By Muklis Ali and Sunanda Creagh
Reuters
Friday, April 10, 2009

JAKARTA, April 10 -- Indonesia's president was expected to start talks with potential coalition partners Friday after early results from Thursday's elections showed his party ahead but not by as much as expected, damaging prospects for reform.

The Democratic Party of President Susilo Bambang Yudhoyono, a former general who has won praise for his solid leadership of the country, won about 20 percent of the votes for parliament, based on a quick count from sample polling stations late Thursday.

Although Yudhoyono, 59, is expected to win a second term in the more important presidential election July 8, he will have to rely on coalition partners in parliament, reducing the prospects for major economic reform in Southeast Asia's biggest economy.

The various parties will start jockeying to form parliamentary coalitions, and Yudhoyono's choice of ally will determine the extent to which he can improve the judiciary and the civil service as well as clamp down on endemic corruption.

His administration has delivered strong economic growth and brought relative peace and stability to the world's most populous Muslim nation, which also has sizeable religious minorities. But tackling graft has proved far tougher.

Yudhoyono could continue with his current coalition partner, Golkar, the longtime political vehicle for Suharto, the country's late autocratic ruler, or turn to one or two of the small Islamist parties instead.

Analysts said that such a move would slow the pace of reform but that they still expect the government's policies to remain market-friendly, particularly if Yudhoyono keeps his respected finance minister, Sri Mulyani Indrawati, and other technocrats in the cabinet.

The Democrats, which have led in most opinion polls, were ahead of former president Megawati Sukarnoputri's Democratic Party for Struggle, which had about 15 percent, and Golkar, which had 14 percent, based on about 90 percent of the early count by the polling agency LSI.

Official results are not expected for days, but electoral observers say they are not likely to differ much.

Yudhoyono's party, which won just 7.5 percent of the vote in the 2004 parliamentary elections, has improved its share and will end up with the largest number of seats.

That should "make it easier for him in terms of cabinet lineup, without having to allocate a large number of cabinet posts to political parties," said Kahlil Rowter, president director of rating agency Pefindo, an affiliate of Standard & Poor's Rating Services.