Q+A-Indonesia's presidential candidates to debate democracy

Indonesians will elect their president on July 8 for only the second time in the country's history, a sign that the democratic process has taken hold in Southeast Asia's biggest democracy and largest economy.

One sign of Indonesia's progress is the series of televised debates held by the presidential and vice presidential candidates in the run-up to the election.

President Susilo Bambang Yudhoyono, who is in the lead in most of the opinion polls, will face his rivals, former president Megawati Sukarnoputri and Vice President Jusuf Kalla, in the final debate on Thursday night. The subject will be democracy and regional autonomy.

Here are some of the key issues on democracy: HOW DEMOCRATIC IS INDONESIA?

The changes since May 1998 when autocratic former president Suharto stepped down, ending three decades in power, have been enormous.

Indonesia now holds direct elections for its president and for the representatives of the parliaments at national, provincial and district level every five years.

Suharto's resignation paved the way for decentralisation of power, greater freedom of speech and of the media, efforts to fight rampant graft and nepotism, improved rights for women and minority groups, the separation of duties by the police and military, and the removal of the armed forces from parliament where previously they had been allocated a set number of seats.

Indonesia now has a constitutional court and corruption court, as well as ombudsmen and state-funded watchdogs to monitor institutions including the judiciary and police.

HOW DOES IT MEASURE UP?

The Economist Intelligence Unit's democracy index by regime type ranked Indonesia at 69 in 2008, where Sweden occupies first place and North Korea ranked 167th.

That puts Indonesia among the group of countries the EIU considers "flawed" democracies, ahead of the Philippines at 77 and Singapore, considered a "hybrid regime" at 82, but just behind Malaysia at 68 and Thailand at 54.

The EIU takes into account factors such as the electoral process and pluralism, functioning of government, political participation and culture, and civil liberties in ranking countries.

For a country that only a decade ago was wracked by religious and ethnic conflicts, Indonesia's 2004 and 2009 elections generally went smoothly and peacefully.

Voter turnout was high at about 71 percent in April, but down from 84 percent in 2004 and 93 percent in 1999, the year of Indonesia's first free elections.

That said, there's still room for improvement. Millions of voters were unable to cast their ballots in the April 9 general election due to mistakes on the electoral rolls.

Women remain under-represented in parliament, at just 18 percent. Some new laws introduced have been criticised as curbing individual rights and freedoms, while independent reports have cited cases of human rights abuses by the police and military.

Some activists fear that if either Kalla or Megawati -- both of whom have picked Suharto-era generals with poor human rights track records as their vice presidential candidates -- were to win the election, it would be a setback for democracy.

HAS DECENTRALISATION WORKED ?

Very broadly, yes. The shift in power from Jakarta to the provinces and districts of this vast archipelago has allowed local governments to take charge of their resources and manage their own budgets and policies.

Local leaders are now more accountable to their voters. Several have won praise for their clean, transparent governance, improvements -- whether the introduction of free schools and health care, or internet services -- and their ability to attract investors.

Under Suharto, the dominance of the majority Javanese over a vast array of ethnic groups created a development gap between Java and the rest of Indonesia, sowing the seeds of resentment.

Decentralisation, which kicked off in 1999-2000, means that the resources-rich provinces are no longer forced to give up their wealth to Jakarta to subsidise poorer parts of the country.

Aceh, which suffered from a decades-long conflict between secessionists and the military, eventually won the greatest degree of autonomy after it signed a peace deal in 2005.

It was allowed to implement sharia law, given a 70 percent share of its oil and gas revenues, and the right to form local political parties. Defence and foreign policy remain with the central government.

WHY DO SOME POLITICIANS WANT TO TURN THE CLOCK BACK?

Decentralisation has provided far greater opportunities for corruption, because of the additional levels of bureaucracy created, causing uncertainty for businesses and investors.

There has been a proliferation of provinces and districts, with several regions carved into smaller and smaller pieces, paving the way for more officials to get into positions of power and gain access to natural resources and lucrative contracts.

There are proposals to divide resources-rich Papua into three provinces, from two currently.

In some cases, such subdivisions are aimed at reducing the power of a governor or particular ethnic group. For instance, proposals to slice Aceh into two provinces would reduce the power of the governor, a former member of the Free Aceh Movement.

There are also serious problems concerning conflicting national and local legislation, which affects forestry, mining and other resources and which create legal uncertainty for investors.

Former president Megawati Sukarnoputri has said that decentralisation has gone too far. But in reality, analysts say it would be almost impossible to reverse this now.

JAKARTA, July 2 (Reuters)