Once again Sutarto, 54, refused. The stocky, U.S.-trained military leader is no fool: he knows that martial law is “bad for the nation.” He also recognizes that the military must transform itself into a more disciplined and professional outfit under civilian control. Sutarto gave Wahid no choice but to abide by the Constitution. Relieved Indonesians hailed Sutarto’s stand. “The military is acting responsibly,” says political analyst Dewi Fortuna Anwar. Adds Juwono Sudarsono, Wahid’s former Defense minister: “Ironically, people now see the military as the defender of democracy against the president’s authoritarian threats.”

Over the past six months Indonesia’s armed forces have staged an amazing comeback. Long scorned as a brutal instrument of repression, the military is now arguably the only stabilizing force in a shaky country. Harold Crouch, an Indonesia expert, says that the military’s resistance to Wahid is a sign of maturity. “It was a smart, defensive reaction,” says Crouch. “The military didn’t want to be dragged into the political fray.” The generals are keenly aware that they have neither the capability nor the popular support to take over the country–or to fix it. “They know they would encounter fierce domestic resistance and international condemnation,” says Anwar. “And they know they don’t have a clue about dealing with our economic and financial troubles, the IMF, bank restructuring or private debt.”

Wahid and his predecessor, B. J. Habibie, contributed to the military’s new reserve. When Wahid became president, one of his first priorities was to establish firm civilian control over the military. The armed forces commanders agreed, accepting a civilian Defense minister for the first time. They offered no resistance when Wahid forced General Wiranto, the former armed forces commander, out of his cabinet after an investigation linked him to massacres and mayhem in East Timor. The military even agreed to gradually abandon its dual security and political role, called dwifungsi, by which it has run not only security affairs but also Indonesia’s political system and bureaucracy. The military pledged to be a neutral force in politics and lost its power to approve or reject political-party leaders and electoral candidates. Active military officers were banned from serving in the bureaucracy, costing the armed forces more than 4,000 plum administrative jobs. And the appointed military faction in the otherwise elected Parliament was reduced from 75 to 38 seats (out of a total of 500).

For all the reforms, the military retains plenty of rough edges–especially in outlying regions. The Army’s territorial-command system–an administrative and security apparatus that operates parallel to the civilian bureaucracy–remains a problem. Through it, the Army is involved in illegal logging, protection rackets and mafia-style crime syndicates. Experts says the system is corrupt and stifles democracy. Local military officers are more powerful than elected officials.

The military argues that the territorial command cannot be junked, only slowly dismantled. Lt. Gen. Agus Widjojo, the territorial-affairs commander, told NEWSWEEK that the provincial police forces and civilian administrations are not yet strong enough to deal with separatist threats, religious tension and crime. “If we reform too fast, there will be negative effects,” says Widjojo. One of those “negative effects” is a loss of money. About 70 percent of the military’s operating expenses come from the territorial command’s “off-budget” activities–including income from military-related businesses and kickbacks from rackets.

According to armed forces expert Salim Said, “The military looks beautiful right now because the civilian politicians are so ugly.” If Vice President Megawati Sukarnoputri replaces Wahid, Western leaders will press her to keep on with the Army makeover. “There hasn’t been as much progress as we would have liked,” says a Western military attache in Jakarta. The good news is that military leaders like Sutarto understand that in modesty there is strength.