By Jalil Hamid
KUALA LUMPUR (Reuters) - Malaysia's ruling coalition triedto regroup on Monday after a shocking electoral setback thatdecimated its ranks and sent markets swooning over thepolitical uncertainties ahead.
Prime Minister Abdullah Ahmad Badawi was sworn into officeafter his Barisan Nasional (National Front) coalition lost thetwo-thirds majority in parliament it had held for nearly fourdecades at the weekend's elections.
He got a much-needed vote of support from his United MalaysNational Organisation (UMNO) to stay on as both party presidentand prime minister at a special meeting of the party on Monday,despite calls from his predecessor Mahathir Mohamad to quit.
But the prime minister has an enormous task ahead inholding together his battered coalition and filling holes inhis Cabinet -- four ministers lost seats in the weekendelection, including Works Minister S. Samy Vellu, the head ofthe main Indian party in the coalition.
Sources close to the Prime Minister said Abdullah hadcancelled plans to attend next week's Organisation of theIslamic Conference summit in Senegal -- he was to hand overchairmanship of the 57-member grouping -- to deal with thecrisis at home.
A key partner in the multi-racial coalition, the MalaysianChinese Association (MCA), dismissed speculation the partymight pull out of the coalition that has ruled Malaysiauninterrupted since independence from Britain in 1957, and theMalaysian Indian Congress (MIC) was expected to follow suit.
The poll carnage was spectacular and wreaked havoc on themarkets. Trading in Malaysian stocks was suspended for an hour-- the first time that's ever happened -- after they fell tothe daily 10 percent limit.
But Credit rating agencies Fitch and Moody's on Mondaymaintained their sovereign ratings on Malaysia, saying theeconomy was on a sound footing.
"The element of uncertainty has gone up but thefundamentals of the economy are quite strong to withstand asharper-than-expected heightening of uncertainty," Moody'ssenior analyst Aninda Mitra told Reuters.
REVIEWING MEGA-PROJECTS
Race riots erupted the last time the ruling coalition lostits two-thirds majority in 1969, but the streets have been calmsince Saturday's vote, perhaps because members of all threeethnicities voted against the status quo.
A loose alliance of three opposition parties took controlof five of Malaysia's 13 states, their most by far. They havethreatened to review projects in the multi-billion-dollardevelopment "corridors" in states now under their control thathave been the centrepiece of Abdullah's economic programme.
Malaysian states control land and water and can effectivelyscuttle federal development projects.
The first indication of that came on Monday when theincoming government in Penang said it would review plans for an$8-billion real estate project, whose major backer is a firmpartly owned by businessman Patrick Lim, a friend of the primeminister's son.
Government-linked infrastructure companies took a beatingon the bourse. Malaysian Resources Corp tumbled a whopping 39percent, UEM World 24 percent, and Sime Darby 17 percent, overfears the opposition would scrap projects on the drawing board.
Opposition parties were trying to parcel out cabinet postsand power sharing arrangements in the first test of how wellthey will govern before being sworn into office on Tuesday.
The opposition Islamist party, PAS, is expected to lead thenorthern heartland states of Kedah and Perak and easilyretained power in its stronghold in northeastern Kelantanstate.
PAS played down fears it would try to ban gambling andalcohol in states under its control.
Former Prime Minister Mahathir Mohamad, who anointedAbdullah his successor but now has waning influence in theparty, advised him on Sunday to take responsibility and quit.
Mahathir's son Mukhriz Mahathir, who commands some supportwithin the party, was also expected to call on Abdullah toquit.
Barisan Nasional won just half the popular vote and 62percent -- down from 90 percent -- of the seats in the222-member national parliament. The MCA saw their strength inparliament halved from 31 to 15, while MIC lost two-thirds oftheir seats.
A protest vote from ethnic Chinese and Indians, upset overwhat they saw as racial inequality in terms of business, joband education opportunities, had been expected.
But Malays, who are all Muslims and traditionally supportBarisan, completed a perfect storm for the government, givingthe opposition Islamists a record vote to protest risingprices.
Without a two-thirds parliamentary majority, Barisan can nolonger change the constitution or make some key appointments.
(Reporting by Jalil Hamid; Writing by Bill Tarrant; Editingby Jeremy Laurence
