Malaysia PM won't resign despite poll debacle

Prime Minister Abdullah Ahmad Badawi's multi-racial National Front (Barisan Nasional) coalition won just a simple majority in parliament, and his future as leader is in doubt after he watched a record majority collapse to the weakest level ever. Barisan has effectively ruled since independence from Britain in 1957.

Abdullah had no plan to quit, his spokesman said on Sunday, despite urging by predecessor Mahathir Mohamad that the prime minister must take responsibility for the election defeat. "There are no plans to resign," Abdullah's spokesman, Kamal Khalid said. "He still has plans to proceed to the palace tomorrow morning to take the oath of office." Mahathir advised Abdullah to quit. "He should accept responsibility," said Mahathir, who now says he made a mistake in picking Abdullah as his successor and that the current deputy premier, Najib Razak, should have taken over.

Malaysia's share market is expected to slide on Monday, as political uncertainty takes hold after the massive protest vote. "The political stability has finally been challenged," said Pankaj Kumar, chief investment officer at Kurnia Insurance, who helps manage 1.6 billion ringgit ($506 million) in assets. "The question is, how does Malaysia move forward from here in restoring confidence?" A sales broker said he expected the benchmark Kuala Lumpur Composite Index to fall 50 to 100 points, or around 8 percent, on Monday as investors try to answer that query.

The streets were unusually quiet, with many older Malaysians fearful of trouble. The last time the coalition suffered a heavy setback, in 1969, race riots erupted.

Abdullah, who just four years ago led the coalition to a record election victory on a wave of hope for change, faced a bleak political future on Sunday, his aides stunned but unwilling to concede that he must step down. Several party leaders were to meet the prime minister on Sunday to pledge him their support, a source close to the party leadership said. Abdullah's humbling performance nationally -- the coalition ended up with 62 percent of federal seats, down from 90 percent previously -- was compounded by the fact that his own home state, the industrial heartland of Penang, fell to the opposition.

ISLAMISTS ON THE RISE

The leftist Chinese-backed Democratic Action Party (DAP) won Penang, the hub of Malaysia's electronics industry, which accounts for about half of exports. Lim Guan Eng, Penang's chief minister-designate, assured domestic and foreign investors that the opposition recognised the importance of their major contributions to the state's economy.

The opposition Islamist party, PAS, scored shock victories in the northern heartland states of Kedah and Perak and easily retained power in its stronghold in northeastern Kelantan state. PAS sought to play down fears it would try to ban gambling and alcohol in opposition-controlled states, with party president Abdul Hadi Awang saying Muslims would not be allowed to do anything banned by Islam, although non-Muslims would be free to do whatever their religion permitted. DAP and PAS also joined the People's Justice Party, or Parti Keadilan, to wrest control of the industrial state of Selangor and almost all the seats in capital Kuala Lumpur.

Political experts and economists wondered aloud whether the Barisan government could now pursue its agenda, including plans for $325 billion in development zones across the country. Without a two-thirds parliamentary majority, Barisan can no longer change the constitution or make some key appointments. "This is probably not good news for the equity market or the ringgit," said Tim Condon, Singapore-based head of Asia research for investment bank ING.

Malaysia is largely a mix of ethnic Malays, who make up about 55 percent of the population, and ethnic Chinese and Indians, who account for about a third. A protest vote from Chinese and Indians, upset over what they saw as racial inequality in terms of business, job and education opportunities, had been expected. The Indians were merciless, voting out the leader of the coalition's Indian component party and handing a seat to an Indian activist now in detention. But Malays, who are all Muslims and traditionally support Barisan, completed a perfect storm for the government, giving the opposition Islamists a record vote to protest rising prices. "Tomorrow we will start building a brighter future," said opposition figure Anwar Ibrahim, de facto leader of Keadilan, which emerged as the biggest opposition party in federal parliament with 31 seats. "This is a new dawn for Malaysia."

Results from the election commission as of 0720 GMT showed the National Front with 138 seats in the 222-seat parliament versus 82 for the opposition, with 2 seats still being tallied.