Malaysia PM shakes up cabinet after poll setback

PUTRAJAYA, Malaysia (Reuters) - Malaysia's premier made sweeping changes to his cabinet line-up on Tuesday, dumping his long-serving trade minister, after the ruling coalition suffered a heavy setback at elections this month.

Abdullah Ahmad Badawi retained his deputy, Najib Razak, as the defense minister, left his economic team almost intact, moved former Foreign Minister Syed Hamid Albar to the home ministry and scrapped some posts to reduce the size of his governing team.

The omission of Trade Minister Rafidah Aziz, a minister for almost 30 years and a senior member of the main ruling party, was the biggest surprise in the new line-up, which could shape Abdullah's political future after the election upset.

"Half (of the cabinet) will be new faces and will represent the people effectively," said Abdullah, who faces a possible test of his leadership at party elections later this year.

Former farm minister Muhyiddin Yassin took the trade portfolio and Rais Yatim was named as the new foreign minister.

Abdullah said the ministers would have to declare their assets, so that they were known to the public.

Asked why Rafidah, reputedly the world's longest-serving trade minister with 20 years on the job, had been dropped, he said: "I don't want to discuss this. I don't need to explain further. Rafidah needs to make way for someone new to take over."

Party opposition to Rafidah, 64, had been growing silently following a controversy over car import licenses distributed by her ministry, said political analyst Ooi Kee Beng, of the Institute of South East Asian Studies in neighboring Singapore.

"She is an old giant who was valuable to the party but she has been tainted with allegations of corruption from the approved permits issue," he added.

Rafidah controls a key faction in Abdullah's party, where the move to drop some party heavyweights could feed discontent already simmering over the dismal election result.

RUFFLES SOME FEATHERS

Abdullah's National Front coalition suffered the biggest electoral setback in its 50-year reign on March 8, when it lost its two-thirds majority in the federal parliament and five of the country's 13 states to opposition parties.

The opposition said the new team must get down to work immediately and draw up wide-ranging reforms in time for the first parliament sitting in May.

"Time however is not on the side of the new Cabinet," said Lim Kit Siang, a leader of the opposition Democratic Action Party. "The political tsunami of March 8 does not give the new cabinet the luxury of the usual political honeymoon."

Economists warned that investors would not return until the current spell of political uncertainty ended.

"The cabinet will need to regain the confidence of the people and investors," said Chua Hak Bin, an economist at Citigroup in Singapore. "Malaysia needs to improve the standard of living of its citizens and try to balance the tensions between races."

"I have been given a mandate. A very strong mandate," Abdullah, whose United Malays National Organisation (UMNO) leads the Barisan Nasional (National Front) coalition, said in the Malaysian administrative capital.

"I am not going to shirk from my responsibilities," he told reporters. "I have the support of the UMNO leadership and also the Barisan Nasional leadership."

But the key stock index ended the day up just 0.2 percent, barely reacting to the news.

Abdullah kept technocrat Nor Mohamed Yakcop as second finance minister, a role in which he effectively runs economic and fiscal policy, though the premier formally remains the finance minister.

He also appointed top banker, Amirsham A Aziz, as economic planning minister. Amirsham is the outgoing chief executive of Malaysia's biggest lender, Malayan Banking.

The new line-up comprises some younger politicians than the previous cabinet, which was known as the "mummified cabinet" by opposition parties because it included several ministers with more than 20 years of service.

Abdullah gave no post to his son-in-law, Khairy Jamaluddin, 32, elected to parliament this month for the first time. Khairy's relative youth and swift rise through party ranks have ruffled some feathers.

(Additional reporting by Niluksi Koswanage and Saeed Azhar)

(Writing by Mark Bendeich; Editing by Alex Richardson)