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Indonesia on a high after poll

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What's next for Indonesia?

JAKARTA, Indonesia (CNN) -- Investors have been cheered by the decisive lead former army general Susilo Bambang Yudhoyono has taken in Indonesia's first direct presidential election.

Indonesia's stocks, bonds and currency have strengthened amid optimism that Yudhoyono is almost certain to replace incumbent President Megawati Sukarnoputri, and inject fresh life into an ailing economy struggling with corruption.

"Having a president with such a big mandate is going to be an enormous boost," Sidney Jones, the Southeast Asia project director for the International Crisis Group, told CNN.

On Tuesday the Jakarta index finished at a record closing high and the rupiah strengthened to a two-month high, pushed by Yudhoyono's pledge of firmer leadership.

The market Wednesday gave back some of the previous day's gains, with the Jakarta composite index down about 0.8 percent in afternoon trade.

Endemic corruption and cronyism has been rife in Indonesia, with a lack of reliable legal recourse in contract disputes and a weak banking system hitting a battered economy.

But analysts are optimistic there may now be a real effort to improve the nation's legal system in a bid to build up the confidence of investors and boost economic growth.

"If they get a technocrat and a skilled professional in the job as minister of justice and attorney general, we could see some real movement that's been lacking over the last several years," said Jones.

The 54-year-old Yudhoyono has yet to claim victory, but with about two-thirds of votes counted in this nation of 151 million voters, he is leading with 61 percent to Megawati's 39 percent.

Yudhoyono, who left his post as security minister under Megawati in March after a public dispute over his political ambitions, has said he would not claim victory until official results are in on October 5.

The U.S.-educated career soldier has asked Indonesians to accept the results of the poll regardless of the final outcome and called for both his supporters and Megawati's to come together "to build a better Indonesia."

One of Yudhoyono's most serious challenges is to merge Indonesia's old system of party politics with the direct vote, leaving the former security chief with a fractured government.

But he will also have to deal with the same domestic curbs Megawati came up against in the world's most populous Muslim nation.

"He's going to face the same two blocks that have constrained things in the past: the conservative Muslim constituency that doesn't want to see the whole Islamic system tainted on the one hand, and the reformers that don't want to see any roll backs of civil liberties on the other," said Jones.

Megawati's coalition controls more than 60 percent of the parliament, a political force that could prevent Yudhoyono from accomplishing his goals in the world's third largest democracy.

Despite the challenges, one 28-year-old Indonesian man, Irwan Sah, said he has high hopes and expects Yuhoyono to deliver on a range of issues.

"Security, improve the economy, which can't happen without security, and get rid of corruption and collusion," he said.

After a 32-year dictatorship under Suharto, Indonesia has stumbled through four presidents in six years. Under Suharto, lawmakers acted as an electoral college, choosing the president.

'Kiss of death'

While the two contenders had almost identical stands on many issues, the challenger Yudhoyono put security at the top of his campaign agenda after three major attacks in the nation in two years.

Analysts say they are optimistic that he will do a better job at improving coordination among the different agencies that deal with terror.

While Yudhoyono has singled out Jemaah Islamiyah as a big threat in speeches in Canberra and Washington, Jones said the real test is whether he goes to that level of detail with his own public, and whether he is being seen as kowtowing to allies.

"The kiss of death for any Indonesian politician is to be seen as capitulating to outside pressure, so he does have to walk a very very fine line between actually taking some action but seen to be doing it as his own man and not as a puppet of the West," says Jones.

If the voting trend holds, the 57-year-old Megawati will be the first leader held accountable by Indonesian voters and punished, analysts say, for her lackluster and weak leadership.

CNN Jakarta Bureau Chief Maria Ressa contributed to this report.

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