indonesia cut interest rates for the first time in 11 months to help prop up the struggling economy.

The rupiah, already one of the world's worst performing currencies—a reflection of its over-dependence on swooning commodity markets—fell 1% on Thursday. It is down 9% over the past 12 months, although it had been staging a modest recovery of late, in part due to belief in Mr. Widodo's reformist zeal.

He realizes that Indonesia has failed to attract the same levels of investment as low-cost Asian rivals like Vietnam. Investors have been put off by poor infrastructure and corruption in the bureaucracy and Mr. Widodo, a former governor of Jakarta with a reputation as "Mr. Clean," is arguing that his administration is tackling these issues. The rebirth of the terrorist threat is likely to make his case that much harder to argue.

Thursday's attacks are also a blow for Indonesia's U.S.-trained special antiterrorism police, who had won praise in recent years for breaking up terrorist rings and averting a major attack on Indonesian soil since 2009. In recent months, the police have mounted attacks on safe houses in Poso, a remote area on Indonesia's Sulawesi island.

Write to Tom Wright at tom.wright@wsj.com

(END) Dow Jones Newswires

January 14, 2016 07:25 ET (12:25 GMT)

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