The plan is to cut tax for publicly traded companies and raise the minimum salary threshold for personal tax by 300 percent, Yudhoyono said Tuesday in a speech to parliament on the eve of Indonesia's 60th Independence Day.

The government expects the measures to help attract investment and boost economic growth to 6.2 percent next year - the fastest since 1996.

Indonesia wants to attract US$150 billion (HK$1.17 trillion) in investment in the next five years to build the roads and power plants it needs to spur growth and help lift 40 million people out of poverty. That may depend on Yudhoyono convincing overseas investors about the effectiveness of the legal system in Indonesia.

"Foreign investment is expected to increase with an improvement of international trust,'' Yudhoyono said. Still, "the target of 6.2 percent is insufficient to significantly reduce the level of unemployment and poverty.''

Government planners expect Indonesia's jobless rate to fall to 5.1 percent over the next four year from 9.9 percent. The proportion of the population living in poverty, or on less than US$1 a day, is expected to fall to 8.2 percent from 16.6 percent over the same period.

The government's "optimistic assumptions could hold if there are sufficient capital inflows next year from donors and foreign investors to help strengthen the rupiah,'' said Fauzi Ichsan, an economist at Standard Chartered in Jakarta. "By strengthening the rupiah, at least inflation would slow.''

The rupiah has declined 6.3 percent this year.

Crude oil prices have surged 43 percent this year, putting pressure on the rupiah and making it more difficult for the government to trim its budget deficit due to higher fuel subsidy costs. Indonesia is the only member of the Organization of Petroleum Exporting Countries that is a net oil importer.

Yudhoyono's government plans to lift caps on fuel prices in January as part of efforts to balance its budget by 2007. That is likely to reduce the cost of fuel subsidies from 140 trillion rupiah (HK$112 billion) this year to 68.5 trillion rupiah in 2006, according to a Finance Ministry statement.

Indonesia expects a budget deficit of 0.7 percent of gross domestic product next year, while this year's gap may widen to 1 percent from the previous target of 0.8 percent of GDP.

The US$258 billion economy grew 5.5 percent from a year earlier in the second quarter after expanding a revised 6.2 percent in the previous three months, the Central Statistics Bureau said.

The government's forecast of 6 percent economic growth this year and 6.2 percent in 2006 was "very optimistic,'' said Suryanto Sandjaja of First State Investment in Jakarta.

"Gross domestic product growth may even slow down next year.''

Still, the nation's central bank will maintain a "tight'' monetary policy, Yudhoyono said.

"The government comprehends the effort made by Bank Indonesia to apply a monetary policy that tends to be tight in anticipation of the dynamics of the world economy and to maintain the level of inflation.''

Yudhoyono also asked Indonesian judges to "cleanse their internal institution,'' and become more serious in their handling of corruption cases.

Berlin-based Transparency International ranks Indonesia among the world's 10 most corrupt countries.

The government expects to raise 539.4 trillion rupiah in 2006 from taxes and grants. The government also plans to raise salaries for civil servants by as much as 20 percent.

Yudhoyono, 55, a retired general who became president last September, said the government plans to raise 3.5 trillion rupiah selling state assets and 2.35 trillion rupiah selling its stake in banks. The government wants to recoup part of the more than 450 trillion rupiah it spent bailing out banks after the 1997 Asian financial crisis.

A legal case against Newmont Mining may damp foreign willingness to invest in Indonesia. Newmont, the world's largest gold miner, and the head of its business in Indonesia, Richard Ness, have been charged for allegedly polluting a seabed with waste from its mine on Sulawesi.

Foreign investment in Indonesia slumped to US$10.3 billion last year - from US$39.9 billion in 1995. BLOOMBERG