Malaysia PM's offer to quit early stokes uncertainty

KUALA LUMPUR (Reuters) - Malaysia's prime minister will accelerate his departure from office, but his failure to set a date at a meeting of top officials from his party on Friday only added to uncertainty over the fate of the government.

The United Malays National Organization (UMNO), the biggest party in the coalition that has ruled Malaysia for 51 years, agreed to Abdullah's request to postpone a leadership vote to March, but an expected date for his departure did not emerge.

Abdullah had wanted the vote delayed from December so as to avoid a leadership challenge he could have lost, a senior party official said prior to the meeting.

UMNO and the Barisan Nasional coalition it heads are for the first time facing the prospect of losing power to a resurgent opposition alliance led by former deputy premier Anwar Ibrahim.

Abdullah has come under increasing pressure to quit since Barisan Nasional stumbled to its worst election result in March this year when it lost its two-thirds parliamentary majority.

Abdullah avoided answering direct questions about a date at a news conference after the party meeting. "Since we have decided to speed up the transition, the original 2010 deadline is out of the question," he said.

Abdullah was referring to his original plan for handing power to his deputy Najib Razak, even though elections are not due until 2013. By tradition, the head of UMNO is also premier of this Southeast Asian nation of 27 million people.

MURDERED MONGOLIAN

Najib, 55, has an impeccable UMNO heritage. He is the son of Malaysia's second prime minister and the nephew of its third. He is a former defense minister who now holds the powerful finance ministry portfolio.

Recently however he has been dogged by allegations he had a sexual relationship with a murdered Mongolian woman. Najib has firmly denied the allegations.

If and when he does assume power, he may prove as incapable as Abdullah in staunching the ruling coalition's losses, analysts said.

Although UMNO is divided and disillusioned at present, it is the fate of its partners in the coalition, the Malaysian Chinese Association (MCA) and the Malaysian Indian Congress (MIC), that will decide who holds power.

UMNO represents the interests of ethnic Malays, the majority here, but does not have the votes to govern alone as there are big Chinese and Indian communities. Political parties are set up along racial lines.

"It will be very difficult for Najib to hold the whole thing together," said James Chin, Professor of Political Science at the Monash University Malaysia Campus. "MCA and MIC are so weak it does not matter who becomes UMNO leader," he said.

Anwar's coalition has mounted an aggressive campaign to win power. He says he has sufficient deserters from the ranks of government MPs to win a confidence vote in parliament, although his calls for a recall of the house have been rebuffed by the government and he has not named his supporters.

Anwar, too, faces challenges and is defending himself against what he says are politically motivated charges of sodomy.

The pressure from Anwar has coincided with turbulence in global financial markets caused by the U.S. banking crisis, which has spooked investors in Malaysian assets.

Abdullah, 68, has failed to implement key pledges such as ending corruption and boosting the independence of the judiciary. The policy drift, along with rising racial tensions, has unsettled both party activists and investors.

The budget deficit is set to balloon to 4.8 percent of gross domestic product this year. Inflation has surged to 27-year highs and his government has flip-flopped on key issues like petrol subsidies, first raising and then cutting prices.

(Reporting by Jalil Hamid; Writing by David Chance; Editing by Bill Tarrant)

Reuters
26/09/08