By: William Pesek Jr
First published: July 6 04, TODAY

JAKARTA: "The president has to go!" shouts taxi driver Ismeth Sofiawan, pounding the steering wheel for emphasis as he navigates Jakarta's pulsating streets.

To explain why he thinks Indonesian President Megawati Sukarnoputri isn't likely to win a second term, Mr Sofiawan slows the car and peers into the rearview mirror. "It's the economy," he says. "We're no better off than we were during the Asian crisis, and that was six years ago!"

Mr Sofiawan is not alone. His anger at Ms Megawati, 57, is omnipresent in this nation of 235 million people, half of whom live on about $3.50 a day. And so, Mr Sofiawan and millions of others went to the polls yesterday in the nation's first direct election.

Another vitally important group has given Ms Megawati thumbs down: Foreign
investors. They've been buying up stocks amid expectations she'll lose. Some of the optimism reflects hopes the contest will proceed without violence, but most of it comes down to anticipation of a more capable leader for the nation.

Whoever wins will become the fifth president in six years and inherit an economy that hasn't recovered from the 1997-98 financial crisis. Corruption, inefficiency and poverty ensure that most inhabitants of the world's fourth most-populous nation don't enjoy a share of its 5 percent growth.

Forty million Indonesians are jobless and those who are working earn, on average, no more than what they did in 1997. This year, overseas investors yanked US$751 million ($1.3 billion) out of Indonesia - US$10.76 billion in the past six years. Debt explains much of the capital flight; this US$208 billion economy is US$135 billion in debt. Banks and private companies owe US$54 billion to creditors. The stock market is the world's eighth-worst performer this year.

With so much at stake, Indonesians joke that this is the "Year of Voting Dangerously". It's a play on The Year of Living Dangerously, the movie that marked 1965, the year Indonesia's first president and Ms Megawati's father, Sukarno, was ousted.

To give credit where it is due, Ms Megawati restored an air of calm to Indonesia's turbulent government. It has prompted local businesses to invest more and encouraged consumer spending.

In more important ways, though - ways that will affect investors in the years ahead - things are deteriorating. Little thought is being given to the future, as in improved education or health care. Politicians are not tackling the corruption, high unemployment and legal uncertainties that keep Indonesia starved for foreign capital.

Reasons why polls show Ms Megawati won't get a second term boil down to her failure to take the lead in formulating policy. She's been reluctant to shake up Jakarta's clubby political system, which undermines the economy. And she's isolated herself from the media and the public.

Ms Megawati's timidity has paved the way for Susilo Bambang Yudhoyono, the
favourite in the election. A retired army lieutenant-general and a former security minister, Mr Yudhoyono's populist credentials, reputation for honesty and focus on creating jobs have drawn much support.

It's not clear if Mr Yudhoyono is the person for the job, but he's the one Indonesians seem likely to get. If he doesn't win 50 per cent of the vote once yesterday's ballots are counted, it's expected he will prevail in a September runoff election.

Who's holding the reins here in Jakarta is less important than the policies they implement. The next government needs to use the opportunity afforded by today's growth to shore up the economy. Four specific steps are needed, and markets would be well served if they were taken.

One, the government needs to tackle corruption and modernise an unpredictable legal system that scares away investors. Two, the micro-economy must be shaken up to improve efficiency and the quality of growth. Three, poverty must be reduced. Four, more investment is needed in education to help create jobs for the future.

If Indonesia's next leader doesn't act quickly and boldly, this could indeed be a year of investing - and perhaps living - dangerously.

William Pesek Jr is a columnist for Bloomberg News. The opinions expressed
are his own.