Louise Williams, Jakarta – The International Monetary Fund's rescue package for Indonesia is expected to be delayed until later this week after private talks reportedly stalled over politically sensitive issues such as the subsidised national car project.

The package was originally due to be presented to President Soeharto last Friday, but talks continued over the weekend and yesterday and analysts said they did not expect an announcement for another few days.

A leading economist, Mr Sjahrir, said the national car program, which gives exclusive tax and tariff concessions to one of President Soeharto's sons, the national passenger jet development and government trading monopolies on agricultural products such as rice would "remain contentious" during the talks.

"The Government will consistently argue that the national car is an internal matter for Indonesia," he said.

Up to $US1 billion ($1.46 billion) in loans have been provided by State banks to the project, which is supposed to develop a national Indonesian car in partnership with Kia Motors of South Korea.

Kia Motors was placed in receivership by the South Korean Government last week and the involvement of President Soeharto's son Mr Hutomo "Tommy" Mandala Putra has made the project more a symbol of economic nepotism than national pride.

Mr Sjahrir said the Soeharto Government would also vigorously defend the national aircraft program, which has already lost hundreds of millions of dollars.

It already produces a turboprop aircraft but now aims to design and manufacture a 130-seat jet, for which a separate finance company was set up earlier this year to raise an initial $US2 billion.

The visiting Malaysian Deputy Premier and Finance Minister, Mr Anwar Ibrahim, said Kuala Lumpur was preparedto contribute $US1 billion to help Indonesia restore its economy.

The Indonesian State Secretary, Mr Murdiono, clarified that Malaysia's aid "is outside the IMF program".