From the outset of his frank and heavily political introduction to the budget, Mr Habibie stressed the importance of Indonesia's transition to democracy, in the form of the first post-Suharto elections.

The following are excerpts from his speech, which was broadcast live on national television to the country's 147 million inhabitants:

"The development of a democratic and constitutional political system is our priority. God willing, general elections will take place in early June 1999 as planned. The emergence of new political parties which will in turn lead to a multi-party system is our response to the people's strong demand for political freedom.

"In the era of reforms, political freedom must indeed be guaranteed and governed by a series of laws. Simply speaking, our political development during the era of reforms must be able to prevent the return of authoritarian power."

'Atmosphere of trust'

It was vital, he said, that the elections should be fair, transparent and take place in an atmosphere of trust.

"We still have enough time to remove mutual distrust and develop mutual trust. A country will not be able to survive if it lives in an atmosphere of mutual distrust. Let us take a lesson from several other countries which eventually split because they failed to restore mutual trust. Mutual trust is indeed the essence of nationalism."

Press must be 'responsible'

The president noted that an important part of the democratisation process was freedom of the press, but he emphasised the need for responsible reporting.

"Exaggerated or unbalanced reports have the potential to cause social confusion and unrest. The press as an integral part of the nation must be responsible for national unity and development. Press freedom which prioritises objective, complete, balanced, just and responsible reporting is needed to enable us to develop the civil society."

'Violence is not democracy'

Mr Habibie warned that the wave of unrest sweeping the country was a threat to the democratic process, and could even degenerate into anarchy.

"Mob violence and acts of looting are not a manifestation of the people's correct and healthy political participation. Such acts will even degenerate into anarchy.

"This is not democracy. Mob violence and brutal acts are not part of the democratisation process but will instead tarnish the people's sovereignty and are against the law."

Economic troubles

Habibie: Budget reflects economic gloom

Before looking ahead to the country's economic prospects for 1999, President Habibie reviewed how the country had weathered "a very difficult" 1998.

"In mid-1998, our economic prospects were indeed bleak and we seemed to have no direction but downhill. We still remember how people rushed to the banks to withdraw all their savings for fear of losing their money. In such a situation, now matter how healthy a bank was, it was hard to survive.

"The flow of goods was also affected by looting, arson, destructive acts and other forms of social violence. The supply of several food commodities, especially rice, was already disrupted by the prolonged drought, which reduced production. The shortage of commodity goods was felt everywhere. Prices soared and many people feared massive starvation."

For 1999, Mr Habibie admitted that the budget reflected "gloomy economic conditions", and predicted zero economic growth and a budget deficit. But it also contained provisions promising help for impoverished citizens, and, he added, grounds for hope in the coming year.

"We can possibly achieve a better standard of living this year if we can restore stability and order though our hard work," he said.

Recovery plan

Closing his budget preamble, Mr Habibie outlined a three-point plan to kick-start an economic recovery in Indonesia, through the implementation of development programmes.

• "First, the development budget must be used effectively so as to achieve the target. Any deviation which causes the non-realisation of the target must be prevented."

• "Second, the development budget must be used in a thrifty manner by preventing leakage and waste. The habit of spending funds with little benefit, such as holding ceremonies, must be eliminated. These ceremonies must certainly be simplified. We must reduce spending on foreign currencies by minimising foreign travel by our officials."

• "Third, the usage of the development budget must be transparent and fully accountable. The procurement must be done in a transparent manner. If we properly utilise the existing budget, we will be able to maintain our economy and prevent it from worsening. In that way, we can start our economic recovery process."