Daniel Ten Kate and Arijit Ghosh – Indonesia's President Susilo Bambang Yudhoyono is projected to win a second five-year term with an enhanced majority after the resources-rich nation of 248 million avoided the worst of the global financial crisis.
Polls indicate the 59-year-old former general will win an overall majority July 8, averting a second round of voting that investors say might stall a stock-market rally and weaken the rupiah, Asia's best-performing currency this year.
Political continuity is key to enticing the investment Indonesia needs to match economic expansion in India and China, the world's fastest-growing major economies, Morgan Stanley said in a note last month. In his first term, Yudhoyono delivered the fastest growth in a decade by fighting corruption, cutting debt and reducing regulatory hurdles.
"People always ask themselves how they feel today when they head to the polls," said Anies Baswedan, rector of Paramadina University in Jakarta, who moderated the first of three presidential debates last month. "There is a growing feeling that the economy is really doing well, especially relative to other countries in the region."
Indonesia's $433 billion economy has skirted recession unlike many Asian neighbors that rely more on exports. Gross domestic product expanded 4.4 percent in the first quarter from a year earlier, compared with a 6.2 percent contraction for Malaysia and Thailand's 7.1 percent slump.
Yudhoyono's pledges
Yudhoyono in a campaign rally on July 4 pledged to boost economic growth to 7 percent, reduce poverty level to 8 percent of the country's population from 14.2 percent and reduce unemployment to 5 percent.
He is running against predecessor Megawati Soekarnoputri and Vice President Jusuf Kalla, 67. Yudhoyono was favored by 63 percent of those responding in a poll conducted June 30 to July 2 by the Indonesian Survey Institute. Megawati trailed with 20 percent in the survey, which interviewed 3,034 people and had a margin of error of 2.8 percentage points.
Both challengers say Yudhoyono's policies favor foreign investors and big business at the expense of poor farmers.
Megawati has pledged to create 12 million agricultural jobs, delay overseas debt payments and "save the nation's wealth" by reviewing government contracts.
Kalla, Megawati
Kalla heads Golkar, the party former dictator Suharto used to stay in power for 32 years until his ouster in 1998. Kalla helped draft Yudhoyono's economic policies and brokered a peace accord with rebels in Aceh to end a 30-year insurgency. He has vowed to protect small retailers against expanding hypermarkets, and says he'll cut fuel, food and electricity subsidies and use the savings to fund infrastructure projects.
In 2004, Yudhoyono required a run-off to defeat 62-year-old Megawati, becoming the first directly elected leader.
His Democrat party became parliament's biggest by winning 26 percent of seats in April's legislative elections. Support from groups unconnected to Kalla or Megawati may give him control of parliament, strengthening his hand in a nation where power is decentralized right down to the district level.
Yudhoyono's "got the best hand he could be dealt given the circumstances," said Robert Broadfoot, managing director of Hong Kong-based Political & Economic Risk Consultancy Ltd. "There are so many power centers that he's going to have his work cut out for him."
The president has also reduced terrorism in Indonesia, the site of at least 14 attacks between 1999 and 2005. Secretary of State Hillary Clinton said in April that the majority Muslim nation is an "anchor country" in rebuilding US ties with the Islamic world.
Incomes double
Per capita income doubled in Yudhoyono's first term to $2,237 last year, according to the International Monetary Fund. Cash handouts to 18.5 million households helped sustain his approval rating above 60 percent even as he cut fuel subsidies that strained government finances.
The budget deficit will be about 2.5 percent of GDP this year, Finance Minister Sri Mulyani Indrawati said on June 30, compared with 7.6 percent in Malaysia. Yudhoyono has reduced the debt-to-GDP ratio to an estimated 33 percent from 57 percent in 2004, according to the Finance Ministry.
Yudhoyono has pledged to double spending on roads, ports and bridges in the next five years to $140 billion. The country's 17,500 islands span an area wider than the continental US, creating transport bottlenecks that have restrained growth.
Investment boost
Last year, foreign investment in Indonesia rose at the fastest pace in the region to $8.3 billion, almost double the amount attracted in the entire decade before Yudhoyono took over.
Still, Indonesia's unemployment rate of 8.4 percent is the highest in Asia. About 32 million people live on less than 70 cents a day, according to the government. The nation's ranking in Transparency International's corruption-perception index remains lower than Nigeria and Costa Rica.
With natural resources like palm oil, coal and nickel, Indonesia benefited from a China-driven commodities boom since the last election that made the benchmark Jakarta Composite index the third-best performer in Asia after Shanghai and Mumbai.
Mining and energy stocks including PT Perusahaan Gas Negara and PT Timah led the gains. Indonesia is the world's largest palm oil producer and the biggest exporter of power-station coal.
"The market doesn't really need a whole lot, it just needs to become bigger," said Uwe Parpart, Asia strategist at Cantor Fitzgerald in Hong Kong. "In relative value terms, Indonesia would have my vote."