He said he was determined to make sure that elections, due to be held in June, would be implemented as honestly and fairly as possible. He urged people to unite to make the first post-Suharto elections, which he promises by June this year, a success.

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"The government is fully aware that elections that are accepted, trusted and respected by the people are a must to form a government that can function efficiently and effectively in restoring ... national development and the building of pure democracy," Mr Habibie said.

Indonesian politicians have repeatedly aired doubts on the government's professed intention to conduct fair and honest elections, with most charging that President Habibie, a former Suharto protege, is trying to preserve the status quo.

The government's focus, he said, was on developing a system with transparent, honest and fair institutions, and the recruitment of leadership at all levels that reflected the people's sovereignty.

Demonstrations 'not right'

President Habibie also defended his stand against the almost-daily street demonstrations which have marked his eight-month tenure.

Unrest has spread across Indonesia since last May

Reform should be supported by a commitment to respect the principle of democracy and the prevailing laws, he said, adding that such demonstrations, especially those accompanied by mass violence, was "not a right and healthy manifestation of political participation."

Election monitoring

The government has also invited the political parties, non-governmental organisations, university students, youths and other civilian forces, to take part in supervising the elections.

"We even have accepted offers from abroad - co-ordinated by the UN - to help and partake in monitoring the implementation of the elections," he said.

Parliament is currently debating a set of political laws, including those governing elections and the parties, with an end of January deadline.

Budget predictions

President Habibie said in his budget speech that the country faces zero economic growth and 17% inflation for the year to March 2000. But he called these assumptions "extremely conservative."

He saw no hope for an easing of unemployment, which leaves at least 20 million out of work.

Expenditure would be down 17.3% in local currency terms, with a deficit of 4.8% of GDP, same as this year, funded by foreign borrowing.

Analysts do not share Mr Habibie's optimism for next year, and the budget speech did nothing to boost the stock market - the Jakarta Stock Exchange composite index closed the morning almost unchanged in thin trade.