Malaysia PM won't resign despite poll debacle

KUALA LUMPUR (Reuters) - Malaysia's premier said on Sunday he has no plan to step down after leading his ruling coalition to its worst election result in decades, despite calls by his influential predecessor for him to quit.

Prime Minister Abdullah Ahmad Badawi's multi-racial National Front (Barisan Nasional) coalition won just a simple majority in parliament, and his future as leader is in doubt after he watched a record majority collapse as the opposition Islamists and reformists won control of five of the nation's 13 states.

Barisan has effectively ruled Malaysia since independence from Britain in 1957. The coalition ended up with 62 percent of federal seats, down from 90 percent previously and without a two-thirds parliamentary majority, Barisan can no longer change the constitution or make some key appointments.

Abdullah had no plan to quit, his spokesman said on Sunday, despite urging by predecessor Mahathir Mohamad.

"There are no plans to resign," Abdullah's spokesman, Kamal Khalid said. "He still has plans to proceed to the palace tomorrow morning to take the oath of office."

The streets were unusually quiet on Sunday, with many older Malaysians fearful of trouble. The last time the coalition suffered a heavy setback, in 1969, race riots erupted. Malaysia's share market is expected to slide on Monday, as political uncertainty takes hold after the massive protest vote.

In a recorded speech to be aired later on Sunday, Abdullah thanked voters for support that enabled his coalition to form the government, and promised to implement its manifesto.

"I'd like to emphasize that Barisan and other component parties accept the people's wishes in the election that was conducted smoothly, based on a democratic process that is fair and transparent," he said.

"God willing there will be no disturbance, there will be no chaos."

Malaysia is largely a mix of ethnic Malays, who make up about 55 percent of the population, and ethnic Chinese and Indians, who account for about a third.

A protest vote from Chinese and Indians, upset over what they saw as racial inequality in terms of business, job and education opportunities, had been expected.

But Malays, who are all Muslims and traditionally support Barisan, completed a perfect storm for the government, giving the opposition Islamists a record vote to protest rising prices.

WHAT NOW?

Deputy Prime Minister Najib Razak pledged loyalty to the continued leadership of Abdullah, saying in a statement: "I will assist the party president to face the challenges".

"The people have made their choice and we are grateful that Barisan has still been entrusted to govern the country".

Former premier Mahathir bluntly said Abdullah should quit.

"He should accept responsibility," said Mahathir, who now says he made a mistake in picking Abdullah as his successor and the current deputy premier, Najib Razak, should have taken over.

"The political stability has finally been challenged," said Pankaj Kumar, chief investment officer at Kurnia Insurance, who helps manage 1.6 billion ringgit ($506 million) in assets.

"The question is, how does Malaysia move forward from here in restoring confidence?"

A sales broker said he expected the benchmark Kuala Lumpur Composite Index to fall 50 to 100 points, or about 8 percent, on Monday as investors try to answer that query.

"This is probably not good news for the equity market or the ringgit," said Tim Condon, Singapore-based head of Asia research for investment bank ING.

Abdullah, who just four years ago led the coalition to a record election victory now faces a difficult period, although several party leaders are to meet with him to pledge their support, a source close to the party leadership said.

Abdullah's humbling performance nationally was compounded when his own home state, the industrial heartland of Penang, fell to the opposition.

The leftist Chinese-backed Democratic Action Party (DAP) won Penang, the hub of Malaysia's electronics industry, which accounts for about half of exports. As for the opposition Islamist party, PAS, it scored shock victories in the northern states of Kedah and Perak and held northeastern Kelantan.

DAP and PAS also joined the People's Justice Party, or Parti Keadilan, to wrest control of the industrial state of Selangor and almost all the seats in the capital Kuala Lumpur.

Now the disparate opposition parties must work together.

"I am playing the role of coordinating the opposition outside parliament, that is the major thing for now," said opposition figure Anwar Ibrahim, de facto leader of Keadilan, which emerged as the biggest opposition party in federal parliament with 31 seats. "I am optimistic that we can have a more coherent force."

Results from the election commission at 1130 GMT showed the National Front with 140 seats in the 222-seat parliament versus 82 for the opposition.

(See also MALAYSIA-ELECTION/CYBERSPACE; and MALAYSIA-ELECTION/VOXPOP <nKLR84033)

(Additional reporting by Mark Bendeich, Jalil Hamid, Niluksi Koswanage and Naveen Thukral; Editing by Matthew Jones)