President Robert Mugabe's government says the bill is part of its drive to empower the country's poor majority and eliminate traces of the colonial past.

Legislators of the opposition Movement for Democratic Change (MDC) kicked off debate on the bill, saying it was designed to enrich a few powerful individuals and win votes for the ruling ZANU-PF party in parliamentary and presidential elections due next March.

At the U.N. General Assembly in New York, U.S. President George W. Bush denounced Mugabe's government as "tyrannical" and demanded freedom for the Zimbabwean people.

But African nations, closing ranks behind Mugabe, insist on his presence at an EU-Africa summit in Portugal in December, Zimbabwe's information minister said in response to the British prime minister's refusal to attend if Mugabe was there.

Critics accuse the Zimbabwean government of causing the economic crisis by seizing white-owned farms and handing them to inexperienced black farmers, leading to soaring inflation and unemployment and crippling shortages that have forced hundreds of thousands to seek work and food abroad.

Mugabe has denied charges of economic mismanagement and blames the crisis on Western sabotage. The European Union has imposed targeted sanctions on members of his leadership group it accuses of rights abuses and election fraud.

A survey released in Johannesburg on Tuesday showed political repression was an even bigger cause of Zimbabwean flight to South Africa than the economy. Between two and three million Zimbabweans are estimated to have fled to South Africa.

"The government has cracked down on peaceful calls for reform and forced millions to flee their homeland ... The United Nations must insist on change in Harare and ... on the freedom of the people of Zimbabwe," Bush told the U.N. General Assembly.

The MDC's Edwin Mushoriwa, leading parliament's debate on the bill, told lawmakers: "What we are seeing is an attempt obviously to use this as a campaign tool to woo voters for the elections and to give money to a few people."

Indigenisation and Economic Empowerment Minister Paul Mangwana and Zanu PF legislators defended the bill and accused its opponents of trying to perpetuate economic imbalances brought about by colonialism.

"If we do not dismantle the structure of colonialism that we inherited, then we have not given back all the country's resources to its rightful owners, our people," he said.

Mugabe, 83 and in power since independence from Britain in 1980, has accused some foreign-owned firms of working with his Western opponents to topple his government by raising prices without reason. He has threatened to seize foreign businesses.

Mangwana tried to allay business fears by saying the government would work with industries to set timetables for foreign-owned firms to transfer majority ownership to locals. "We are not going to indigenize in a day," he said.

Mining and business officials said the law could accelerate the decline of an economy that has shrunk by at least 30 percent since 1999.

"Zimbabwe is now seen as a high-risk destination because of uncertainty over security of tenure and lack of confidence in the rule of law," Chamber of Mines leader Jack Murewa said.

Information Minister Sikhanhyiso Ndlovu told journalists Mugabe had solid African backing to attend the December summit.

"If any pressure is put on Portugal not to invite President Mugabe, SADC will also not attend and the AU will not attend," he said, referring to the Southern African Development Community and the African Union.

British Prime Minister Gordon Brown said last week he would not attend the summit if Mugabe did because Mugabe's presence would divert attention from important agenda items.

The EU-Africa summit did not take place in 2003 after Britain and other EU states refused to attend if Mugabe did.