Megawati warns of debt crisis

A brawl in the assembly before Megawati's speech

Indonesian President Megawati Sukarnoputri has warned of the nation's grim economic outlook after her 100th day in office.

On Thursday the rupiah was trading at its lowest rate since her inauguration on 23 July.

Addressing an annual session of the top legislative body, President Megawati warned that the country's ability to repay its huge foreign debts is reaching breaking point.

Megawati has failed to deliver on economic or political reform

Shortly before her speech, the People's Consultative Assembly (MPR) had to be temporarily suspended, after a nationally televised brawl broke out between dozens of legislators.

A dispute over demands by several representatives for the immediate formation of a regional faction in the assembly raised temperatures and escalated into a fistfight.

Correspondents say the legislator's demands reflect the assembly's evolution from what was once a rubber stamp body to one willing to sack President Megawati's predecessor, former President Wahid, in July for incompetence.

MPR speaker Amien Rais later apologised for the incident. "Indonesia is not Taiwan or Korea, so I appeal to all assembly members not to let this incident ever happen again," he said.

In her speech, President Megawati said that it was possible that the government may have to cut spending again in order to meet its payments.

Indonesia has a foreign debt burden of some $140bn - nearly the same amount as its annual gross domestic product.

Go-slow reforms

But she indicated that a plan to sell off state assets in order to meet this debt could be delayed, stressing that privatisation had to proceed "very carefully".

President Megawati said that Indonesia needed to lure foreign investors back to the country by shoring up political and social stability.

Mr Rais praised the president's address as being a "very comprehensive report".

But analysts have been critical of her failure to deliver this stability.

Long-term conflicts in the provinces of Aceh and Irian Jaya, where separatists are fighting for independence, are no nearer to a solution.

President Megawati has dropped her predecessor, President Abdurrahman Wahid's, negotiations, and the military has been given the green light to flex its muscle in the two provinces.

War on terrorism

The Indonesian leader also called for a ceasefire in Afghanistan during her speech to the assembly.

She warned that prolonged military action "will not only be counter-productive, but will also weaken the global coalition to wage war on terrorism".

Indonesia was initially very supportive of the US war on terrorism, with President Megawati condemning the 11 September attacks on the World Trade Center and The Pentagon as "the worst atrocity ... in the history of civilisation".

But she is under pressure from conservative Muslim parties in her coalition.

Protesters outside the assembly demanded Islamic law in Indonesia

She urged the allied forces to halt bombing during the holy Muslim month of Ramadan, and on Christmas Day.

There are reports that the assembly will approve a plan for direct presidential elections by 2004, during its session.

The MPR currently has the power to elect and sack the president, although analysts say President Megawati is unlikely to meet the same fate as President Wahid because, unlike him, she has avoided making enemies in the legislature.