By Ranjeetha Pakiam
Jan. 18 (Bloomberg) -- Malaysia’s National Front lost a regional election, signaling waning support for incoming Prime Minister Najib Razak after the ruling coalition suffered its worst-ever election result last year.

The Pan-Malaysian Islamic Party, part of an opposition alliance, took 51 percent of votes cast yesterday in the coastal town of Kuala Terengganu, taking the seat back from Najib’s National Front coalition, the state news service Bernama said.

“The National Front is on a continuous slide down a dangerous slope,” said Khoo Kay Peng, who runs his own political consulting firm outside Kuala Lumpur. “This will not reflect well on the new leadership.”

Najib, due to succeed Abdullah Ahmad Badawi as prime minister in March, is struggling to convince Malaysians he can eradicate the corruption that party leaders say is endemic after 51 years of unbroken rule. Yesterday’s by-election may embolden opposition leader Anwar Ibrahim, who is trying to rise to power with his three-party, multi-ethnic coalition.

“He can use the results to explain he has the backing of Malay voters,” said Ong Kian Ming, a Malaysian political analyst studying at Duke University in North Carolina. Some members of the National Front may now question whether Najib can lead them into the next general election, he said.

Abdullah has said he will hand over to Najib, the deputy premier, at party elections in March. The president of the party, called the United Malays National Organization, is usually also the country’s premier. Najib is standing unopposed for the position.

Anwar’s Challenge

Najib doesn’t have to call a general election before 2013. Anwar’s challenge is to convince at least 30 government lawmakers to defect to his opposition in order to take control of the 222-seat parliament and become Malaysia’s prime minister.

Race defines politics in Malaysia, where ethnic Malays account for about two-thirds of the 27 million population.

Under the 38-year-old policy of the National Front, Chinese and Indian minorities must pay more for homes and apply for jobs and contracts once Malay allocations have been filled.

Anwar’s People’s Alliance gained seats in parliament at last year’s election after pledging to scrap that program. Anwar says the policy, designed to rebalance wealth and eradicate poverty, has been abused and hasn’t met its goals.

A survey this month by the Merdeka Centre, an independent Malaysian research group, showed the privileges afforded to Malays were among the top concerns of the constituency’s ethnic minorities. The poll found that 75 percent of Chinese voters in Kuala Terengganu agreed that voting for the opposition would send a “strong signal” to the ruling government.

‘Added Momentum’

At elections last March, Anwar’s multifaith coalition won a record number of seats in parliament, denying the government a two-thirds majority. His People’s Alliance also won control of an unprecedented five of Malaysia’s 13 states.

“This win will give him added momentum,” said independent analyst Khoo. “He needs to set up a shadow cabinet to present himself as a clear alternative” to the National Front.

Anwar, Malaysia’s deputy prime minister from 1993 to 1998, won a by-election last year to return to parliament and said he would form a new government by Sept. 16, 2008. He missed the deadline, but he has since reiterated his plan to topple the government before the next general election.

Some political analysts say yesterday’s by-election outcome has little bearing on Najib’s future.

“He will take over as premier regardless of the result,” said Ibrahim Suffian, director of the Merdeka Centre. “What he needs to do now is show that the National Front is serious about tackling issues troubling them and ensure the people that UMNO is a party for all, not just the Malays.”

The primary concerns of most Malaysians are corruption and deteriorating inter-ethnic relations, said Ibrahim.

The opposition’s victory shows a spat between the Islamic and secular parties in Anwar’s alliance failed to dent support.

The Islamic party wants to set up an Islamic state with Muslim law, which can include whipping, stoning to death or amputation of limbs. The Democratic Action Party threatened to leave the alliance if the law was implemented.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

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