By Cindy Shiner
Special to The Washington Post
Thursday, March 12, 1998; Page A25

JAKARTA, Indonesia, March 11—President Suharto began a seventh five-year term today with a somber call for national unity and collective austerity, as thousands of students staged their biggest and most fiery anti-government protest since the economic crisis began eight months ago.

"As a nation, we must tighten our belts," he declared in his inaugural speech.

"As an individual, as a group, some of us may lead an affluent life," he acknowledged. "But, as a nation, we can no longer afford to lead an extravagant life. During the present hardship, we need precisely a stronger solidarity, a sense of sharing the same fate and destiny."

Indonesia is in the midst of its worst economic and political crisis since Suharto came to power 32 years ago. The local currency, the rupiah, has lost 70 percent of its value since last July, there is mounting unemployment, inflation and a plethora of other problems.

Meanwhile today, the People's Consultative Assembly, Indonesia's most powerful policymaking body, elected controversial Research and Technology Minister B.J. Habibie as vice president. Habibie, 61, a workaholic and surrogate son to Suharto, could become president if Suharto, who was ill in December, fails to complete his term or to run for election in 2003.

Habibie, a German-trained aeronautical engineer, has raised eyebrows with his economic views that have often clashed with those of the technocrats who guided Indonesia through three decades of steady growth. When his name surfaced as a vice-presidential candidate this year, the rupiah plunged to an all-time low of 17,000 to the dollar. It now stands at about 10,000.

University students, angry over the high prices that have resulted from the economic crisis they blame on government mismanagement and corruption, have staged protests over the past two weeks. The demonstrations for the first time turned violent shortly after Suharto was sworn in today.

Up to 10,000 students demonstrated at Yogyakarta's Gadjah Mada University on the main island of Java and burned an effigy of Suharto, while thousands of others protested in the eastern town of Surabaya, on the outskirts of Jakarta, and in other cities.

The Yogyakarta protest was reportedly peaceful but more than a dozen students were injured in a clash with troops in Surabaya.

Indonesia has banned street protests during the weeks before and after the assembly meeting, which wrapped up today. The protests have been confined to university campuses and security forces have largely held back from intervening.

The demands vary, but the students are mainly calling for price cuts and political reform. They say they will keep demonstrating until their demands are met.

"We don't want the tension to drop too low," said Annas Alamudi, 21, a law student at the University of Indonesia in Jakarta, the capital. "Our struggle is until we achieve total reform in this country."

Suharto, Asia's longest-serving leader, came to power in 1965 after an unsuccessful Communist coup attempt. He set the country on the path to economic reform and the standard of living improved dramatically. In the meantime, however, his six children, other relatives and associates amassed billions of dollars through the patronage system that Indonesians have come to revile.

Suharto has been in a standoff with the International Monetary Fund over the terms of a $43 billion bailout. The IMF said last week it was delaying the latest $3 billion payment at least until April, apparently because of Suharto's reluctance to carry out the economic reforms he promised.

The government wants to peg the rupiah to the dollar through a currency board that the IMF and Washington have deemed potentially disastrous unless banking reforms and other changes are carried out first. Suharto did not mention it in his speech today.

On Tuesday, the IMF signaled it might be softening its stance, saying that a currency board might be acceptable if certain preconditions were met in the coming months. A top-level Indonesian team is to visit Washington next week for further negotiations with the IMF.

A number of Indonesian officials this week indicated that the government might forgo the bailout if it felt it was being unduly pressured to carry out measures it considered unsuitable and potentially destabilizing.

Suharto hinted at this in his speech, saying that "new powers are emerging in the international scene, especially in the economic area," and that "nations are developing themselves with a view to attaining progress and prosperity."

"On the one hand, we encourage changes that lead to peace, prosperity and progress of all nations," he said. "On the other hand, we prevent events that may lead to an unjust and insecure world."