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ANALYSIS-Indonesia's Habibie faces reform dilemma 05:10 a.m. Oct 04, 1998 Eastern

By Andrew Marshall

JAKARTA, Oct 4 (Reuters) - The conflicting political pressures of post-Suharto Indonesia have left President B.J. Habibie teetering on a tightrope -- too much reform could topple his precarious government, but so could too little.

Buffeted by the demands of reformist protesters, populist politicians and powerful vested interests seeking to block change, Habibie is maintaining the appearance of reform momentum while doing as little as possible in practice, analysts say.

Progress in democratising Indonesia and giving greater autonomy to restive provinces could further undermine the fragile authority of the Habibie regime, and risks provoking a backlash from the ruling elite whose interests are threatened.

But failure to press ahead with reform will inflame unrest as pro-reform protests and separatist pressures gather steam.

Given Habibie's weakness, analysts say, the pace of reform may be dictated not by the president but by whichever pressure group proves to be the strongest in Indonesia's political maelstrom.

``Unfortunately Habibie is not really in control of events,'' said Muhammad Hikam, political analyst at the Indonesian Institute of Sciences.

``What you will have is further stagnation of reforms. The appearance of reform is a political concession to the people and also, more importantly, to the international community, especially donor countries and institutions. But there is no real movement.''

Jakarta has sent conflicting signals on reform since the resignation of former President Suharto in May amid a savage economic downturn, mass protests against his rule and an explosion of rioting in Jakarta that left almost 1,200 dead.

It has pushed forward with attempts to ease separatist unrest in the former Portuguese colony of East Timor, the staunchly Moslem province of Aceh and the eastern territory of Irian Jaya.

Indonesia announced last week Irian Jaya's military operations status had been revoked after a ceasefire agreed with separatist rebels. Aceh's military status was revoked in August.

Indonesia and Portugal also begin in-depth talks this week at the United Nations on Habibie's proposals to give significant autonomy to disputed East Timor, which Indonesia annexed in 1976.

But despite these signs of softening, Indonesia has said it will take a tough line against pro-independence protests and arrest protesters who raise separatist flags.

Political reform moves have also appeared contradictory.

Parliament last week began debating draft of political laws that Habibie has promised will make a more democratic Indonesia. The laws allow the setting up of new parties and cut the number of unelected armed forces representatives in parliament.

But in tandem with the new political laws, the government aims to introduce rules limiting the right to demonstrate.

Last week it gave up an attempt to pass the law through a decree bypassing usual parliamentary channels, amid complaints by legislators about the way it was being introduced. But the government immediately said it would submit a new, almost identical bill to parliament.

Analysts say the government's reform moves are more a result of its weakness than of a genuine desire to promote change.

Eager to present a better international image and prevent an upsurge in unrest, the government appears committed to settling separatist disputes, and particularly to resolve the East Timor issue, long a running sore in Jakarta's foreign relations.

But many in the ruling elite are worried that too many concessions could lead the multi-ethnic and multi-religious country to unravel as regions exploit the centre's weakness.

``Promises of broad-ranging autonomy for East Timor have helped to improve President Habibie's international reputation. However, they also risk opening up a Pandora's box which could ultimately threaten the unity of the state,'' the Political and Economic Risk Consultancy (PERC) said in its latest report on Indonesia.

Habibie faces a similar dilemma in his political reforms and efforts against corruption. Too little action will fan the flames of unrest, but too much threatens powerful interest groups.

The clearest example, analysts say, is an official probe into Suharto's wealth. They say Habibie was forced to pay lip service to a probe to appease public opinion, but will not want to see any real progress as ministers who served under Suharto -- including Habibie -- could be implicated in any corruption uncovered.

``The political situation remains highly unstable, with a weak government moving only reluctantly in the direction of reform,'' PERC said. ``The lack of a strong movement towards reform risks pitting the government against demonstrators in a way that could trigger more ugly clashes with security forces.''

Hikam said he expected Habibie's government to limp on until elections scheduled for next year, with little clear agenda, merely reacting to pressures from competing interest groups.

``There is no clear and united agenda. This is a government without real control of different factions among the elite and the people,'' he said. ``The government has no real intention to reform. It will just be reacting to developments and pressure.''

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