Malaysian state heads to polls in key test for PM

Malaysia's Prime Minister Najib Razak delivers his keynote address during Invest Malaysia 2011 in Kuala Lumpur April 12, 2011.

KUCHING, Malaysia (Reuters) - Malaysia's government will likely retain control of a key state which heads to the polls on Saturday but significant opposition gains in the ruling coalition's bastion could delay Prime Minister Najib Razak's pursuit of economic reform.

The poll for a state assembly in Sarawak will provide a reading of public support for the coalition as Najib considers calling a snap general election to consolidate his grip on power and overhaul Malaysia's economy to attract investors.

"This is the biggest political test for Najib ahead of the next general election and if the opposition makes major inroads it may force him to delay the next general election," said Ibrahim Suffian, director of the independent opinion polling outfit, Merdeka Center.

Najib needs more sway in parliament to push through reforms held back by populist pressure, including a rollback of fuel subsidies and a goods and services tax.

A strong win in the resource rich but rural state on Borneo island should convince him to call a general election which is not due until 2013.

It would also further weaken an opposition alliance led by former deputy prime minister Anwar Ibrahim, which has been on the back foot since its best-ever performance in 2008 national polls.

However, support for the ruling National Front coalition has been eroded by complaints of religious discrimination and dissatisfaction with the state's long-serving chief minister.

Analysts polled by Reuters last month predicted that Najib's coalition would secure a two-thirds majority, with the opposition seen as not strong enough to mount a serious challenge.

But opposition candidates could win more seats in the 71-seat legislature on voter unhappiness about rural poverty, government corruption allegations and the rule of chief minister Taib Mahmud.

They could win 18 seats, compared with 7 at the last election, said political analyst Ong Kian Ming. That would be considered a blow for Najib.

REFORM IMPLICATIONS

The opposition is looking to make inroads in Sarawak to rejuvenate its bid for national power after being weakened by a string of recent local election losses.

Despite the ruling coalition's attacks on Anwar, who is battling a sodomy charge in court and allegations of involvement in a sex video scandal, both of which he has denied, the opposition is expected to put up a good fight at least in some seats in Sarawak.

In many urban constituencies, opposition campaign events have consistently drawn thousands of supporters, with colourful banners strung up throughout the state capital, Kuching, asking the electorate to "vote for change".

"We've been promised development by the government for decades, but it's only when elections happen that they get serious about it," said Rubiah Karim, a 47-year-old worker at a laundromat in Kuching. "A lot of people are fed up."

Anwar himself is brimming with confidence.

"This state election will have an impact nationally, and the people will signal that they reject the politics of corruption and cruelty," he told reporters in Kuching.

The most heated contests are taking place in 12 seats dominated by ethnic Chinese. At the last election, the ruling coalition won 6 of those seats.

The outcome in these seats will be read as a barometer of Najib's efforts to regain support from Malaysia's minorities who abandoned the ruling coalition in 2008 national polls, leading to record losses for the government of the Muslim-majority nation.

Ethno-religious tension has been fuelled by an ongoing court row over the right of Malay-speaking Christians to use the word "Allah", which in early 2010 led to attacks on places of worship.

The dispute also saw the government seizing Malay-language Bibles, sparking anger among the country's Christians who make up 9.1 percent of the population and more than 40 percent of the population in Sarawak.

Efforts are going on between the government and church groups to resolve the Bible issue, but widening opposition support in Sarawak will signal lingering anger and trouble for Najib in regaining support from minorities at the next general election.

OSK Research, in a March 21 note, said voter unhappiness over the Bible seizure issue was a major question.

"The election results may be uncertain and may add to market volatility," it said.

(Editing by Liau Y-Sing and Raju Gopalakrishnan)