Malaysia's Islamists endorse Anwar in bid for power

KUALA LUMPUR (Reuters) - Malaysia's leading opposition figure, Anwar Ibrahim, cleared a major hurdle in his race to win power when an Islamist party endorsed him on Wednesday as leader of an anti-government alliance.

The move by Parti Islam Se-Malaysia (PAS) came after Anwar's convincing win in a by-election and was made despite reservations among some sections of the Islamic party about the "rainbow alliance" of which they are a part.

However, political analysts say that Anwar may struggle to hold his coalition together, let along find the 30 defectors from the ranks of government MPs he needs to join him to win power.

The government has been on the back foot since losing its two-thirds majority in an election in March and there were calls on Wednesday for Prime Minister Abdullah Ahmad Badawi to quit.

Anwar also faces prosecution for sodomy, a reprise of charges which saw him jailed and in the late 1990s and forced him out of politics for a decade.

If convicted in a trial starting on September 10, his political career would be at an end.

But it is Malaysia's bitter racial and religious politics, which Anwar wants to end, that could be the biggest stumbling block in the former deputy prime minister's rush to lead the country of 27 million people.

"Even if he managed to get 30 MPs, it has to be of the correct distribution in terms of the Malay-Muslims and non-Malay-Muslims," said Lee Hock Guan, of Singapore's Institute of Southeast Asian Studies.

"It has to be in such a way that it won't upset the Malay-Muslims who are dominant in Pakatan Rakyat (Anwar's coalition), otherwise PAS may leave or something," he said.

Anwar's coalition has 82 MPs in parliament, of which 23 are from PAS, and needs to win over MPs from the ruling Barisan Nasional coalition to get a majority in the 222-seat parliament in a confidence vote he has said he will call for September.

The coalition has ruled Malaysia since independence from Britain in 1957.

CAMPAIGNING ON EQUALITY

Despite pledges to end Malaysia's decades-old policy of preference for ethnic Malays, who make up more than half of the country's population, Anwar swept the largely rural and Malay seat of Permatang Pauh in Tuesday's by-election.

That policy, which gives preferences at university and the civil service as well as in setting up companies, Anwar believes has hampered economic growth and failed to help the people it was supposed to lift out of poverty.

The result has seen Malaysia slip in foreign investment (FDI) rankings and according to United Nations data FDI totaled $53.58 billion in 2006, little changed from $52.75 billion in 2000, whereas neighboring Thailand saw a surge to $68 billion in 2006 from around $30 billion in 2000.

Anwar wants to target government programs at the poor, regardless of race.

His plans have won plaudits from some foreign analysts but may face a backlash from Malays who fear losing their privileges.

"I think the main contents of his (Anwar's) 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.

The prospect that a rudderless and desperate Barisan government may 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 government dissident Tengku Razaleigh Hamzah, who had earlier offered to challenge the prime minister for the presidency of the dominant party in the coalition in December, said Abdullah should quit.

He was joined by ex-prime minister Mahathir Mohamad, a trenchant critic of Abdullah.

(Additional reporting by Jalil Hamid, Soo Ai Peng and Liau Y-Sing; Editing by Alex Richardson)