By Jalil Hamid, Reuters
Wednesday, September 10, 2008

KUALA LUMPUR -- Malaysia's ruling coalition met on Tuesday to try to end a potential revolt over a w
orsening racial row that analysts say may help opposition leader Anwar Ibrahim in his bid to unseat the government.
The dispute started when an official from the governing party described Malaysia's ethnic Chinese as "immigrants" and then on Monday likened them to Jews in America who wanted to seize power.

It has exposed cracks in the 14-party Barisan Nasional coalition which has held power for 50 years and is dominated by Malays but also relies on ethnic Chinese and Indian parties. Prime Minister Abdullah Ahmad Badawi said that his United Malays National Organization (UMNO) would take "firm action" against the mid-ranking party official from the northern state of Penang.

He denied that Barisan and UMNO, the biggest party in the coalition, were falling apart under an assault from Anwar who has said he can win over 30 MPs from the ruling coalition so as to take power on Sept. 16.

"No, (do) you want to see BN falling apart? We will never allow that," Abdullah told a news conference after a meeting of UMNO leaders.

The race row was ignited by Ahmad Ismail, UMNO leader in one of 13 districts in the state of Penang, who a month ago labelled Malaysia's ethnic Chinese "immigrants." Penang state is controlled by a Chinese dominated opposition party.

Ahmad returned to the attack on Monday, saying Malaysia's ethnic Chinese, who make up about a quarter of the 27 million population, were becoming like "the Jewish in America, where it is not enough that they control the economy, but they also want to dominate politics".

The Malaysian Chinese Association, which holds 15 of Barisan's 140 seats in the 222-member parliament, called on Tuesday for action to be taken, although it did not threaten to leave the government coalition.

"We cannot follow the old ways... If there is a problem, just sweep it under the carpet," party president Ong Ka Ting said.

Testy relations

The turmoil within Barisan came as Anwar moved to entice Barisan lawmakers to defect in his campaign to unseat the government by his self-imposed Sept. 16 deadline. In an apparent bid to pre-empt Anwar, Barisan took about 50 of its MPs to Taiwan for a week-long study tour.

Anwar's attempt to overturn a political order that has persisted since independence from Britain in 1957 has sharply raised Malaysia's political risks and rattled foreign investors.

The cost of insuring Malaysia's debt has risen sharply and the price of the 5-year CDS (credit debt swap) stood at 129.765 basis points on Tuesday, up from 91.85 on March 7, the day before the election which saw Barisan lose its two-thirds majority.

While the jury is still out on whether Anwar, who is facing new charges of sodomy, can win power on Sept. 16, observers warned that Malaysia and the government may be in for a prolonged period of uncertainty.

"There has been a mounting sense of BN (Barisan Nasional) desperation (shown) by opening this example of Malay chauvinism," said a foreign diplomat in Kuala Lumpur who spoke on condition of anonymity.