Quotes of the Day

Asep, a Jakarta parking-lot attendant, rejoiced in 1998 when Indonesian strongman Suharto was overthrown after three decades of authoritarian rule. But democracy hasn't proved to be quite the boon he and so many other Indonesians expected. In some ways, says Asep, his life is worse now than ever before. Under Suharto, he says, at least he only had to bribe one person—a stadium security officer—for the right to manage the lot at Senayan Stadium. But now, Asep complains, he is routinely approached by people claiming to be policemen, soldiers, sports department officials and political-party officers, all demanding baksheesh of a few thousand rupiah or a pack of cigarettes. These kickbacks often eat away almost half of his meager earnings of $2 a day, but "it's hard not to give," says Asep, "because you don't know anymore who is really in charge."

Asep's frustration should be tripping the alarms in the offices of President Megawati Sukarnoputri. The daughter of Indonesia's founding father Sukarno, Megawati, 57, is called Ibu (Mother) by her adoring supporters, and not long ago she embodied an egalitarian Indonesia no longer dominated by Suharto's cozy cabal of politicians and businessmen. But after two ineffective and inconsistent years in office, Megawati has started to look more like Mini-wati in the eyes of the disillusioned masses, who are voicing their disappointment at the ballot box. Members of her Indonesian Democratic Party of Struggle (known by its Indonesian acronym PDIP), suffered a surprise setback earlier this month in the parliamentary election. PDIP lost its status as the legislature's largest party, garnering about 20% of the vote, down from 33% in 1999, and its candidates were ignominiously outpolled by those from Suharto's old party, Golongan Karya (Golkar). "I wanted Megawati to be President because I believed she would take our side," says Asep, who attended rallies and volunteered to help during her 1999 party campaign. "But she hasn't done anything for us since she became President. I thought I'd be able to earn a better income, but look where I am now. I earn about the same amount as I did before but everything is twice as expensive." Says Hans Vriens, managing director of consulting firm APCO Indonesia in Jakarta: "Megawati has lost the mandate of heaven."

If that's true, the mandate has slipped from her grasp at the most inopportune time imaginable. Campaigning has just begun for Indonesia's first direct presidential election, set for July 5, and the incumbent is suddenly beset by credible challengers. One is Megawati's former Security Minister, Susilo Bambang Yudhoyono, leader of Partai Demokrat, a new populist party. Another is Wiranto, a former general under Suharto, who last week was nominated as Golkar's presidential candidate.

It's hard to believe Indonesians could yearn for a return to the oppressive Suharto era. Wiranto, Indonesia's armed-forces commander during East Timor's successful fight to secede from the country, was indicted in February 2003 by a United Nations-backed court for crimes against humanity. He allegedly failed to prevent atrocities committed by his troops and pro-Indonesia militia against East Timorese civilians. (He has denied the charges and says he tried to stop the violence.) Yet amid the disgruntlement over Megawati's performance, Wiranto's Suharto ties no longer count against him. Wiranto and Yudhoyono, who is also a former general, are both expected to base their campaigns on the public's perception that Megawati has been a weak leader. They will capitalize on popular longing for the political stability and economic progress Indonesia enjoyed during Suharto's rule.

A common criticism of Megawati is that she hasn't done enough to make Indonesia a stable and safe place. Separatist movements still rage, and her administration is brutally suppressing one of them in the western province of Aceh. Her response to the threat of Islamic militancy has been perceived in some quarters as indecisive, even following the deadly Bali bomb blasts and last year's attack at the JW Marriott hotel in downtown Jakarta. She encouraged a competent and thorough investigation of the Bali bombings, which led to the arrests of more than 30 Muslim militants and key players in the network of al-Qaeda-linked Jemaah Islamiah (JI). But Indonesia is the world's most populous Muslim nation. If Megawati does not move cautiously, she risks alienating Muslim voters or being branded a U.S. lackey. Although JI has been declared a terrorist organization by the U.N., Megawati has been reluctant to follow suit.

Far more relevant to Indonesia's 235 million citizens is the country's halting economic progress. Megawati styles herself as a reformer and a champion of the wong cilik (little people), but Indonesia is only now climbing out of the crater caused by the 1997 Asian financial crisis. Its annual GDP growth rate has averaged an anemic 3.4% since 1999, compared with 6.5% for all other developing East Asian countries, according to the World Bank. Indonesia's rate is expected to rise to 4.8% this year, but David Nellor, Jakarta-based senior resident representative for the International Monetary Fund (IMF), believes the economy ought to be growing as much as 7%. "There has been progress, but it has not yet come to a critical mass that will support growth or investment to achieve Indonesia's potential," he says. Meanwhile, prices for everyday necessities like cooking oil and electricity have risen as the government eliminates subsidies on many staples, while wages have not. "Megawati seemed to have pity for the wong cilik," observes Merry Gultom, a 30-year-old housewife in Jakarta who says it's tough to get by on her husband's salary as a minibus driver. "But she doesn't seem to try anything. I just want change." So Gultom says she intends to vote for Yudhoyono.

Another common complaint is that Megawati has done little to tame the corruption that saps Indonesia's economic vitality. In a survey of businessmen and academics conducted last year by

Berlin-based watchdog Transparency International, Indonesia ranked as the world's 12th most corrupt country, worse than economic basket cases such as Sierra Leone, Papua New Guinea and the Congo. Indonesia's legal system gets particularly low marks. In an IMF-sponsored report, a panel of Indonesian lawyers recently studied 500 bankruptcy cases in the country since 1998 and determined that about 30% of all verdicts were incorrect, either because judges misunderstood the law or disregarded it. Foreign bankers and investors often have trouble enforcing contracts in Indonesian courts. In one case, a court last year nullified a $180 million loan made by a syndicate of foreign lenders to property developer Danareksa Jakarta International to construct the Jakarta Stock Exchange building, saying the loan circumvented Indonesian borrowing laws and therefore need not be repaid. The creditors are appealing, but one, U.S. investment firm Lone Star, is so fed up that it has vowed not to pursue new business in Indonesia. "Indonesia is never really going to get foreign investment back in any meaningful way unless it reforms its legal system," says Richard Smith, president director of Hudson Advisors Indonesia, which manages Lone Star's assets in Indonesia.

That Megawati is blamed for all the ills of the system isn't entirely fair. In fact, she may not be getting enough credit, particularly for bright spots in the economy, which is in its best shape in nearly a decade. The Jakarta Stock Exchange index hit an all-time high in April and foreign-currency reserves are the largest ever at $37 billion. The economy is growing at its fastest rate since 2000, fueled in part by China's soaring demand for commodities—the 17,000-island archipelago is rich in oil, natural gas, gold, copper, nickel, coal, palm oil and rubber. Global confidence in Indonesia's prospects has also improved somewhat. In March, the country successfully raised $1 billion in its first international sovereign-bond issue since the 1997 Asian crisis.

By contrast, when Megawati took over as President in 2001 after the impeachment of her predecessor Abdurrahman Wahid, the economy was on the verge of another debt crisis. "We had to rebuild the economy, not from scratch but from ruin," says Laksamana Sukardi, Megawati's minister for state enterprises. "We can't really please everyone in two years." But, he adds, much has been achieved: "I guarantee that there will never be a crisis like 1997 again."

Yet the government continues to dither when it comes to attracting businesses that could help create many new jobs. ExxonMobil has been forced to delay an investment of up to $3 billion in a massive new oil field off the coast of Java. The problem: protracted negotiations with the government and with Indonesian oil company Pertamina, which is being privatized, over revenue sharing and the length of ExxonMobil's contract. In addition, tough labor laws, which among other things make it difficult for companies to lay off workers, discourage hiring at a time when more than 9 million Indonesians are unemployed and another 30 million—almost a third of the work force—can't find as much work as they would like.

Restiveness among the masses is driving voters to embrace opposition parties. The Islam-based Prosperous Justice Party, or PKS, has become popular with young educated urbanites by dropping its demands for Islamic law and painting itself as a corruption fighter. And Golkar's Wiranto is gaining by tapping into lingering nostalgia for the high-growth days of Suharto. During the party's political convention, Wiranto emphasized his ties to the strongman with a black-and-white video that juxtaposed his face and the dictator's. The biggest threat to Megawati, however, is Yudhoyono. The 54-year-old four-star general, who resigned from Megawati's Cabinet in March, is seen by the public as tougher on terror and a stronger leader than the wishy-washy Megawati.

Even Megawati's minister Laksamana admits the administration has suffered from its inability to communicate with voters. "Our policy is not wrong," he says. "What's lacking is how we convince people." But Megawati is a notoriously reticent public speaker, which often makes her seem imperious and detached. Adding to this perception, she skipped a ceremony marking the first anniversary of the Bali bombings, sending Yudhoyono instead; and two years ago, her administration appeared helpless in the face of Malaysia's expulsion of 20,000 Indonesian migrant workers who were crammed into refugee camps.

Still, with two months before the presidential election, it's too soon to write her off. Various parties are forging alliances, which could swing the vote in her favor. But the incumbent must convince the electorate that her administration is dynamic and focused. "Megawati is very much a part of the past," says James Castle of Jakarta-based consulting company Castle Group. "Indonesians are now looking to the future." Parking-lot attendant Asep has already made up his mind—he's voting for Yudhoyono. "He is firm, he is a man of action, and I think he is more able to provide security," Asep says. And what if a new President doesn't make life any better? "Easy. Just replace him with somebody else," Asep says. "We are allowed to do that now, right?"

• Michael Schuman | Jakarta
• After two lackluster years in office, Indonesia's President faces the political battle of her life