updated 6:14 p.m. ET Nov. 10, 2007

MALE, Maldives - While vacationing tycoons and bikini-clad Hollywood superstars blissfully sipped drinks on the Maldives' secluded white beaches, an Islamic revolution fueled by preachers trained in Pakistan and the Middle East was brewing.

On Sept. 29, the two faces of the Maldives collided when a homemade bomb exploded in a park in the capital, Male, wounding 12 tourists, threatening the critical resort industry and sending the clear message that even this remote corner of paradise is not immune to terrorism.

The attack, and a bloody confrontation days later between police and masked Islamic extremists armed with harpoons, stunned this Indian Ocean nation and threatened its careful effort to balance its traditionally moderate Islamic heritage with liberal Western values.

The government reacted swiftly to crush the fundamentalist movement that had risen amid the palm trees and crystal blue waters of its 1,190 coral islands. Authorities banned the veil, arrested scores of suspected extremists, sealed underground mosques and promised a crackdown on radical preachers.

"We are not taking chances," Information Minister Mohamed Nasheed said.

So far, the violence has not frightened off the tourists, who account for one-third of the economy, he said. But "if there is another attack, then we just close tourism here. And we can't afford that," he said.

By far the most prosperous country in south Asia, with a per capita annual income of $2,700, the republic had seemed safe from the worldwide rise of Islamic militancy. Its longtime ruler, President Maumoon Abdul Gayoom, had harnessed his nation's major natural resource — hundreds of small, deserted islands — to create remote, upscale resorts that fueled explosive economic growth.

But the country also suffered deep divisions.

While many high school graduates went to Europe or Australia for a liberal education, others studied religion at extremist institutions in Pakistan and Saudi Arabia and spread their radical beliefs across the islands, said Rohan Gunaratna, a Singapore-based terrorism expert hired by the government. He estimated that several thousand of the country's 300,000 people now follow these clerics.

"They are preaching a deviant form of Islam," he said.

These once marginal preachers have found a new wave of adherents in recent years. The global outburst of Islamic anger after the U.S. invasion of Iraq and the spread of Internet access to this country's remote islands played a major role in the growing fundamentalism, said Hassan Saeed, the Maldives' former attorney general.

"Suddenly, an island nation cut off from the rest of the world became part of the global village," he said.

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So did the Maldives. But despite the relative prosperity, there weren't enough jobs for the huge population of young people, and many turned to drugs or radical Islam, Saeed said. The Islamic Council, the government body that runs official mosques, accredits preachers and controls all aspects of religion here, was still distributing decades-old sermons to its imams and was caught unprepared, he said.

The trauma of the 2004 tsunami, which killed more than 100 people here and devastated many islands, also fueled an Islamic revival. Hussein Mohammed, 40, said he was among 200 displaced people originally from the island of Moondu who spent two years in an abandoned textile factory on the island of Gan before getting a new house. Many in the crowded factory sought solace in the translated copies of the Quran the government provided, and within months nearly all the women began wearing head scarves, he said.

"After something like the tsunami, this frightening thing, people became far more interested in religion," he said.

While many of the fundamentalists were not violent, a Maldivian was caught trying to join the Taliban in Afghanistan, another was arrested in India seeking to buy sniper rifles, and a third was jailed by U.S. authorities in Guantanamo Bay, Saeed said.

"For a small country, there were a large number of alarming signals," said Saeed, who quit the government in August, in part because he felt a report he wrote on the looming problem was ignored.

Like villagers on several other scattered islands, the people of Gan found themselves suddenly confronted by a small group of angry fundamentalists earlier this year.

"They said they are Muslims and others are not Muslims and that others should be killed," said Daoud Ibrahim, the clean-shaven imam at the government mosque. "I have never seen this before ... it's against our traditions."

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