Habibie, 61, standing at the same podium in the Merdeka Palace where only 24 hours before veteran leader Suharto stunned the nation with his sudden resignation, vowed to work for reform and development.

"As I said yesterday, we will develop a goverment free from inefficiency, and corruption, collusion and nepotistic practices," he said.

In a move certain to win praise, he excluded Suharto's golfing buddy Mohamad `Bob' Hasan, the former trade minister, and his eldest daughter Siti `Tutut' Hardiyanti Rukmana who held the social affairs portfolio.

Their appointments in March to the previous cabinet, as the country's economic crisis spiraled out of control, were widely condemned as further examples of the nepotism and cronyism which flourished under Suharto's 32-year rule.

But in a sign ofstability, Habibie retained army chief general Wiranto as defence minister, amid reports the four-star general had played a key role in convincing Suharto to resign.