The tremors that have shaken Indonesia's political landscape will persist as the country heads into elections next year amid a crippling economic crisis, and analysts say this makes buying into state companies risky.

In a single year Indonesia's economy has been through one of the worst convulsions of any modern nation, and few economists or analysts believe it has turned the corner.

In May, the nation faced its worst rioting in decades. Food prices and unemployment are rising while the rupiah currency remains stubbornly weak. Its collapse from 2,400 against the dollar to levels around 13,000 now has sent the price of basic necessities soaring.

The government has said that by the end of this year, half of the country's 200 million people will be unable to afford food and basicneeds.

Apart from the huge social pressures, some investors fear that the relative calm that has prevailed in Indonesia since president BJ Habibie took over from long-serving president Suharto after May's rioting could easily be shattered.

They also question the ability of Habibie, former vice-president to Suharto, to oversee vital economic reforms and his commitment to introducing real democracy, especially as he may seek a second term in office - a move which may threaten more unrest. Despite the risks, outside interest in major Indonesian companies is keen.

For example, interest shown in state cement producer Semen Gresik -- which has drawn bids from several firms offering a large premium above its share price -- suggests foreign companies are being lured by the prospect of securing a low-cost foothold in Indonesia. And analysts say the response to the government's plans could prompt non-state firms to follow its lead and search for strategic investors to inject desperately needed funds.

The firstphase of sell-offs involves the sale of more state shares in five already partially privatised firms -- Gresik, communications giants Telkom and Indosat and mining firms Aneka Tambang and Tambang Timah.

All five are ranked among the country's corporate crown jewels, analysts say. Stakes in seven wholly state-owned firms are also being sold.In last month's accord with the IMF -- which had demanded the privatisation programme as one of the conditions to bail-out package for Indonesia -- the country said given the interest expressed by foreign investors it was confident of raising $1.5 billion from the sell-offs in the current fiscal year.

The sale of Gresik has made the most progress -- Indonesia announced earlier this month that Mexico's Cemex had won the first round of bidding with an offer of $1.?8 a share for a 35 per cent stake -- double the share price at the time of 9,150 rupiah ($0.70) and well above market expectations.

Germany's Heidelberger Zement, Switzerland's Holderbank and France's LafargeAsia Pacific have entered the second round of bidding and have until August 17 to trump Cemex's offer. If they do, the Mexican firm will be given a chance to respond with a new bid of its own.

Optimism that a strong strategic investor could boost Gresik's fortunes sent its share price bounding up to 12,050 rupiah at Friday's close from a low of 4,800 in early June.

Shares in Telkom, Indosat, Timah and Aneka Tambang have also been driven up on anticipation they could see similar premiums.