Yudhoyono boost for stock market

'SBY' has significant economic challenges to face

Indonesia's stock market has welcomed signs that ex-general Susilo Bambang Yudhoyono will win the country's presidential election.

Jakarta's stock market rose to record levels for intra-day trading, while the rupiah rose 1% against the US dollar.

A defeat for Megawati Sukarnoputri would be Indonesia's first direct democratic handover of power.

The new president faces economic trials such as rampant corruption, slim foreign investment and slow reform.

'Time to produce'

Any honeymoon period is therefore likely to be short-lived.

"SBY (Mr Yudhoyono's nickname) has a very short time to prove himself to be effective," said Jeffrey Winters, Indonesia expert at Northwestern University in Chicago.

"If he doesn't produce on the rule of law, on corruption, on the economy, on jobs, on getting investment going, he's going to be thrown out too in five years."

Critics charge that both Mr Yudhoyono and Ms Megawati remain close to the elites which dominated throughout the 32-year authoritarian rule of former president Suharto.

Recovery

Mr Yudhoyono is trying to distance himself, for instance by threatening punishments for bank owners who have yet to repay more than a fraction of the $16bn aid in emergency loans during the Asian financial crisis of 1997-98.

The Asian economic meltdown hit during Suharto's rule

Ms Megawati herself had also come to power in 2001 promising to crack down on graft and turn the country around from the meltdown.

In part she has succeeded, with Indonesia graduating this year from the International Monetary Fund's borrowing programme.

But much of the credit has been given to her finance minister, Boedino, who is widely expected to stay on in a Yudhoyono administration.

Mr Yudhoyono was also part of Ms Megawati's cabinet, before resigning as security chief in March.

Now he says he will resuscitate the war against corruption, which is deeply seated after Suharto's three-decade rule.

Attacks

Alongside the corruption issue, as a disincentive for outside investment, sits the problem of security.

Indonesia has been the locus for repeated attacks by hard-line Islamic groups with ties to al-Qaeda, primarily Jemaah Islamiah (JI).

Many of its leaders have been arrested or killed, but counter-terrorism experts believe that groups such as JI are reinventing themselves with younger recruits.

The most recent attack, on a building housing the Australian embassy in Jakarta, killed nine Indonesians.