The result of the parliamentary elections held in Indonesia on April 9 is now out officially (see Table 1). The Democratic Party (PD) with President Susilo Bambang Yudhoyono as its patron has emerged as the first party with 150 seats (out of 560), followed by the Golkar Party headed by Vice President Jusuf Kalla, and the Indonesian Democratic Party of Struggle (PDIP) led by former President Megawati Sukarnoputri. The four leading Islamic parties -- the Islamist Prosperous Justice Party (PKS), the National Mandate Party (PAN), the United Development Party (PPP), and the National Awakening Party (PKB) -- did badly, with their combined votes plummeting from 44% in the previous 2004 elections to 25% this time.

What does this mean for Indonesian politics, above all, the presidential election scheduled on July 8? The revised presidential election law states that only parties, or coalitions of parties, that win at least 20% of votes in the parliamentary election, or 25% of the parliamentary seats, can nominate candidates for the presidential election. This revision was originally engineered by Golkar and other parties, which did not have promising presidential candidates for the election, to extract concessions from Yudhoyono. The emergence of Yudhoyono's Democratic Party as the first party with 27 percent of the parliamentary seats, however, has rendered this maneuver moot. His party's victory has allowed Yudhoyono to negotiate from a position of strength with other parties to form a coalition and to impose his choice of vice-presidential candidate, Boediono, a respected economist who served as Coordinating Minister for Economic Affairs and then as Central Banker under President Yudhoyono, on the four Islamic parties.

The victory of the Democratic Party has also dashed Jusuf Kalla's hopes of running as Yudhoyono's vice president. Yudhoyono's first-term administration was built on an equal partnership between the President and Vice President Jusuf Kalla. It was an open secret that Yudhoyono was often irritated by Jusuf Kalla's outspokenness, frequent intervention in policy-making processes, and ill-considered remarks and outbursts. Yudhoyono no doubt decided that he would no longer tolerate this partnership and ditched Jusuf Kalla as his running mate for the re-election, leaving Kalla with no other choice but to run for the presidency himself. Kalla has picked as his running mate Wiranto, the former military commander who oversaw the transition from President Soeharto's New Order regime to the current decentralized democracy and who was responsible (as President Habibie's military commander and Defense Minister) for the destruction of Dili in the wake of the referendum in which East Timorese overwhelmingly opted for their independence.

The poor showing of the Megawati-led PDIP also underlined the point (repeatedly shown in public-opinion surveys) that Megawati would not be able to beat Yudhoyono in the presidential election, even though her followers naturally expected her to run again. This put the PDIP leadership in a quandary. Megawati did not want to run for the presidency if she did not have a chance of winning. Practically all the other PDIP leaders wanted to join the Democratic Party-led coalition. But negotiations broke down at the last minute, when Prabowo, Soeharto's former son-in-law, with his small Gerindo party, agreed to be her running mate.

The presidential election will now be fought among three sets of candidates: Yudhoyono-Boediono, Jusuf Kalla-Wiranto, and Megawati-Prabowo. It is hard to imagine either Jusuf Kalla or Megawati winning the election, given their vice-presidential running mates' tainted reputation for human rights abuses. Public opinion surveys place the Yudhoyono-Boediono slate well ahead of other parties. The only question is whether Yudhoyono-Boediono will win fifty percent of the votes in the first round, or whether they will go through the second round of election in early September.

The past eleven years have seen a restoration of the people's faith in Indonesia as a national project, with the Indonesian polity achieving a new dynamic equilibrium in the form of a decentralized democracy in which many contending parties, small and large, have become stakeholders in the political process both in Jakarta and in the provinces, districts, and municipalities.

In his first term, Yudhoyono achieved domestic peace for the first time in Indonesian post-colonial history, presiding over an Indonesia in which the military is not engaged in any major counter-insurgency operations. He has maintained macro-economic stability and achieved decent economic growth despite the global financial and economic crisis. He has also demonstrated that he can make tough decisions, for example, raising fuel prices even at the risk of losing public support in the early part of 2008.

Once Yudhoyono is re-elected, he and his team will face the challenges of overcoming the current crisis, maintaining domestic peace, and restoring ASEAN's status as the hub of East Asian region-making. How he goes about meeting these challenges will be the true test of his leadership.

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Takashi Shiraishi is President of the Institute of Developing Economies - Japan External Trade Organization (IDE-JETRO), and Professor of the National Graduate Institute for Policy Studies.

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The views expressed in this piece are the author's own and should not be attributed to The Association of Japanese Institutes of Strategic Studies.