Malaysia's embattled PM confirms will step down

KUALA LUMPUR (Reuters) - Malaysia's embattled Prime Minister Abdullah Ahmad Badawi confirmed on Friday he would step down, just three months after winning office, ending a leadership crisis sparked by the coalition's worst ever election result.

Abdullah, who had been widely expected to hand power to his anointed successor, Deputy Prime Minister Najib Razak, however did not spell out the timing of the transition.

"Datuk Seri Najib and I have decided on the right time for me to hand over the premiership to him. We have no problems and we enjoy good working relations," state news agency Bernama quoted Abdullah as telling government officials in the northeastern state of Kelantan.

"The leadership change will definitely take place at the right time," he added.

Uncertainties about when Abdullah would hand over power to Najib, together with a steep rise in fuel prices, have raised Malaysia's political risks in investors' eyes, analysts say.

Abdullah has faced mounting public anger since ordering a steep increase in fuel prices in line with a global surge in oil prices, which touched a record $139 a barrel last week. The measure will drive Malaysia's inflation rate to a 10-year high of 4.2 percent in 2008.

But on Friday, a protest opposition supporters hoped would draw 20,000 people managed to draw only several hundred.

"Down with PM, long live the people," the protesters, mostly young Malays, shouted as they left a mosque in a poor part of Kuala Lumpur after noon prayers and headed to the iconic Petronas Towers in the city centre to underline anger against the state energy giant.

The protest ended peacefully after police prevented the activists from marching to the city centre and they dispersed at the headquarters of the Islamist opposition party Parti Islam SeMalaysia (PAS) party, one of the organizers.

"The people are angry. They say the fuel price is very high so they want to say something," said Safarizal Saleh, a leader of the youth wing of the PAS.

There are tight curbs on public rallies in Malaysia, and ahead of the rally police warned they would arrest anyone taking part. Hundreds of riot police watched the protesters.

"The voters think it's just an opposition ploy ... exploiting an international issue as a national issue," said political analyst Shamsul Amri Baharuddin about the small size of the protest. "They flopped."

"NOT ABOUT BADAWI OR NAJIB"

Abdullah's United Malays National Organization (UMNO) is the backbone of the Barisan Nasional, which has ruled Malaysia since independence from Britain in 1957.

"It's important for everyone to see the relationship between me and Najib as very crucial to strengthen UMNO and the government and to implement the development projects and programs that have been planned," Abdullah said on Friday.

But opposition leader Anwar Ibrahim, campaigning to oust the government and promising to lower oil prices if he takes power, said on Friday his struggle would continue even if Abdullah quit.

"It is not individual. It is not about Abdullah Badawi or Najib Razak. It is about the system," he said in Dubai.

An analyst said Abdullah was unlikely to step down any sooner. "It's all mere talk. He made that statement in order to soothe the feelings of people who feel that he should give the leadership to a new person," political analyst Yahya Ismail said.

Even before the fuel hikes, Abdullah's popularity had been falling with voters unhappy over racial and religious tensions, rising crime and failure to honor a pledge to fight corruption.

Malaysia joined India, Indonesia, Taiwan and Sri Lanka in raising pump prices last week, provoking a public outcry in the oil producing country. Soaring global fuel costs have triggered strikes by truckers from Thailand to Spain.

(Additional reporting by Niluksi Koswanage in Kota Baru and Lin Noueihed in Dubai; Writing by Sanjeev Miglani; Editing by Jeremy Laurence)