By Niluksi Koswanage
PENANG, Malaysia (Reuters) - The opposition took power inMalaysia's industrial heartland on Tuesday and immediately saidit will no longer follow the nation's controversial affirmativeaction policy in state administration.
"We will run the government administration free from theNew Economic Policy that breeds cronyism, corruption andsystemic inefficiency," said Lim Guan Eng, whose DemocraticAction Party (DAP) won control of the state at the weekend'swatershed general election.
Under the policy, majority ethnic Malays, whose politiciansdominate the ruling national coalition, receive preference interms of state contracts, jobs and financial assistance.
Penang is the only one of Malaysia's 13 states so far toopenly spurn the "Bumiputra" (sons of the soil) affirmativeaction policy.
Lim also said he wants to use cash from state oil firmPetronas to fund a new $940 million bridge project, and wouldseek a meeting on that matter with Prime Minister AbdullahAhmad Badawi.
In Kuala Lumpur, de facto opposition leader Anwar Ibrahimalso took aim at the Bumiputra policy and said opposition-heldstates would review state government contracts if they are notawarded in a transparent fashion.
Describing the opposition programme as the MalaysianEconomic Agenda (MEA), he said: "The MEA can be implemented atthe state level to reduce race-based affirmative actionpolicies, and begin to implement a more competitive,merit-based system.
"This will immediately increase foreign investment, improvethe state tax revenue and begin to promote more equity andincome parity."
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 the five stategovernments that fell under opposition control.
The National Front coalition won the most seats, but lostthe two-thirds majority it has enjoyed almost withoutinterruption since independence in 1957, a stunning slap in theface to the prime minister, who had won 90 percent of the seatsin 2004.
SOMBRE CIVIL SERVANTS
Lim's government, led by his DAP party backed mainly byethnic Chinese, was sworn into office on Tuesday in Penang in aquiet ceremony witnessed by sombre-looking civil servants whohave only ever worked for the long-ruling National Front.
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 and the DAP have vowed to review federal projects onthe drawing board in their areas, but said would not stand inthe way of projects that were already approved and werebeneficial to the people, and have warned they would nottolerate cronyism.
Malaysia's politics of patronage, whereby state contractsare given to businesses aligned with ruling-party interests,has nurtured a powerful political-business establishmentwhereby contracts are often awarded without open, competitivetenders.
The Edge Financial Daily said in an editorial on Tuesdaythat was a major factor 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.
The prospect that this nexus could be cut, and thepossibility of policy gridlock now that the National Front haslost its iron-clad two-thirds majority in parliament and facesstrong opposition in heartland states, has spooked the markets.
Malaysian shares rose 2 percent on Tuesday after plunging9.5 percent on Monday, wiping out some $30 billion in marketcapitalisation, probably the biggest single-day loss in themarket's history. Analysts saw it as a short-lived rally.
Prime Minister Abdullah has a tricky task ahead in fendingoff leadership challenges, especially with his UMNO party --the dominant coalition partner -- set to hold leadershipelections in June. He will also need to fill gaping holes inhis Cabinet -- four ministers lost seats in the weekendelection.
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, the DAP, PAS and People's Justiceparty were still hammering out power-sharing arrangements onTuesday in Kedah, Perak and central Selangor state.
PAS kept power in Kelantan state and its government was dueto be sworn-in on Tuesday evening.
(Additional reporting by Y-Sing Liau and Niluksi Koswanage;Writing by William Tarrant; Editing by Alex Richardson)
