Embattled Malaysian PM wins ruling party's support

By Jalil Hamid and Ramthan Hussain

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.