WHAT'S UP IN INDONESIA?: As part of my informal series of updates about countries that are too big to fail, here's the latest on Indonesia. Both this New York Times article and this Financial Times op-ed indicate that the country has taken aggressive and productive steps to eliminate terrorism. The Times reports:

"After denying there was a terrorist threat here and calling travel warnings alarmist, the Indonesian police in recent months have rounded up more than two dozen suspected terrorists, including several men thought to be senior Qaeda operatives in Southeast Asia. The police have also increased security at the American Embassy and at residences of American diplomats, as the United States has been demanding.

'Progress on every one of our benchmarks has been extraordinary,' the American ambassador, Ralph L. Boyce, said in a letter last week to American diplomats.

While Americans at home have been warned to buy duct tape and bottled water to prepare for terrorist attacks, Mr. Boyce wrote that 'there has been no new credible threat information against the official American community' in Indonesia for nearly two months."

The FT essay concurs:

"In spite of a weak leadership, conflict in its regions and economic, political and social crises, Indonesia has, since the October 12 Bali bombing, moved firmly against both regional and local terrorists. With international support, its police force has caught almost all of the Jemaah Islamiah members responsible for terrorist acts carried out over the past three years. In doing so it has gained self-respect and public confidence, and is now going after Indonesia's other terrorist groups, forcing them on to the defensive.

Debilitating local conflicts have been overcome in central Kalimantan, south Sulawesi (Poso) and the Moluccas. In Aceh, which has endured a separatist insurgency for the past 20 years, a road map for peace has been agreed between the government and the rebels with the assistance of the Henri Dunant Centre in Geneva. This outlines a process for ending hostilities and allowing the rebels to participate in the political process. And at last Jakarta is granting greater autonomy to Papua, after long years of neglect.

On the economic front, too, the indicators have improved: inflation - 10 per cent in 2002 - is under control; growth is 3.5 per cent (although still not adequate to absorb 2m people entering the workforce each year); the currency has stabilised; and the fiscal deficit is manageable."

This essay also acknowledges the country's persistent problems -- corruption in particular. But this is still an improving picture.