Jakarta – Indonesia's Investment Minister Laksamana Sukardi has pleaded for time to reform the country's graft-ridden legal system and promised to honour contracts agreed with past regimes.

Indonesia is battling growing disillusionment from foreign investors, disturbed by repeated signs the bad old ways remain as ingrained as ever despite the government's efforts at sweeping reform.

But some investors also worry that the corruption issue could be used as an excuse to undo agreements made years ago, an element of uncertainty not welcome by the business community.

"Bear in mind how far Indonesia has come ... we have more checks and balances in the system. We have been transforming ourselves," the minister told foreign businessmen on Thursday. "This is transition. Sooner than later it will settle down."

He said the new government had blocked what he saw as former President Suharto's attempts to build a "corrupt dynasty" for his family. In the Suharto era, when surging growth was matched by unchecked corruption, Mr Laksamana said it had been a hollow development boom, which for investors was like riding a roller-coaster without a seat-belt.

The new government of President Abdurrahman Wahid had introduced checks and balances and given legal reform top priority. "But it will never happen overnight ... it takes some time to overhaul our legal system," he said. During Suharto's long rule, judges turned into "auctioneers", handing down verdicts on behalf of the highest bidder, he said.

Indonesia's credibility took another blow earlier this week when two separate court rulings over a high-profile bank scandal dropped an indictment against one of the main suspects and allowed his company to keep a huge fee the government wanted back.

The case revolves around a US$70-million fee paid by Bank Bali to a then politically well-connected firm to collect a loan worth less than double that amount. The scandal, which ruined Dr B. J. Habibie's chances of re-election in last year's presidential vote, triggered a freeze on international aid. The government is appealing the case, but Mr Laksamana said it could not interfere in the court rulings.

There have also been growing concerns about whether the government might backtrack on contracts agreed during the Suharto-era and which are now seen as tainted by corruption.

Top among them are several deals with the state electricity firm to buy power from independent firms – several with close links to Mr Suharto's family and associates – at what became exorbitant prices after the country's economic collapse. "Our government's commitment is still to honour contracts by the previous government," Mr Laksamana said.

The government is working on new laws to axe barriers to foreign investors but they will be required to conduct business that is environmentally sound, promotes good worker relations and does not get involved in graft.