Soak the tamarind in water. Gently press with your fingers for a few seconds, then set aside.
Roast the cashew nuts in a dry wok or frying pan until golden brown. Set aside.
Put the sliced lemongrass and belacan in a blender cup or food processor.
Gently press the tamarind to render more juice. Using your fingers as a strainer, pour all of the juice into the blender cup. Blend the mixture until it becomes a smooth paste. Set aside.
Pour the cooking oil in to your wok, then turn the heat to medium-low. Before the oil gets hot, toss in the sliced shallots. Stir constantly. After about a minute, turn up the heat to medium and keep stirring until the shallots turn a nice shade of light golden brown. Remove them from the wok using a spider strainer. Spread them out on a piece of paper towel to let them cool and crisp up.
Toss in the sliced garlic and keep stirring until they start to turn golden brown as well. Remove them from the wok and place them with the fried shallots.
Using a wok spatula, remove as much oil as you can from the wok, then stir-fry the red and green chilies for just a few seconds. Remove and set aside.
Add 1 tablespoon of oil into the wok and stir-fry the shrimp for about a minute. Remove and set aside.
Pour the lemongrass sauce into the wok and let it simmer. As soon as it starts to bubble at the sides, add the coconut milk mixed with water. Give it a good stir.
Add the shrimp back into the wok and stir well.
Add sugar and salt.
Transfer the shrimp and the sauce on to a serving plate or bowl.
Garnish with roasted cashew nuts, red and green chili, fried shallots and fried garlic slices. Serve immediately with steamed rice.