Embattled Malaysian PM wins ruling party's support

KUALA LUMPUR (Reuters) - Malaysia's prime minister won the backing of the country's main ruling party on Thursday, fending off a challenge to his leadership from the former premier that threatens to deepen political turmoil.

Malaysia's ruling United Malays National Organisation (UMNO) endorsed Abdullah Ahmad Badawi as party leader and accepted the resignation of ex-premier Mahathir Mohamad, who has called for the prime minister to step down.

"The supreme council has decided to continue to support the leadership of the prime minister," Deputy Prime Minister Najib Razak told reporters after a three-hour emergency meeting of the party's top decision-making body. One council member said the meeting was attended by 29 of the 30 members.

Mahathir's departure has cast doubt on Abdullah's future and raised political uncertainty as the government is grappling with high inflation, slowing economic growth and rising subsidies.

Abdullah also faces pressure from opposition leader Anwar Ibrahim who said his group had the numbers to topple the government.

"The excessive politicking has generated extra uncertainties into the whole political and economic environment," said Zainal Aznam Yusof, a senior fellow at Malaysia's Institute of Strategic and International Studies.

UMNO has been in turmoil since a poor showing in March elections when the Barisan Nasional (BN) coalition which it dominates lost its two-thirds majority in parliament.

The stock market eased on Wednesday after losing more than 1 percent the previous day on jitters over the political flux.

ANWAR WAITING IN WINGS?

Mahathir's resignation on Monday from the party he led for 22 years came with a call for other UMNO members to quit. A meeting of lawmakers on Tuesday ignored the call and rallied behind Abdullah.

Mahathir, who has become increasingly vehement in criticism of his successor, said he was leaving UMNO in an attempt to force Abdullah out.

Mahathir wrote in his blog www.chedet.com that BN lawmakers should temporarily leave the coalition and declare themselves as independents in a vote of no-confidence in Abdullah.

"This is one way to force Abdullah to resign. Once he resigns, the MPs can return to the BN fold," he said.

Abdullah this month ordered the attorney-general to investigate Mahathir and five others on possible offences over the appointment of judges while the former premier was in power.

An emboldened opposition, headed by Mahathir's arch-foe Anwar, is seeking to wrest parliamentary control by wooing BN defectors.

But Najib said: "We are confident that the party members will be loyal to UMNO and will continue to remain within the party," adding the meeting had not raised the issue of transition of power.

"I do intend to topple the government. We have the numbers," Anwar told reporters in Singapore, a claim echoed by government insiders.

"I'm looking forward to early elections," Anwar said, adding he hoped these would take place before September.

"The moment we are sure we can contest, we move," he said, saying a vote of no-confidence in parliament was the best course of action.

Najib said UMNO would hold a special meeting to rejuvenate the party and regain the trust of party members and citizens.

UMNO, backbone of the 14-party BN that has ruled since independence from Britain in 1957, holds 79 of its 140 seats.

The opposition is a loose alliance of Islamists, a Chinese-based party and the multiracial PKR, and needs to gain just 30 seats to win a simple majority and form the government.

(Additional reporting by Neil Chatterjee in Singapore; Editing by Liau Y-Sing and Janet Lawrence)