In the July 5 direct presidential poll Indonesia's first since the corrupt Suharto dictatorship's downfall in 1998 contender Susilo Bambang Yudhoyono (or SBY, as he's widely known) thumped incumbent Megawati Sukarnoputri to second place. SBY won 33.58% of the popular vote, Megawati 26.29%, and ex-general Wiranto 22.21%.

Wiranto, however, protested to the Constitutional Court that vote-counting irregularities had robbed him of second spot to Megawati and a shot at facing off SBY in the presidential run-off today. Wiranto's case was tossed out, and the besieged Megawati was thrown a lifeline. But this won't save Megawati from ignominious defeat. Or will it? If she or SBY were to win, would Indonesia be better off?

Upon assuming power in 1999 Megawati promised to end the shenanigans of the outrageously incompetent Jusuf Habibie and Abdurrahman Wahid administrations. She promised Indonesians a brighter future. But in fact Indonesia has slid backwards and sideways under her watch. It's racked by deep politico-ideological conflict, including state-backed internecine wars in Aceh and West Papua and state-condoned bloody ethno-religious violence throughout the far-flung archipelago.

More, Indonesia is still smarting from losing East Timor in 1999, after invading and colonising it in 1975, and from fanatical Islamist terrorist bombings in Bali and Jakarta. Years of Suharto-inspired insidious corruption and cronyism stay deep-rooted and unchecked by the regime, while the promise of reforming Indonesia's crooked justice system last year alone mired in itself in its own farce, first over Golkar chief Akbar Tandjung's acquittal from corruption charges and the quashing of the death penalty for the Bali killers.

Business as usual

Surely it's not all that dire in Indonesia. Take the economy, which since the late 90s Asian crisis has been stagnant. Now, though, there are signs the economy may be turning around. During 2000-03 GDP growth averaged 3.8%. That's in stark contrast to the crisis years, when the economy was scorched, and mayhem reigned in Indonesia as the republic nearly crumbled, stumbling from crisis to crisis amid the weak and clueless Habibie and Wahid governments.

So, strange that Megawati hasn't, during the post-July election campaign, flagitiously staked a claim for bringing order to the economy, especially vis--vis her spectacular failure to do likewise on the political front. At no time has Megawati looked even remotely presidential. Still, it seems macroeconomic stability has returned. Economic growth has continued so far this year. After the late 90s bailout by the International Monetary Fund and other state-nation donors, it's business as usual again.

Some macro aggregates do look impressive. Inflation is down from 58% in 1998 to a shade over 5%, year-on-year, in late 2003. The rupiah has stabilised, despite threats by SARS, bird-flu and Islamic terrorists. Public debt, once hovering more than 100% of gross domestic product, is now 60% of GDP. So much so Jakarta's Berkeley Mafia US-trained technocrats who lord over economic policy now says debt no longer chokes the economy. And they'll rein in budget deficit to just 1.2% of GDP by end 2004.

Subscribers of Economics 101 are forgiven for thinking their faith in the free-market Holy Grail is just what Indonesia needs. Their naivety is fantastical if they believe the Berkeley Mafia's revitalised mantra. Thing is, Indonesia isn't out of trouble yet. Not by a long shot. Several things still worry. The 'recovery' is about as spectacular as the presidential contenders: both Megawati and SBY have daintily danced around economic issues throughout their campaigns. Indonesia's recovery is un-dynamic, its improvement unglamorous compared to the pre-crisis years'. Even then the high growth rates of 'tiger' economies had merely masked numerous woes, all of which exploded in early to mid-1997 with a roller-ball dynamic.

For starters the economy hasn't fired up like the other afflicted East Asian economies. The recent bounces in Indonesia's stock market aren't indubitable indicators of growing investor confidence in an economy still horribly bereft of real reforms. It has mostly been responding to institutional investors from Singapore and Malaysia bottom fishing cash-strapped Indonesian corporations, like banks and telcos. The euphoria will stay since Jakarta will sell off more distressed state-owned assets.

But most key economic sectors, from agriculture and manufacturing to oil and gas, are suffering. Banks still aren't lending. If the economy is buoyant, it's because consumer spending is underscoring the 'boom', inspired by pump-primes that have benefited Indonesia's moneyed classes. All this, in turn, without substantive and balanced policies, will potentially amount to fiscal suicide down the road.

That'll be politically disastrous for strife-torn Indonesia and the immediate region. Take unemployment, which was 10.5% in 2003, down from 10.6% in 2002, but up from 8% in 2001. Jakarta says per capita GDP rose to US$3,200 in 2003, and that only 27% of Indonesians now live under the poverty line. But in human development index terms, Indonesia was last year ranked 112 of 175 countries studied.

Government studies say about 6% of the estimated 10.24 million unemployed are university graduates. But other independent research shows 38.2 million Indonesians are jobless. If the economy keeps growing at under 4%, jobless numbers will swell by another 1.1 million a year, at least, with 2.5 million Indonesians entering the tight labour market each year and vying for 1.4 million low-paid jobs. Which explains why, like the Philippines, millions of Indonesians turn into cheap, exploited and abused migrant workers in countries like Malaysia. Indonesia, like the Philippines, has increasingly become a nation producing coolie labour for its richer neighbours.

2003 Year of Investment?

All this makes a mockery of Megawati and SBY serenading voters at campaign rallies while their speeches are spiked with rhetoric and banal and wholly devoid of substantive and real policies and vision. Megawati had hailed 2003 as the Year of Investment. It fizzled, despite a new investment bill aimed at luring foreign investors by liberalising all economic sectors even some of the most crony-owned and protected ones. During 1997-99 foreign investment fell thunderously, then stagnated. In 2003, it again fell. Today, roughly 60% of all approved foreign direct investment is the result of dubious changes in project status.

Even the meagre 3.8% GDP growth could easily come unstuck as global interest rates come under sustained pressures to lift, thanks in no small part to rising world oil prices. And oil and gas, once the harbingers of the New Order economy, today are bearers of new uncertainties. Up to the third quarter last year exports were up slightly to 7-8%, compared to the same period in 2002, but non-oil and gas exports, especially agriculture and manufacturing, have steadily slowed. The Berkeley Mafia would be feverishly hoping the US, Japan and Singapore economies can sustain their GDP expansion: all three buy 40% of total Indonesia's non-oil and gas exports.

Once a boon fiscal to the economy, oil, particularly, despite recent price hikes, is becoming a major economic headache at a time when foreign investors are shying away from plonking their money in an economy that hasn't basically reformed, in real terms, and poses rising economic costs and politico-security risks to their operations. Pertamina, the state-owned oil company, was a handsome cash cow to boosting the economy's bottomline and for lining the pockets of Suharto and his family, his cronies, politicians, bureaucrats and private capitalists.

Problem is, as investors sit on the sideline, export income falters, and Indonesia's proven oil reserves continue to dwindle (down by 13% since 1994), the budgetary outlook will simmer with dire problems, and many essential public expenditure programmes will be shelved. Which means not only increasing the potential for political instability as more people try harder to eke out an even more meagre living. Many more Indonesians will be piled onto the growing mountain of jobless and poverty scrap heap. And they'll be open to exploitation by Islamic radicals and extremist groups like the murderous fascist Jemaah Islamiah.

Problems will worsen more if, in the face of falling state revenue, Jakarta seeks to raise money through higher direct and indirect taxes, selling off more state-owned domestic and foreign assets, raise foreign loans, and increase its debt exposure. That'll render Indonesia's already precarious budget even worse off. And if the economy should contract and there's no reason it won't, given the deep-rooted problems it faces and that it's on a completely different trajectory than to other regional economies neither Megawati nor SBY will be in positions of strength to save Indonesia from a crisis far worse than the Asian crisis had meted out.

That's because both Megawati and SBY are fundamentally incompetent political leaders. And incompetent leaders make incompetent managers of a complex economy and a complex society, such as Indonesia's, in an increasingly complex world. Either Megawati or SBY will win on Sept 20, that's for sure. It'll probably be SBY. But whoever wins, it'll be Indonesia that will ultimately lose from their victory. Neither has a clue on fixing Indonesia's dire problems, and that has been clear in the way they've skirted questions of economic policy and reforms during their campaigns. Croon and sway all they like but this won't help Indonesia out of the dark times ahead.

MANJIT BHATIA, an academician and writer, is also research director of AsiaRisk, a political, economic and risk analysis consultancy in Australia. He specialises in international economics and politics, with a focus on the Asia-Pacific.