President Wahid may pay dearly for failing to get a quick turnaround in his country's troubled economy, writes Hamish McDonald.

Analysts of Indonesia have occasionally looked to the Soviet Union for analogies to explain and predict trends in this far-flung archipelago.

The rise of former KGB agent Vladimir Putin as Russian president has given rise to fresh conjecture about Indonesia tracing a similar circular path through chaotic democracy back towards a familiar authoritarianism.

If former president B.J. Habibie was Indonesia's Mikhail Gorbachev, the old regime insider turned belated reformer, and the current President Abdurrahman Wahid is a version of Boris Yeltsin, the unpredictable and ill maverick who is able to stay in office but can't achieve national progress, where and when will a tough, probably less democratic, leader emerge? What bits of Indonesia might fall off like the non-Russian Soviet republics in the meantime?

Most Indonesia specialists see no immediate threat to Wahid's position, despite intensifying jostling ahead of the August session of the supreme legislature, the MPR, which has the power to censure or fire the President. There is yet no Putin apparent, says Sydney University's Michael van Langenberg, because Indonesia has nothing like the KGB (or FSB, as it is now named).

The military, the TNI, has been neutralised for the time being by Wahid's deft removal in February-May of General Wiranto and many other adherents of Soeharto-era military involvement in politics. "There is no possibility of a successful military coup in present circumstances," says a recent survey by the Crisis Management Group, a political risk outfit represented in Jakarta by long-time TNI-watcher Harold Crouch.

Nor do any of the potential civilian contenders – the nationalist Vice-President Megawati Sukarnoputri, the Islamist chairman of the MPR, Amien Rais, or Akbar Tanjung, leading the rump of Soeharto's Golkar party – look to have enough support inside or outside the MPR to challenge.

Yet the optimism last October that greeted Wahid's emergence as Indonesia's first president resulting from popular elections (even if the vote was transmuted through backroom deals in the MPR) has faded drastically in recent weeks.

The gloomier mood has overclouded the sound political beginnings of Wahid's first six months – purging Wiranto and elevating TNI reformers, engaging the Acehnese in negotiations on terms for staying in the republic, adjusting the presidency to more democratic ways and, through his apology in Dili, setting relations with East Timor on a decent basis.

Wahid's travels, his provocative statements and retractions, his simultaneous pursuit of dialogue and attack (in different ways, with the Acehnese rebels and the Soeharto family) have been credited with a certain Machiavellian method in their apparent randomness. Wahid has unbalanced his domestic political targets, cut off international support for regional separatists, and girded himself with important foreign support.

But only confusion is seen in Wahid's approach to Indonesia's huge economic problems, notably the refloating of the banking system now largely in receivership under the restructuring agency IBRA. The President is surrounded by several economic ministers and advisory teams with overlapping authority. Even his main economics minister, Kwik Gian Gie, has said that "if I were a foreign investor, I wouldn't come to Indonesia".

Weakening economic confidence is compounded by perceived nepotism and influence-peddling around Wahid. A brother was given an unmerited job in IBRA, Wahid's masseur walked off with $7 million from a government agency, extorted on the basis of his alleged closeness to the President, and a lobbyist who paid for Wahid's eye surgery in the United States seems to have upset the awarding of a power contract. To be fair, Wahid has an unwieldy coalition to keep happy. And implementing economic policy is hampered by the chronic weakness of institutions like the judiciary resulting from neglect and corruption during Soeharto's 32-year rule, when the army provided the stiffening for the state and Soeharto's family ran a parallel tax system to pay off regime insiders.

But the lack of a firm stamp on policy is producing some hard judgments on Wahid. "Gus Dur [Wahid's nickname] has some qualities, but not the full range of qualities needed to fix all the problems," says a senior Australian banker who visits Jakarta frequently. "He's still behaving like a traditional Nahdlatul Ulama chieftain," said another long-time visitor, referring to the Islamic movement Wahid has led. "It's like he's sitting around in a sarong on the mat, chatting with his mates and plotting against his enemies."

The weakness has extended forecasts for Indonesia's recovery from the couple of years envisaged in 1998, just after the Asian crisis. "Indonesia will take several years to restore order and stability," Singapore's Deputy Prime Minister, Lee Hsien Loong, said earlier this month in Canberra, in a remarkably hard comment for a South-East Asian neighbour.

With this has come more pessimism about the longer-term prospects for Wahid, and democracy in Indonesia. "My guess is Wahid's pretty safe for another 12 to 18 months," said van Langenberg. "I would not put any money on him lasting a full five-year term."

Nor is the military permanently knocked out of contention. "Although the danger of a military takeover seems low at the moment, it remains a real possibility in Indonesia," wrote Laksamana Sukardi, a lieutenant of Megawati who was recently dropped from Wahid's Cabinet, in the Jakarta Post on June 23. "[It is] one that could grow more likely if the Government's performance over the coming seven months is as poor as we have seen during the first seven months."

A senior Canberra expert also fears Indonesia could be on a cycle back to dictatorship, delivering a blow along the way to the current philosophy pervading the World Bank and other development circles that "democracy equals development".

"The best guide might just be to re-read Herb Feith," this expert said, referring to the 1962 book The Decline of Constitutional Democracy in Indonesia, which charted the country's course from the high hopes of independence to Sukarno's "guided democracy" – which was replaced by Soeharto's military rule. "I would say we are at about 1951 or 1952 right now."

[Hamish McDonald is the Herald's Foreign Editor.]