Malaysia PM warns against dismantling race policy

By Jalil Hamid

KUALA LUMPUR (Reuters) - Malaysia's prime minister warned the opposition on Wednesday against provoking racial tensions after it announced plans to undo a controversial affirmative-action program.

The three-party opposition alliance has said it would dismantle the New Economic Policy (NEP) -- which gives majority Malays preference for almost everything from jobs and housing to government contracts, educational opportunities and stocks -- saying it breeds cronyism and corruption.

Lim Guan Eng of the Chinese-backed Democratic Action Party (DAP), heading the new government in the industrial state of Penang, said after he was sworn into office on Tuesday that he would scrap the NEP in Malaysia's only Chinese-majority state.

"The (Penang) state government must not try to create an atmosphere which can cause racial tensions," national news agency Bernama quoted Prime Minister Abdullah Ahmad Badawi as saying.

"Do not marginalize the Malays. I want to ask Lim Guan Eng what are his plans for the Malays in Penang? What are his plans for the Indians in Penang?

The opposition won control of five of the nation's 13 states in national and state elections held on Saturday.

SIGNS OF STRAIN

But Malaysia's loose opposition alliance showed the first signs of strain since its historic election upset at the weekend, with a feud over who should lead one of the state governments it won.

The DAP said on Wednesday it would not attend a ceremony to swear in the chief minister of northern Perak state, scheduled for Thursday, after a hardline Islamic party was named to lead the government.

The Sultan of Perak, titular ruler of the state, named a Malay Muslim candidate from Parti Islam se-Malaysia (PAS) as the chief minister.

"The decision to appoint a PAS assemblyman, Mohamad Nizar Jamaludin as Perak chief minister, has caused shock and consternation to DAP leaders, members and supporters," DAP leader Lim Kit Siang said in a statement.

DAP had formed a coalition in Perak with another party, the People's Justice Party of former Malaysian Deputy Premier Anwar Ibrahim. Those parties were the top two vote-getters in Perak.

The DAP is deeply suspicious about PAS, which advocates Sharia law for Muslims and Islamic punishments such as stoning and amputations. The DAP and People's Justice have strongly supported dismantling of the NEP.

UMNO will be on the backfoot in trying to defend the NEP, which even many Malays have grown disillusioned with, saying it has only enriched a small elite, while most of them remain poor.

"UMNO is facing an uphill task to defend the NEP," said Rita Sim, deputy chairman of the Institute of Strategic Analysis and Policy Research, a think-tank linked to the main Chinese party.