By Keith B. Richburg
Washington Post Foreign Service
Tuesday, May 26, 1998; Page A01

JAKARTA, Indonesia, May 25—Indonesia's new president, B.J. Habibie, pledged today to lift restrictions on political parties and hold open elections as part of a package of reform measures that would liberalize life in the world's fourth most-populous nation and revive political activity that has been stifled here for more than four decades.

Habibie, who took office last week when president Suharto stepped down after 32 years in power, said in an address before the first meeting of his new cabinet that he recognizes the Indonesian people's "democratic aspirations" and the lingering "questions about the legality and legitimacy of this government." He promised to institute reforms that will not only open up Indonesia's politics, but also end the "corruption, collusion and nepotism" that characterized Suharto's rule.

Habibie gave few details and no timetable for the reforms or the elections, but state secretary Akbar Tandjung told reporters that elections will be held when all the necessary laws are in place. "If we can make it in six months or earlier, that would be good," he said. "But it might also take one year."

Habibie's proposals coincided with a dizzying spate of other initiatives and announcements that, taken together, underscore the remarkable transformation here in the four days since Suharto bowed to a wave of popular protest and defections from his ruling clique and relinquished power to Habibie, his vice president and longtime protege.

In addition to the election pledge, the government announced plans to free some political prisoners, to make the judicial system more independent and -- in the most dramatic evidence yet that the Suharto era is over -- to begin severing the government's close links with the businesses of the former president's children and cronies.

In one case, Energy Minister Kuntoro Mangkusubroto announced that Pertamina, the state oil company, will "review" contracts with Peta and Permindo, smaller affiliated companies that handle international trade. Peta is partially owned by one of Suharto's sons, Hutomo Mandala Putra, known as "Tommy"; another son, Bambang Trihatmodjo, is a major shareholder in Permindo.

In another case, the Jakarta city government over the weekend canceled an agreement with two companies involved in providing tap water to the capital. One of the companies was owned by longtime Suharto business partner Liem Sioe Liong; the other was controlled by Suharto's eldest son, Sigit Harjoyudanto.

With nepotism now out of fashion, the armed forces commander, Gen. Wiranto, announced today that his wife and daughter are resigning from their appointive seats in the consultative assembly, the largely rubber-stamp body that meets every five years to select the president.

At the same time, the armed forces announced that a preliminary investigation into the shooting deaths of six student democracy demonstrators at Trisakti University -- which triggered violent riots and ultimately led to Suharto's fall -- revealed that eight soldiers were involved in the shooting and that six officers are "suspected of supporting the incident."

When Habibie took power last week, he faced widespread skepticism about his commitment to reform, and many here predicted his tenure would be short-lived. But he now seems intent on seizing the initiative on the reform issue and demonstrating to his critics that while he may be a product of Suharto's authoritarian regime, he is willing to break with the past and usher in a more liberal, democratic political process.

Leaders of the opposition movement that toppled Suharto had given Habibie breathing space to implement change while vowing to keep up the pressure until he did. Habibie is also believed to be under heavy pressure from the country's powerful armed forces, whose top leadership has voiced strong support for reform.

Overseas voices have also called on Habibie to recognize the need to restructure Indonesian politics drastically. The United States, among others, greeted Habibie's presidency with caution, saying it should be a step on the way to true political reform.

Rep. Christopher H. Smith (R-N.J.), chairman of the House human rights subcommittee, brought that message to Jakarta today, saying he will tell Habibie, whom he is scheduled to meet this week, that "this is a golden opportunity to grab the brass ring." Smith said in an interview that "the whole movement right now shows the air is blowing in the direction of reform."

Perhaps with an eye to his international audience and to secure further international assistance as he tries to lift the country out of its deepest economic crisis in decades, Habibie's pronouncements came just one day before a high-ranking team from the International Monetary Fund is due here to begin negotiating terms for release of the latest installment of a stalled $43 billion bailout package.

Of all the measures unveiled today, the most far-reaching were the plans to rewrite election laws. Under Suharto and his predecessor, Sukarno, Indonesia has known one-man rule with only a facade of democracy preserved through three officially sanctioned parties. It remains uncertain exactly what form the promised pluralism will take or how this diverse nation will take to multiparty politics.

It is not even clear what offices future elections might fill. There is a widespread desire that the next president be directly elected, but some people believe only a new parliament should be elected and empowered to choose the president. Those who favor indirect presidential election say they fear that direct elections might lead to the emergence of religiously based candidates who might make divisive appeals to the country's Muslim majority.

Amien Rais, the Muslim leader and university lecturer who emerged at the forefront of the student-led protest movement, said in an interview that he is ready to form his own party and run for the presidency. "We must have elections as soon as possible," he said.

Rais said Suharto's ruling Golkar party machine has lost its credibility and will be reduced to a minor role in politics. He also predicted that the military will run its own candidate to promote the interests of the armed forces.

Meanwhile, an adviser to opposition politician Megawati Sukarnoputri said that Sukarnoputri, the daughter of former president Sukarno, is likely to be a candidate. Although she has kept a low profile lately, adviser Laksamana Sukardi said that her name guarantees her a natural base of support that few can match.