Musa Syed, his wife and their two children live in a bamboo box on a narrow embankment between a railroad yard and a storm canal. The box is tall enough for the children, who are 18 months and five years old, to stand; the adults must stoop.

The Syed have lived in this box and dozens of others like in since they came to Jakarta from their hometown in western Sumatra 15 years ago. More than 265,000 people, 5 per cent of the capital's population, live this way.

Nowhere else in Southeast Asia do so many people live in such obviously miserable conditions. The nearest cities in which comparable squalor can be found are Calcutta and Dacca, the capital of Bangladesh.

The Jakarta administration tries to cope with the blight but is thwarted by the economic situation. According to the National Research Ministry, 20 per cent of the capital's 5.3 million people control well over half the city's wealth. The bottom 40 per cent, people like the Syeds, posses only 15 per cent of the income.

Thus, nearly half the population earns $43 a year, well below the "absolute poverty line" of $75 and nearly two-third below the average yearly income of $128.

Statistically, Jakarta is not measurably different from other capitals in the region. Bangkok, Manila, Kuala Lumpur. Yet somehow the extemes of poverty and wealth, of squatter huts and walled-in-mansions are more marked here than in those other cities.

Most Jakartans seem to close their eyes to the problem, limiting their view to their own lives. But some national leaders are fearful of what such gross inequities will lead to "Clearly, this situation must be drastically rectified." Research Minister Sumitro Djojohadikusumo wrote in a recent study. "If social stability is to be maintained between now and the year 2000, then conditions of both relative inequality and absolute poverty must be tangibly improved in the process of Indonesia's growth."

Life for people who live below the "absolute poverty line" here is not as bad as it is for the squatters and sidewalk dwellers of Calcutta and Dacca. Even in th worst of times, they manage to scrounge enough rice to eat. Starvation is virtually unknown. But their discomfort is almost subhuman.

About once a month, the police come to the Syeds' squatter settlement and knock the boxes over. Sometimes they give Musa a few rupiahs and tell him to go back to Sumatra. Squatter settlements are illegal in Jakarta.

The Syeds don't answer the police. But they don't seriously consider going back. Musa hasn't had a regular job here for seven months. Sometimes he gets work as a railroad coolie and then he can earn about $1.20 a day. In Sumatra, he says, he'd have nothing.

Sometimes the Syeds wait for the police to go away and they patch their old box together taking care to secure the plastic sheet beneath the thatch top. Sometimes, they pack up their possessions, a rice pot, a ladle, two woven-grass sleeping mats, a furry puppy and the plastic sheet, and walk to another place where they put the box up again.

The embankment where the Syeds abd aviyt 2,000 other squatters currently live is in the Tanah Abang section of Jakarta. Just across the muddy canal is the recently established government textile museum, a pet project of President Suharto's wife, Tien.

The museum is housed in a gracefully colonnaded, beautifully refurbished Dutch colonial building, freshly painted in a soothing cream color and shaded by ancient banyan trees.

From the embankment, the Syeds and their neighbors can easily see the glass an steel office towers and hotels on bustling Jalan Thamrin and nearby the glittering, whit, 23-story City Hall, completed last year at a cost of $2 million.

In his enormous wood-paneled office, Jakarta Gov. Ali Sadikin admitted unhappily that all his efforts over the past 10 years to eliminate "the squatter problem" have met with little success.

"Even when we try to get them to transmigrate to the outer islands and we give them land and some capital, many are unwilling to leave," he said in an interview. "They seem to prefer their existence in Jakarta to rural poverty."

Musa Syed agrees. Crouching on his skinny haunches and wearing his most presentable clothing, a pair of red underpants, he told a visitor that despite the deprivation, he valued his independence in the city. "If I went back to Sumatra, about the best I could hope for would be seasonal farm labor.And farms are so small these days that no landowner really needs workers. Here I'm my own man."

At 35, what did he hope for? The visitor asked did he think he would ever have a regular job and perhaps live in a proper house in a village? For a moment, Musa stared wide-eyed at his visitor. Then he and the neighbors who had clustered at the door burst into laughter.

"Who can think of such things," he finally replied with sympathetic forgiveness for the stranger's silly question. "I hope the police will leave us alone, to have more children, to live in peace. If that is God's will, then I will be happy."

Jaafar Yusuf andhis wife Farida, have much higher goals. Right now, they and their four children live in a rented three-bedroom house in a kind of urban village, near Jakarta's airport. But with a loan from the Ministry of Finance, where Jaafar works as a department head, they have bought a small plot of land outside town and plan to begin building their own home next year.

The Yusufs (not their real name, which they asked not be used) have plans and dreams, worries and concerns, which are recognizable to any middle-class American. They want to put their children through college, to own a house, buy a car, dress nicely, enjoy a good meal at holiday times and take an occasional vacation trip.

They are concerned about declining standards in their children's schools and the competition for places in universities. They consider their neighborhood of cramped houses and meandering alleys too crowded for their young children and want to give them a backyard to play in. And of course they worry constantly about making ends meet.

The Yusufs both work, she for a government bank. But despite their combined income of $304 a month they cannot cover their monthly rent of $50 and their food bill, which Farida said averages about $365 a month, even though their staple is rice at every meal.

So, the Yusufs manage by "doing a little something on the side." For example, Jaafar explained to a guest, he helps people "get things done" in the Finance Ministry.

"If you need a license or a permit stampd, that sort of thing, I arrange for you to get it without spending weeks, sometimes even months, going through all the red tape," he said. "This is a service I can perform because I know my way around the ministry and I save you a lot of time. So, of course, you're happy to pay me a small commission."

Another type of "service" he performs in putting salesmen, of office supplies for example, in touch with the right purchasing agents in the ministry. "This helps the salesmen and so they're happy to pay a small commission too," he said.

As the Yusufs laid out tea and potato chips on a red plastic-topped table, it was evident from their attractive, smiling faces and their open manner that they in no way equate these "services" with the massive corruption so common in Indonesia.

It was only later, when their guest brought the conversation around to this touchy subject, that Jaafar expressed fear that his guest might misunderstand. "We know about corruption and we don't like it," he said. "But of course none of us has the opportunity to collect payoffs. We're small people and we're paid very small salaries. We must do a little something on the side or we'd never survive."