By Niluksi Koswanage
PENANG, Malaysia (Reuters) - The newly elected oppositiontook power in Malaysia's industrial heartland on Tuesday andimmediately said it would kill one of the nation's sacred cows-- affirmative action for majority ethnic Malays.
"We will run the government administration free from theNew Economic Policy (NEP) that breeds cronyism, corruption andsystemic inefficiency," said Lim Guan Eng, whose DemocraticAction Party (DAP) took control of Penang state afterSaturday's watershed elections and was sworn into office onTuesday.
The four-decade NEP was meant to fight poverty by steeringresources to indigenous people, including Malays, whosepoliticians dominate the ruling national coalition. They getpreference in state contracts, jobs, university seats andfinancial aid.
But many Malays say the plan has strayed from its originalaim of fostering economic competition and is enriching a smallelite, while rural Malays live hand-to-mouth in wooden huts.
In Kuala Lumpur, de facto opposition leader Anwar Ibrahimalso took aim at the "Bumiputra" (sons of the soil) policy.
"We consider the NEP is obsolete," Anwar told reporters.
"I always say the NEP benefits the few family members ofthe ruling establishment and their cronies. So we stop thispractice of awarding tenders, projects and privatisation tofamily-related companies and cronies only at states where weare in charge."
Many in the country's large Chinese and Indian minoritieshave criticised the policy as unfair. It has also been widelycriticised abroad and was a key stumbling block in fivefruitless rounds of talks with the United States on a freetrade deal.
Anwar said the opposition's version of the programme, whichhe called the Malaysia Economic Agenda, will protect theinterests of "the Malays, the poor and the marginalised" butwill be a "competitive, merit-based system".
Acting Law Minister Nazri Aziz confirmed thatopposition-ruled states did have the power to scrap the NEP.
"Anything to do with federal government projects, whichcome under our jurisdiction, then the NEP applies. But if it'sa state government jurisdiction, then it's up to them," he toldReuters.
SOMBRE CIVIL SERVANTS
The Edge Financial Daily said in an editorial on Tuesdaythat cronyism was a major issue in Saturday's election.
"Indeed, one can say that one reason why the people votedso strongly for the opposition in the elections is to send amessage that they have had enough of political cronyism andawards of contracts and deals to politically connectedcompanies," it said.
Anwar's People's Justice party won 31 seats in the222-member National Parliament, the most of any oppositionparty, and will share power in four of five states now underopposition control.
The National Front won the most seats, but lost thetwo-thirds majority it has enjoyed almost without interruptionsince independence in 1957.
The strongly Islamist Parti Islam se-Malaysia (PAS) willlead or share power in four states, including three -- Kedah,Perak and Kelantan -- that share borders with Thailand, whichhas been battling an Islamic insurgency with historical linksto Malaysia.
PAS Vice President Husam Musa told reporters on Tuesday theopposition intended "to create an investor-friendly atmosphere... and that foreign investment and interests are guaranteed inthe states where we are in power".
New Penang state Chief Minister Lim said he would lobby theprime minister to use cash from state oil company Petronas tofund a new $940 million bridge project. The giant oil firm haslong been a cash cow for National Front building projects,including the iconic Petronas Twin Towers in Kuala Lumpur.
The election aftermath spooked financial markets. Malaysianshares closed up 2.84 percent on Tuesday after plunging 9.5percent on Monday, wiping out some $30 billion in marketcapitalisation, probably the biggest single-day loss in themarket's history.
Analysts called Tuesday's partial recovery a short-livedrally, given the uncertainties ahead.
Prime Minister Abdullah has a tricky task in fending offchallenges, especially with his UMNO party, the dominantcoalition partner, set to hold leadership elections in June.
He also needs to fill gaping holes in his cabinet, afterfour ministers lost seats in the weekend election.
The winning opposition parties also face a delicate task.The Chinese-dominated DAP has long harboured deep suspicionsabout the Islamist agenda of PAS, which advocates Islamic lawfor Muslims, including punishments such as stoning andamputations.
In their first test, DAP, PAS and People's Justice partywere hammering out power-sharing arrangements on Tuesday inKedah, Perak and central Selangor state. PAS kept power inKelantan state and its government was to be sworn-in later onTuesday.
(Additional reporting by Jalil Hamid; Writing by BillTarrant; Editing by John Chalmers)
