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Indonesia president says corruption threatens economic growth

JAKARTA, Aug 16 (Reuters) - Indonesia’s President Susilo Bambang Yudhoyono said on Thursday corruption is on the rise, even in parliament, in his most explicit comments yet on a scourge that he warned threatened economic growth in Southeast Asia’s largest economy.

Corruption is widely seen as holding back the economy and Yudhoyono has been criticised for letting the fight against it slow as he comes towards the end of his second five-year term.

A series of corruption scandals have rocked the president’s Democrat Party, weakening it in advance of elections in 2014 when Yudhoyono will step down.

“The drum of war on corruption should not dissipate. Corruption should be completely eradicated,” Yudhoyono said in a speech to parliament ahead of the country’s Independence Day anniversary.

“I have to admit there are still many perpetrators of corruption even in the government, parliament, regional representatives and among law enforcers,” Yudhoyono said.

Despite rampant graft, resource-rich Indonesia has become a favourite of emerging market investors because of its large domestic market as the world’s fourth most populous country, rising middle class, relatively stable fiscal framework and low levels of public debt.

Economic growth picked up to a stronger-than-expected 6.4 percent last quarter, defying a global downturn because of domestic consumption and investment.

Yudhoyono’s wide-ranging speech ahead of Independence Day was the latest in a series to touch on corruption.

He said cooperation between the anti-graft body the KPK, the Supreme Court, police and the Attorney General’s office was paramount in fighting corruption.

Yudhoyono said the government must provide a safe legal environment for investors if it is to promote economic growth, as well as removing hurdles to investment and promoting infrastructure growth.

He said Europe’s economic crisis also provided a threat to growth in Indonesia, and that the government needed to cautiously give a fiscal stimulus, though he did not give any details.

Economists say the government needs to spend more to overhaul infrastructure to drive long-term growth, though central government spending usually falls below target because of corruption and bureaucratic inefficiency.