Some Indonesians, watching Australia's sponsorship of East Timor's move to independence, suspected it was unstated policy to encourage a fragmentation. On the contrary. It was never Canberra's policy, but it was one of Canberra's paranoias. That was the fear. The fact: under the President, Susilo Bambang Yudhoyono, universally known as SBY, the most virulent separatist movement, in Aceh, has been reconciled. The West Papuan independence movement is moribund. The country is unified and stable. East Timor was the only breakaway, and its sad stagnation has not inspired imitators. The second big fear was that without a military dictator to repress fundamentalist Islam, Indonesia would turn radical. Perhaps the Islamists would take control through the ballot box. Perhaps the Islamic extremists would revive the Darul Islam project to overthrow the government violently and impose fundamentalist sharia law. Either way, Indonesia would become a brooding presence, increasingly hostile to Western values and inimical to Australian interests. The fact: as the Australian National University's Greg Fealy wrote after last year's legislative elections: "Despite the fact that almost 90 per cent of the electorate is Muslim, Islamic parties gained less than 30 per cent of the vote - their lowest figure over the three democratic elections held after the downfall of President Soeharto in 1998."

This doesn't mean Indonesians are abandoning Islam. There is a trend to increasing religious observance. A growing percentage are attending prayers, fasting during Ramadan, and using Islamic banks. Muslims pursue their religious beliefs as a personal, social and religious matter, not a political one. Voters demand better services from their government, not religious exhortation. Other religions, including its Christian churches, are flourishing too. In the immediate post-Soeharto years, churches were firebombed in an effort to foment sectarian upheaval. In an interesting role reversal, it's in next-door Malaysia that churches are under attack. In Indonesia, religious tolerance is practised and the secular state is increasingly entrenched. A relapse into military dictatorship was the third scenario. A new-generation general would assert control. Perhaps he'd be provoked by an Islamist uprising, by the break-up of the nation, or by political disarray. The fact: Indonesia today is led by a former general, but he was chosen by the people in a free election, not just once, but now for a second term. SBY is a model democrat. The only generals who vie for power do so at the ballot box. They campaign for votes like other candidates do, often singing ballads at rallies to woo voters rather than ordering the troops to intimidate them.

Democracy is entrenched as the sole source of legitimacy. The media is one of the world's most thrusting and free, and strong democratic institutions are increasingly solid. Corruption remains a serious problem, but the polity is struggling mightily to break its grip. Neighbouring Thailand has relapsed into military coups. In Indonesia, the generals are in the barracks and no one in Jakarta speaks of coups any more. Fourth was the fear that massive economic dislocation and political unrest would precipitate a torrent of Indonesian boat people. In a country of 230 million, it was often pointed out, you'd only need 1 per cent to head for the boats and Australia's systems would be overwhelmed. The fact: the economic and political upheaval came and went. The boat people? None came. Refugees from Afghanistan, Sri Lanka and other countries have, via Indonesia, but the Indonesians stayed home. They are pretty happy where they are. Since the trauma of the Asian economic crisis in 1998, Indonesia's economy has developed better than almost anyone could have imagined. In the crisis, one-seventh of the Indonesian economy evaporated, while interest rates shot up to 75 per cent. But its average for the past five years is 5 per cent a year, behind only China and India among the region's economies.

The World Bank recently said Indonesia has a ''unique opportunity to rise as a dynamic, inclusive, middle-income country which can be both a leading sophisticated commodity economy like Australia [and] a hub of labour-intensive industry in Asia like China". The final fear was that Indonesia would be an impenetrable haven for terrorists, who would launch operations against Australia at will. Indonesia was so riddled with Islamist extremists, and the Indonesian state so weak and incompetent, Australia would have to live in a permanent state of terrorist siege. The fact: there have been terrorist attacks against Australian citizens and interests, including the Bali bombing. The threat remains real. But the Indonesian authorities, in co-operation with Australian counterparts, have proved to be vigorous and highly effective counter-terrorists. Loading For all of these reasons, the Australian Parliament tomorrow recognises Indonesia's emergence as a moderate, stable, peaceful, secular democracy, and it honours Yudhoyono as the pivot on which it has turned, when he addresses a joint sitting.

Peter Hartcher is the 's international editor.