First, the elections were poorly administered, damaging the credibility of the electoral process and highlighting a disturbing laxness on the part of Indonesia’s political establishment with regard to safeguarding the quality of democratic processes. Second, there was a near total lack of ‘new blood’: all six candidates for the Presidency and Vice Presidency roseto prominence during theSoehartoera and three of them, including SBY, come from the military. A decade of democratic politics has yet to bring to the fore a new generation of national leaders free from tainted association with Soeharto.

SBY will enjoy a more solid baseof support in the parliament and his re-election offers the opportunity for 10 years of policy continuity, a luxury in most democracies. Will his second term be marked by accelerated reform or the cautiousincrementalismthat was the hallmark of his first term?

There is no room for complacency if SBY and other Indonesian leaders aspire to accelerated – and transformational – development. Although Indonesia is weathering the global economic downturn relatively well, some 35 million Indonesians still live below the poverty line and half the population remains vulnerable to poverty. And looking ahead Indonesia faces three major challenges that, if not addressed, will be serious drags on its development.

First, for a country of Indonesia’s size and wealth, its human resources are poor and lagging. The large majority of Indonesians don’t have the education or skills they need to find higher paying, skills-based employment. And the pool of well-educated Indonesians able to function effectively in the global economy is relatively small. The challenge is less about increasing spending and more about using resources wisely to upgrade the quality of the education system.

Second, although democracy has taken root, good governance at the national and local levels has not. In recent years there have been some important improvements in the administration of state finances and a genuine effort to combat corruption. But the Indonesian bureaucracy is, in many ways, a state within a state; and it remains resistant to reform – especially reforms intended to reduce corruption and increase accountability.

Third is the challenge of managing democratic politics. Polls show generally strong support for democracy in Indonesia. Looking ahead, the trajectory of democratic politics will be influenced by two inter-related dynamics. The first is how Islamic political parties and groups deal with the reality that while 87 per cent of Indonesians are Muslim, only about a quarter see Islam as being central to their politics. The second is the balancing of majoritarian politics and pluralism. Indonesians rightly pride themselves on their pluralism, but most Indonesians are Muslim and this creates the potential for the ‘tyranny of the majority’ on issues affecting core Islamic values.

Thus, one of the long term threats to democracy is not Islamic extremism per se but rather the gradual and incremental erosion of liberalism, pluralism and freedom of expression that could occur with the continuing Islamization of Indonesian society. A second, much more speculative threat is the rise of illiberal populism, which could be far more appealing to poor and marginalized Indonesians than Islamic extremism.

Without major economic and governance reforms Indonesia’s economy probably can continue to grow at a respectable 5 to 6 per cent a year. But this would produce only limited improvements in job creation, poverty reduction, human resource development and governance. Indonesia can and should do better than this. SBY is known to be a deliberate and perhaps overly cautious leader. Now is his opportunity to make a profound and lasting impact on both the quality of the Indonesian state and the welfare of the Indonesian people.

David G. Timberman is a consultant to the Asia Society’s Policy program and to the Asia program of the National Democratic Institute