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The Islamic State (ISIS) group is working to boost its presence in Indonesia with dreams of creating a "distant caliphate" in the world's most populous Muslim-majority country, Australia warned on Tuesday, according to AFP.

Australian Attorney-General George Brandis, who spent Monday in meetings between Indonesian and Australian ministers, police chiefs and security officials, said it constituted a threat to Australian and Western interests.

"ISIS has ambitions to elevate its presence and level of activity in Indonesia, either directly or through surrogates," he was quoted as having told The Australian newspaper.

"You've heard the expression the 'distant caliphate'? ISIS has a declared intention to establish caliphates beyond the Middle East, provincial caliphates in effect. It has identified Indonesia as a location of its ambitions," warned Brandis.

Islamic State, which adheres to a fundamentalist doctrine of Sunni Islam, has already declared caliphates in several areas outside Syria and northern Iraq where it holds a swathe of territory.

Brandis' comments follow Indonesian police foiling plans for a suicide attack in Jakarta and arresting radicals linked to ISIS.

Three-day raids across Java ending Sunday saw the confiscation of explosive materials and an ISIS-inspired flag as well as nine arrests, according to AFP.

The extremists were targeting shopping malls, police stations and minority groups across the country, Indonesia's national police chief said.

Security has been beefed up across the country, with senior ministers from Australia and Indonesia agreeing on Monday to boost intelligence sharing, including on terrorism financing, following bilateral talks in both Sydney and Jakarta.

The Australian newspaper said that while Australian authorities believed there was little chance ISIS could create a caliphate within Indonesia, they were deeply worried the terror group may establish a permanent foothold in the archipelago.

Doing so could allow ISIS to conduct attacks against Western or Australian interests within Indonesia and beyond.

Australian Justice Minister Michael Keenan said the rise of jihadist groups had destabilized the security of both countries.

"The rise of ISIS in the Middle East is something that has destabilized the security of Australia, it's destabilized the security of Indonesia and it's destabilizing the security of our friends and partners, particularly here in the region," he stated.

Indonesia, the world's most populous Muslim-majority country, suffered several major bomb attacks by Islamic radicals between 2000 and 2009, including the 2002 Bali bombings that killed 202 people.

A crackdown has weakened the most dangerous extremist networks although the emergence of IS has sparked alarm that Indonesians returning from battlefields in the Middle East could revive them.

Meanwhile, Australia is equally concerned over the threat from those being radicalized.

Earlier this month, police in Australia arrested two people over plans to carry out a terror attack in Sydney, linking the raids to an earlier counterterrorism operation last December.

Police last year arrested several men after raids that uncovered documents designed to facilitate a terrorist attack, possibly on police headquarters in Sydney or on a random civilian in the city.

ISIS terrorism and radicalization have been on the rise in Australia over the past two years, with police in September of 2014 arresting 15 terror suspects of an ISIS cell that was planning to behead a random member of the public in a campaign of terror.

Last December, Sydney was rocked by a siege at cafe by Iranian-born Man Haron Monis, a self-styled cleric with a history of extremist views.

The government says that six attacks in Australia have been foiled over the past year but several have not, most recently in October when a police employee was shot dead by a 15-year-old reportedly shouting religious slogans.

AFP contributed to this report.