Malaysia's Islamists endorse Anwar, PM pressured

KUALA LUMPUR, Aug 27 - Malaysia's Islamist party, a key partner in Anwar Ibrahim's opposition coalition, moved quickly to endorse him on Wednesday, removing a major obstacle in his push to win power.

The move came after Anwar secured a convincing victory in a by-election on Tuesday by promising to reinvigorate Malaysia's economy, which has lost some of its attractiveness as an investment destination to faster-growing regional rivals.

The size of Anwar's victory also led to calls for Prime Minister Abdullah Ahmad Badawi to step down from some in the United Malays National Organisation , the main party in the coalition that has ruled Malaysia for five decades.

Analysts said that PAS, which wants an Islamic state in this Asian country of 27 million people, would remain a difficult partner for Anwar's "rainbow coalition" which also comprises liberals and an ethnic Chinese party.

"As a member of the Pakatan Rakyat, we will agree to support Anwar as opposition leader to replace his wife," Kamarudin Jaffar, the secretary general of Parti Islam Se-Malaysia , said in a statement.

Anwar will be sworn in as a member of parliament on Thursday.

Anwar's coalition controls 82 seats in the 222-member parliament and aims to challenge the Barisan Nasional government, which has ruled Malaysia for the five decades since independence from Britain, in a confidence vote in September.

PAS has 23 seats in the coalition and some of its members fear that it is selling out on its core Islamic values in its push for power.

Anwar has said he can convince 30 MPs from the governing coalition to switch sides in a move which would hand power to the opposition in a September confidence vote in parliament.

"I am not sure that PAS is convinced that he can get 30 MPs to cross over," said Terence Gomez, professor at the University of Malaya's Faculty of Economics & Administration.

MARKETS ON EDGE

Malaysia's stock market and currency have been under pressure since March when the government lost its two-thirds majority in parliament as investors fretted over a messy political transition.

That uncertainty may not end any time soon.

Anwar must not only hold his fractious coalition together but also avoid being convicted in a new sodomy case which starts on Sept. 10 and deliver on his promise to seize power the same month.

The government is rushing through legislation to make suspects submit to DNA testing, a move Anwar's supporters fear may be used to fabricate evidence to convict him.

In addition, the prospect that a desperate Barisan government could try to spend its way to popularity is another reason to shun Malaysian assets, analysts said.

Malaysia will pass its 2009 budget on Friday and UMNO party dissident Tengku Razaleigh Hamzah, who had earlier offered to challenge the prime minister for the party presidency in December, said Abdullah should quit.

"He may not have the credibility needed to keep the country together," Razaleigh said in a statement issued on Wednesday.

Anwar has pledged a strong government to restore Malaysia's competitiveness in part by ending a system of affirmative action for ethnic Malays which critics say has damaged the country's economic prospects.

Quite how that will sit with the PAS's mainly Malay voter base is not known.

"I think the main contents of his policies are sound, and they do make sense economically over the long run because it should have a positive impact on Malaysia's competitiveness," said Alvin Pontoh an economist at Capital Economics in London.

"But I do question his ability to deliver them when and if he does become prime minister, given that the opposition coalition that he leads is comprised of three parties with widely differing agendas and ideologies," Pontoh said.

(Additional reporting by Jalil Hamid, Soo Ai Peng, Liau Y-Sing; Editing by Sanjeev Miglani)

By David Chance
Reuters

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