At the outset permit me to forward my thanks to the People's Consultative Assembly for giving me the opportunity to speak before this Annual Session.

In conformity with the President's constitutional duties, the substance of this speech relates to the implementation of the state administration, in particular in the field of the executive branch, for the last year, that is, since last year's session of the People's Consultative Assembly.

In presenting this speech, I am seriously paying attention to the changes to the state convention that have been adopted by the People's Consultative Assembly -- especially on the 1945 Constitution that has been twice amended -- and also to various laws enacted to suit the national reform strategy that we have embarked upon since 1998.

It is indeed more than fitting for me to use this occasion to once again convey my gratitude to all members of the Assembly - and certainly also to all members of the House of Representatives who form the largest part of the Assembly's membership, for having given me the confidence over the last three months to shoulder this uphill task as the 5th President of the Republic of Indonesia.

As you may know, prudently --hence seemingly conducted at a snail's pace-- I have formed a cabinet named the 'Gotong Royong' cabinet that I hope will be able to function until the end of the current administration's tenure. Experience has taught us that the government's stability is indeed required to deal solidly with the nation's problems not only by the state apparatuses themselves, but also by community leaders.

I also wish to thank all members of the House and the Assembly not only for their understanding on the herculean tasks entrusted to me, but also for giving the opportunity to this newly established government to do its work. Such understanding, trust, and opportunity are all required to allow the Cabinet and I to seriously and solemnly work to confront the multifaceted national crisis.

Partly this crisis is just one part of and the continuation of the monetary, economic, confidence, political, and security crises that have swept us since 1997 and that we fundamentally failed to address.

On the other hand, it is also part of a series of new crises originating not only from our national livelihood dynamics, but also from the impact of global events. All of these have continued to accumulate to the present day. I am aware of the fact that over the last three months I have shouldered the responsibility for overcoming all of these problems. Nonetheless, I am also aware -- indeed fully aware -- that nobody, including me or any other group or segment of society, can individually deal with these complex and complicated problems. We have to handle them jointly.

Profoundly concerned and with all my sincerity and frankness, I have to admit that there has not been much good progress that I can report to you on this occasion. Although there have been some improvements here and there, generally there has not been much progress achieved. With the tragedy of llth September 2001 having triggered the threat of global economic recession, these recovery efforts have become even more challenging.

In this situation, to strike an optimum balance between the solution of short-term problems -- that occasionally have to be painfully dealt with on an ad-hoc basis, painful, hence unpopular -- and idealism contained in the national reform ideals has actually created a challenge of similar magnitude.

We have put a lot of energy into responding to these situational problems -- highlighted and featured in the community -- which the government is forced to resolve speedily. During this period, it seems that there is not much energy or resources available to systematically confront other fundamental and pressing problems.

The government's institutions both at the national and regional levels, which are actually required to carry out the numerous tasks assigned by various assembly decrees, are currently completing the reform process. It can be stated that these governmental agencies, apart from being forced to improve their own performance, are at the same time also being confronted with formidable and multifaceted problems.

I believe that we can all agree that in order to be able to comprehensively and solidly handle the crisis we have to establish priorities so that our finite national resources can be effectively and efficiently deployed to confront those more pressing issues.

It is certainly true that these priorities have to conform with the new state's perspective as enshrined in the national reforms vision. It means that all the administrative changes that we have carried out and will embark upon have to be endowed with the spirit of planned, gradual, and prudent improvement and perfection.

As I see it, therein lies the difference between reform and revolution. We are definitely not conducting a revolution. We embark upon reforms with vision, a sense of mission, and a clear agenda established by the Honorable Assembly.

Ladies and gentlemen.

It might be beneficial if I start this report by noting some positive achievements we have jointly secured before asking all of you to listen to my report on the various difficulties with which we are confronted as well as on policies that have and will be carried out to overcome them. To focus on these positive developments is indeed most beneficial not only in boosting morale, but also in preventing the encroaching pessimism from advancing.

There is one thing that we need to single out, namely the democratic spirit that we have so far been able to jointly nurture and that has been solidly developing in the midst of our society. All walks of life have been able to enjoy and use their rights to assemble and meet as well as to express their opinions verbally and orally. Currently, our national media -- be it print or electronic -- are the freest in Asia.

In line with the efforts to stabilize democracy, we have been able to establish the people's needs and aspirations as the sole proprietor of the sovereignty of the Republic of Indonesia. The government no longer imposes any strings or even restrictions upon the society's attempts to express its opinions; especially if these are not presented in a form that violates the rights of others. God willing, it will be fully respected in the course of the next two years when the mandate of the current government expires.

In harmony with the betterment of our democratic life, the government also keeps trying to seriously promote and protect human rights, covering civil and political rights as well as socio-economic and cultural rights.

In accordance with the rules contained in Law No. 39/1999 on Human Rights and in Law No. 26/2000 on the Human Rights Court, the investigations of and legal proceedings against cases of gross violations of human rights will be continued and subsequently brought to the corresponding courts for prosecution. For this purpose, the Presidential Decree No. 96/2001 on the Formation of a Human Rights Ad hoc Court to try those cases of gross violations of human rights in East Timor prior to and after the polling period in 1999 and in Tanjung Priok in 1984 has been issued.

Certainly, the human rights situation will not automatically be made perfect after we attempt these improvements. Much remains to be done, not only in crafting the future -- that is more in conformity with the standard norms of human rights -- but also in dealing with various violations of human rights that have happened throughout our nation's history.

PART 2

During the 56th anniversary of the Indonesian Military, I requested the military establishment, in the spirit of reform, to continue its internal transformation by perfecting its doctrines to be further used as yardsticks by all its members. A similar request was directed to the National Police.

Meanwhile I have also instructed all military and police personnel -- from the lowest to the highest ranks -- to carry out their duties with special attention paid to respecting human rights as well as abiding by the prevailing laws and regulations.

The human rights concept is indeed a new phenomenon in our society. I have the impression that a trend has developed recently in our society whereby human rights are being manipulated in order to achieve its objectives while at the same time is being used as a tool to reject anything that runs counter to its interests.

In the meantime there is also a trend toward giving the issue of human rights too broad a scope, as if it recognized no boundaries. It is generally acceptable that international law spells out clear boundaries when it comes to national security interests, public order, health as well as public morality and others' rights.

To accurately understand human rights is therefore important and it has to be subsequently disseminated to our fledging society. The goal is not only to allow our people to precisely understand their rights, but also to enable them to respect others' rights as well, and all of the attendant limitations therein.

Ladies and gentlemen.

The challenge that we must respond to in this rather complicated situation is to precisely establish national priorities. It is certainly difficult to simultaneously and immediately handle all of these problems.

We have to prioritize three main national programs, namely economic recovery, resuming the normalcy of political life, and the restoration of law, security, and public order.

Economic recovery has to be the first priority not only because it is the most acute problem, but because it will also yield a positive impact in resolving the many attendant problems in various sectors.

The data at our disposal indicate that we have recently become a poor nation with a low income per-capita and with huge unemployment while production potential now lies largely dormant. This condition could worsen if food shortages increase.

We have to humbly admit that such a condition exists here and hence unleash all the potential available in this nation to prevent the situation from deteriorating further. There is no shortcut to solving these predicaments. It requires patience as well as hard work and tenacity and some difficult decisions will have to be made before we can pull out of this crisis.

The banking world that we actually expect to play a role in reviving the national economy is yet to recover. We have spent a huge amount of funds to recapitalize this sector. All of this is being done while at the same time we carry forward legal proceedings against those bankers who transgressed legal banking norms.

Cognizant of this situation, the government that I have the honor to lead has taken a number of important steps as an initial effort to revive the economy. Apart from restoring cooperation with the International Monetary Fund, the government is also trying to find a breakthrough in various major projects in the fields of energy and petrochemicals, significantly influencing the smooth implementation of our economic programs in general and the confidence of the international funding institutions and investors on the commitments that we have made.

There is a worrisome problem that, in our efforts to revive the economy, international and domestic investments have nearly come to a halt. We have to amend our image and reconfirm that Indonesia is not a high-risk country in terms of politics, economics, and security. In this way it is to be hoped that investors will be more interested in investing in Indonesia.

When I met with the Indonesian community abroad I stressed the need for the government to take very stern actions to deal with the many problems endangering political stability in favor of the greater good -- our national interests.

I am aware that I run the risk of being misunderstood by some members of our society who may liken these measures to the repressive measures taken by the New Order. I am also aware that in taking steps to salvage the people's interests, there might be some mistakes committed.

Nevertheless, the continuation of democratic life is indeed contingent upon the readiness of all quarters to obey the law, to respect the people's interests and, better still, to impose self restraint. Should this not be the case, it would be rather difficult to distinguish between democracy and anarchy.

Ladies and gentlemen.

There are a number of factors causing the social unrest and mass violations in several areas. Some are triggered by trivial issues and should therefore be avoidable. Others are purely crime-driven. The rest are politically motivated or committed in the name of religion.

Not only are these social unrest and mass violations illegal and hampering efforts to revive the national economy painstakingly carried out by us, these problems also have the potential to violate human rights. Clearly, this cannot be tolerated. No matter how difficult it is, a state of law should be created to specifically deal with such situations.

One sector which has directly fallen victim to this unsafe situation is tourism as well as other real economic sectors. The tourism industry, which had become one of the most significant sources of hard-currency for financing national development, is now suffering a major setback, and that is seriously jeopardizing the livelihood of people in many areas, especially where tourists used to visit. The real sectors are also finding it difficult to flourish.

Through this forum, I wish to appeal to all levels of community leadership and the Indonesian people -- to impose self- restraint upon their respective followers and supporters so as to allow the speedy restoration of a peaceful situation around the country.

Apart from this safe environment, investors also need certainty with regards to rules and regulations. It is against this backdrop that I have directed the economic ministers to implement policies that are coherent and transparent to avoid any confusion among business operators. It is in the same vein that the central government has reminded all regions not to adopt regulations or impose levies that may hamper trading, investment activities and cause long-term damage to the regions concerned.

With these new investments, we will be able to run our economy effectively again, which is urgently needed to provide jobs for the unemployed in our society, the number of whom continues to increase on a daily basis.

Clearly, it is impossible for us to meet all our investment needs by relying solely on our own resources. The funds required to fulfill our economic needs are indeed gigantic whereas our current financial resources are very limited.

Our debts, both foreign and domestic and incurred by government as well as the private sector over the last 30 years, have reached a huge amount. Many national development programs have been funded by them. Even to date, we have yet to put a halt to this foreign assistance due to the ongoing feeble economic performance of ours.

In the meantime, our ability to settle debts has caused concern. A large part of the budget has to be set aside to pay the main debts and their interest. We have to go through all these to honor the commitments made by the government when securing loans. In this regard, we are thankful to donor countries that have been willing to help us settle loans in this difficult period, including their offer to reschedule our debts, as was the case in 1966-1967.

Placing a national priority on economic recovery has brought about some implications and consequences we must continue to shoulder. The first implication relates to the need to adopt a policy of efficiency in all fields and at all levels. Without doubt, we have to reduce routine expenditure and reallocate the resources available to finance more productive programs, which is the prerequisite for economic recovery. We ought to dispose of unnecessary expenditures.

Ladies and gentlemen.

Overall, the state's financial condition is indeed distressing, as there are no better alternatives available to us.

However, the government will leave no stone unturned in finding other possible solutions acceptable to all for the sake of our national interest.

Inevitably, the government must gradually raise the prices of some goods and services, such as fuel and electricity. We also have to consider other stringent policies in the fiscal sector so that we are able to lessen the debt burden.

In this unfortunate situation, the government has had no choice but to implement a policy of reducing the state's expenditure.

On the other hand, in an attempt to increase budget revenue, we have also adopted the policy of selling national assets administered by the IBRA and the privatization of state-owned companies. It is sad to acknowledge, however, that these policies have shown little progress in meeting the targets as planned.

Conducting the privatization of healthy state-owned companies would certainly be less complicated. Yet, experience shows that addressing the very issue of privatization has often led to other issues that need to be carefully dealt with first. In this context, the privatization policy will be conducted cautiously.

And yet, we have to carry out all these initiatives in an unfavorable global environment. Our capability is limited and has yet to rebound. The best that we can do is to try and explore and take advantage of the remaining opportunities by way of maintaining and empowering our economic potential and power. part 3

One of the important sources of economic potential are small and medium-sized enterprises. We have witnessed how these business units, which involve most of the populace, survive the crisis while big companies crumble. Certainly, they neither need nor demand superfluous support, for that would only create dependence on the government, decreasing in turn their vigor to excel. The best support for them is eliminating barriers to conduct business, reducing formal and non-formal tariffs and providing security assurance and a conducive environment. Certainly, other supports such as in financing, technology, marketing and the like need to be made possible, although they have to be carried out within acceptable and healthy economic limits.

The international community, while facing the threat of economic recession, is nowadays besieged by the fear of terrorism that might come unexpectedly in unpredictable forms and could cause great loss and claim innocent victims.

International terrorism committed by whomever and for whatever reason is clearly unacceptable to all. It has also resulted in a widespread fear and might have an adverse impact on economic activities that we are counting on for human prosperity .

Those found to be involved in terrorism should be held responsible and taken to court. It is the obligation of every party to help find and show to the world any evidence connecting any elements allegedly involved in these irresponsible actions before taking measures to combat terrorism.

At the end of this year, Muslims and Christians will hold religious celebrations. We, therefore, call for the military attack aimed at seizing the accused, which has so far claimed the lives of many innocent people, be discontinued before the sacred month of Ramadhan and Christmas.

The long drawn out military attack will not only be counter- productive, it might also weaken the global coalition in combating terrorism.

In this regard, we appeal for the need to hold a humanitarian pause so as to give more space and opportunity for the handling of humanitarian aid while trying to solve the problem through political and diplomatic channels.

Along these lines, the government continues its support for the UN to play its role in accordance with its mandate to maintain international peace and security.

It is not an easy task to conduct a free and active foreign policy amid the tumultuous international environment, for the global economy needs a secure and peaceful world based on the spirit of inter-state cooperation.

To create a strategic environment conducive to the implementation of domestic recovery measures, I visited last August nine ASEAN member countries. Besides reaffirming ASEAN as the cornerstone of Indonesia's foreign policy, the visits were aimed at improving bilateral relations with the countries in the region. I also took the opportunity to expedite the finalization of border negotiations and to promote cooperation among countries' intelligence bodies and security officers in order to tackle cross-border violations of the law, such as smuggling, illicit trafficking of drugs, money laundering, illegal log trading, prostitution and other organized cross-border crimes.

Of no less importance is the West Pacific with which, since August, Indonesia has become the dialogue partner of the Pacific Forum. As well, my visit to the US, the United Nations, Japan, and my attendance at the APEC Economic Leaders Meeting in Shanghai recently, were intended as a measure to improve cooperation for the sake of our national interest.

In an attempt to implement the mandate of the Assembly to eradicate KKN practices, we have to carry it out consistently and firmly together with all components of the nation so that the main factors causing the deterioration of our nation can be brought to a halt. In my State Address last August, I called on the honorable members of the Assembly to commit to avoiding such practices.

We also agreed to oblige members of the state apparatus to submit a report on their personal wealth to the Wealth Audit Committee. Allow me also to offer my earnest appreciation to those who have submitted their wealth reports and agreed to have their reports published. This measure will contribute to our joint efforts to recuperate the image and to improve the performance of the government.

I will instruct the Attorney General and the Chief of the National Police to submit reports every month on the development and progress in eradicating KKN practices.

Apart from economic quandaries, recession and the threat of terrorism, I need to report that the tendency of some regions to secede from the Unitary State of the Republic of Indonesia, or the trend of separatism, needs more serious attention.

While some carry out their intentions peacefully, others have conducted their actions aggressively.

In the government's attempt to tackle security disturbances staged by armed separatist movements, the risk that the lives of many are in jeopardy on both sides -- even innocent people residing in the troubled areas -- is inevitable.

Allow me now to elaborate on the basic policies of the government to settle this no less important issue.

The first policy is that, while providing more room for people in the regions to administer themselves under special autonomy, we are resolved to seek a lasting solution to the problems expressed by the public that directly addresses their welfare, justice and dignity.

As we all know, the government has, in cooperation with the House of Representatives, deliberated on, formulated and enacted the laws required to realize this first basic policy, in particular those connected with the provinces of Nanggroe Aceh Darussalam and Irian Jaya. We have provided them with substantial scope for autonomy and a concrete constitutional recognition of the cultural identity of those regions, which is indeed necessary.

The second basic policy is based on the oath I took last July to uphold the constitution and other regulations, based on the nation's struggle in the early 20th century. Under no circumstances will the government entertain, for whatever reason, the intention of any region to separate from the unitary state of the Republic of Indonesia.

Secession from a nation-state is an action violating the basic principle of nationhood and it is incumbent upon any sovereign country to deal with it. The UN Charter and international law also forbid separatism, for to do otherwise would only condemn the modern international system to chaos. Nation-states are the bricks of the building of the modern world order. We are thankful, therefore, that almost all of the UN member countries pledge their support to the territorial integrity of our sovereignty.

In connection with the question of Aceh, the government has developed a comprehensive policy comprising six agendas in the fields of politics, economy, social issues, law and order, security resumption and communication and information, which are enshrined in the Presidential Instruction No. 4/2001, then revised in Presidential Instruction No. 7/2001.

The political agenda consists of three points: Special autonomy for the province of Nanggroe Aceh Darussalam, the facilitation of dialogue with all segments of the Acehnese community and the acceleration of the empowerment of regional institutions to improve public services.

The economic agenda is aimed at accelerating development in agriculture, economic infrastructure and expansion of job opportunities.

The social agenda is tailored to expedite the rehabilitation and building of infrastructure, expansion of job and business opportunities, acceleration of social rehabilitation and refugee settlement.

In the field of law and order, the policy is aimed at bolstering efforts to enforce public law -- including efforts to solve human rights violations -- and security and order, especially efforts to restore security in the province of Nanggroe Aceh Darussalam by deploying the police force with the assistance of the military, to face disturbances posed by the armed separatist movement, taking into account, and in compliance with, prevailing regulations and procedures and respect for human rights.

Finally, the information and communication agenda is aimed at intensifying the dissemination of correct and balanced information to the society at large within the framework of opinion molding and taking measures to counter false information.

part 4 / end

Similar policies are to be applied in the province of Irian Jaya, for which the Papuan Special Autonomy Bill was passed by the House of Representatives on 22 October 2001. Those are the main measures undertaken by the government in connection with these two regions.

The endeavors to nurture domestic politics continue to progress in concordance with the need for reform. In this field, the infrastructure and suprastructure of the political structures and institutions have played a more important role. Communication between the political institutions takes place smoothly at every level of the society, both in the capital as well as in the regions.

Unfortunately, progress in this very field occurs within a political culture that puts narrow and short-sighted regional interests to the fore.

Some of the major social problems include the protection of Indonesian labor, mostly women, working abroad; the protection of women's rights and the protection of the rights of the children as our next generation; and resolving the problem of internally displaced people.

Allow me to share with you my thoughts on these matters in brief.

The protection of Indonesian labor abroad has gained more attention recently. Such protection is needed not only because these workers are courageous in taking risks in order to feed their families, or because they have contributed to the government's foreign exchange earnings, but mostly because they are often treated inappropriately.

It is not unusual to learn that they have experienced mistreatment either when they were assembled during the training period, on the way to the country of destination, while working, on the way home, or even in their homeland. This kind of ruthlessness can no longer be tolerated and should be stopped.

As well, the protection of women in general has improved, especially after the ratification of the Convention on the Elimination of All Forms of Discrimination Against Women and the establishment of a special national committee to deal with the matter. Yet, there is no room for complacency for we have much to do to position women -- over half of all of us -- properly as members of society, the nation and state.

God creates women with the same abilities and capabilities as men have. These capabilities should be mobilized in order to share the burden with male citizens in coping with tough duties. mega speech again (last missing part), sorry! part 5/ end

It is also to be kept in mind that in Asia, and Indonesia, women have proven themselves capable of demonstrating their talents and skill in taking on tough assignments, ranging from sub-district leaders, regents or governors, parliamentarians, ministers, and even vice presidents and presidents. It is in this very regard that we are obliged to keep the momentum of humanity progressing.

Protection of children is another uphill task that needs our serious attention. I am of the firm belief that we all agree that they are going to take over our responsibilities in the future. It is for them that we must now work hard. In terms of population composition, their number is high. And the economic crisis sweeping across the nation has forced many of them out of school. We have to spare no effort in saving this next generation.

On the issue of internally displaced people, we have now a total of more than one million such persons, thus producing an additional problem that requires resolution. The upheaval and violence that has followed the communal conflicts in a number of regions over the last two years have compelled many people to become refugees. Unfortunately, the situation has yet to improve sufficiently to enable them to return to their homes.

With the assistance of the UN, we have gradually resolved the problem of the East Timor refugees. As we all are aware, the East Timorese are preparing to establish their own country. In this transitional period, there are some outstanding problems still remaining. Some of them are sensitive and need to be handled cautiously. For one, it is a fact that we are neighbors who, albeit under unfavorable conditions, once lived together as one nation.

In general, the policy on refugees involves repatriating them after making sure of their security. Should this be difficult to achieve, integrating them into local communities or transferring them for resettlement or transmigration will be pursued. This policy is expected to resolve the problem as soon as possible.

Ladies and Gentlemen,

We have also witnessed a series of natural disasters recur in several regions. I use the word "recur" because, as a matter of fact, the Indonesian archipelago is geographically located on a part of the earth's surface that is prone to natural disasters, landslides and floods.

This reminds us of the importance of sustainable development. Apart from being related to the preservation of biodiversity, it also plays a significant role in the prevention of natural disasters. It would be, therefore, insufficient and inappropriate if we handle the impacts of natural disasters in an ad hoc fashion. We have to be ready at all times in facing natural disasters. Better still, we should make this one of the government's functions.

Natural disasters also cause massive movements of people who are forced to leave their homes and villages. It is in order to cope with this problem that we have established the Coordinating Board for the Handling of Disasters and Refugees.

The victims need assistance, both from the government and the community at large. In this regard, I would like to thank and express my appreciation for the spontaneous responses of many members of the community who, in a coordinated and continuing manner, have earnestly offered a part of their income to help those suffering as a result of disasters.

Ladies and Gentlemen,

Those are some of the main issues that I have to report to this august Annual Meeting of the Assembly. In order to complement my speech, I am enclosing with this report an elucidation on my speech. Thank you very much for your attention.

Wassalamu'alaikam Warrahmatullahi Wabarakatuh.

Jakarta, November 1 2001

PRESIDENT OF THE REPUBLIC OF INDONESIA

MEGAWATI SOEKARNOPUTRI