The biggest political risk for investors in Indonesia is not that polls this year will rock the nation?s new-found stability, but that they will change nothing.

For unless Indonesia gets a new government able and willing to stamp out legal uncertainties, corruption and other scourges that have caused foreign direct investors to desert in droves, economists worry it will remain stuck on a low-growth path that will ultimately breed political resentment and social strains.

Optimists hope parliamentary polls on April 5 followed on July 5 by the first direct presidential election in 57 years will do just that. Voters, they say, will punish politicians who fail to heed the clamour for jobs and better essential services. But that is very much the minority view among bankers, economists and political experts in Jakarta.

Few fear the world?s fourth-most populous country will break up, succumb to radical Islam or revert to the authoritarian rule that ended with the fall of President Suharto in 1998. Most expect the drawn-out elections to pass off largely peacefully.

The consensus, though, is that it will take several years before money politics and naked self-interest give way to the good governance and accountability needed to attract new investment and return Indonesia to the six-seven percent growth rates it enjoyed for three decades until the Asian crisis.

?No one seems to be making their claim for leadership on improving the economic climate or improving the investment climate,? said Jim Castle, who runs a Jakarta consulting firm.

Financial investors flocked to buy a $1 billion global bond that Indonesia sold earlier this month; the stock market reached a record high in February and the rupiah has been broadly stable. But new investment in job-creating plant and machinery -? and mining ? has been scarce, with businessmen most put off by unpredictable rulings by courts, bureaucrats and regulators.

<B>Unpredictable</B>

Castle doesn?t see that changing under a new government: ?Nothing any of the leading parties are saying leads me to believe they accept regulatory uncertainty as a major problem.?

Take Indonesia?s rigid labour laws, which surveys identify as a major obstacle to investment. A year after parliament passed a manpower law, a sheaf of implementing decrees covering crucial matters such as overtime have still not been issued.

?Some of the defining regulations have yet to be put in place. These are all fundamental issues for any potential investor,? said David Nellor, the International Monetary Fund?s chief representative in Indonesia. Yet with the heavily indebted government strapped for cash, foreign money is desperately needed to pay for the power plants, roads and port improvements needed to kick-start growth. ?If these infrastructure investments don?t come, low growth rates are inevitable,? Nellor said. After four years of foreign direct investment outflows, Indonesia swung back to a tiny surplus of $145 million in 2002, according to balance of payments data from the central bank. But the World Bank said this reflected definitional changes that counted the proceeds of privatisation and bank asset sales as FDI rather than an actual resumption of long-term private investment. Finance Minister Boediono does not dispute the complaints about Indonesia?s investment climate and admits the forthcoming elections have distracted politicians from the economy?s needs. ?Somehow you have to come up with a real action plan with regard to reducing legal uncertainties and so on,? Boediono told Reuters. ?This has been absent so far.?

As a consequence, investment has dropped 10 percentage points since the 1997/98 meltdown to just 20 per cent of gross domestic product. This has left the economy lopsided; private consumption contributed more than 80 percent of growth in 2002 and 2003.

Although banks are ramping up personal lending and interest rates have room to fall further, economists and businessmen fear consumption will falter unless the investment needed to sustain growth in jobs and incomes comes back on stream.

The government is forecasting that GDP growth, buoyed by high oil, gas and commodity prices as well as by a brightening global outlook, will quicken to 4.8 per cent this year from 4.1 per cent in 2003. From an economic perspective, Indonesia might be able to chug along for quite some time at that sort of pace. But is that good enough politically?

Economists reckon six per cent growth is needed to reduce the total of 40 million people out of a workforce of 100 million that is without a job or underemployed.