Indonesia in 2006 is a stable country, with a democratic and decentralized system of government. After two years of President Susilo Bambang Yudhoyono's leadership Indonesia is continuing on a path of democratic consolidation and taking important steps that will likely improve its economic performance over the medium to long term. Considering the depths of Indonesia's economic and political crises that preceded, and followed, the fall of the authoritarian regime in 1998, Indonesia ends 2006 in a rather enviable shape — the Republic is united and peace in Aceh was cemented with the remarkable passage by Parliament of the Law on the Governing of Aceh, justifiably having earned President Yudhoyono a nomination for a Nobel Peace Prize. The economy grew at 5.5 per cent, one of the highest levels in ASEAN and nearly matching the country's post-crisis high of 5.6 per cent in 2005. Most macroeconomic reforms are in place, although the investment climate — for both Indonesian and foreign firms — remains stubbornly unattractive. Indonesia is led by highly competent President Yudhoyono, with a generally strong political and macroeconomic cabinet team. In short, Indonesia is a stable democracy, facing a similar range of serious, though normal, challenges faced by other large developing democratic countries.

To appreciate Indonesia as a normal developing democracy today it is worth recalling what has been achieved since it threw off authoritarianism in 1998: a thriving free media, free labour unions, free political parties, an elected parliament passing a battery of reform legislation and checking the power of the presidency, thorough-going decentralization of political authorities, and solid economic recovery.

Some reforms have even moved with alacrity and tend to be unremarked and taken for granted today, but which reflect drive and commitment to democratic reform that could not have been imagined even a few years ago, particularly the disappearance of the armed forces from most aspects of national life. And in the past 18 months Indonesia has racked up perhaps the best record of any state in Asia of combating terrorism.