For well over a decade, politics was a dirty word for the Asian investor. During Asia's boom, investors earned returns by focussing on the numbers while turning a blind eye to corruption, cronyism and heavy-handed rule.

But since the East Asian bubble burst, investors hoping to catch the wave of Asian recovery have recognised politics as an important factor determining the speed and success of recovery.

But assessing risk has become much more precarious because Asia has become much more volatile.

``If the severity of the economic crisis has abated, the intensity of political challenges facing the region has not,'' said political analyst Sandra Lawson at Goldman Sachs.

``Politics will remain a key driver of economic policy-making with political uncertainty a significant overhang.''

Rather than a sharp bounce back, Asia isdue for a long, drawn-out and troublesome recovery, analysts said.

``The worst may be over in terms of the numbers but I don't think the worst is over in terms of its effect upon the populations at large,'' said first vice-president, Richard Margolis, at Merrill Lynch Asia-Pacific.

``As we grind along this slow recovery, I think we're going to find the political strains this imposes will continue to generate headlines and a measure of investment risk.''

He said Thailand's difficulty passing reform laws proved how quickly popular support for change could evaporate as ordinary people struggled with the daily grind of severe recession.

Indonesia is Asia's most obvious trouble spot, with disruptive political change still a likely prospect, analysts said.

``Indonesia is the one that will cause problems, the only question is how big those problems will be,'' said managing director Bob Broadfoot at Political and Economic Risk Consultancy.

As an oil producer and the world's fourth most populous nationscattered across an archipelago straddling key shipping lanes, Indonesia's potential to disrupt Asia is without parallel.

Its 220 million people are mostly Moslem with a modern history of vicious sectarian violence.

Action on the streets remains a fact of political life in Indonesia, said Merrill's Margolis, and there is widespread concern about approaching elections promised for June.

``Elections could either bring stability or intensify unrest, but will more likely heighten unrest,'' Lawson said.

Severe unrest in Indonesia could lead to a much larger US military presence throughout Asia, Broadfoot said.

Margolis cited soaring unemployment in China as a major risk in 1999, but Broadfoot preferred to describe China as the biggest variable in the region.

China, torn between exporter pressure to devalue the yuan and world pressure to hold the line, handled the currency issue deftly and emerged as a much stronger regional force, he said.

Japan had fumbled both its lines and its policies.

``Theword `risk' puts too much weight on the downside for China,'' Broadfoot said. ``Based on its performance to date, we have every reason to be optimistic.''

Overall, Japanese economic inertia remains the greatest risk to Asia in the coming year, said Lawson at Goldman Sachs. But other nations could also pose substantial uncertainty.

Malaysia could ride out 1999 with no political changes, she said, but the overhang of uncertainty would remain acute with succession to prime minister Mahathir Mohamad still unresolved.

Governments in South Korea and Thailand will continue to grapple with fallout from the Asian crisis, but old economic elites remain in place despite electoral change.

``They are unlikely to support any more than the absolute minimum change necessary,'' Lawson said.

``As the sense of urgency surrounding reform fades, both countries may be left with half-completed structural reforms. Both face a potential backlash against restructuring.''

Added to these obvious hot spots is the issue oftiming and the uncertain global economy, said Broadfoot.

``The biggest risk won't be in 1999, but in 2000,'' he said.

US interest rates are expected to continue falling to keep the world's largest economy on track through presidential elections in 2000, but thereafter lies uncertainty.

``We're going to be nursing our wounds this year when the global economy will be flat, at best. When we're hoping for an upturn, in 2000-2001, Europe and the United States could be turning down,'' Broadfoot said.