Heat the coconut in a dry wok, stirring continuously until golden brown. Set aside to cool.
Using a blender or a food processor, blend the shallots, garlic, chillies, ginger and lemon grass to a thick paste.
Grind the coriander, fennel, cumin and nutmeg together in a mortar and pestle or coffee grinder.
Using the wok, fry the shallot paste in a little oil for a few minutes, until fragrant. Add the ground spices and cook for 3 to 4 minutes, stirring continuously. Add beef and cook over a medium heat for a further 3 to 4 minutes, stirring, until meat is browned all over.
Stir in sugar, coconut, cloves, cinnamon stick, coconut milk and water. Bring to a boil, reduce heat and simmer until most of the liquid has evaporated and the meat is tender, about 1 hour. Season to taste with salt.