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KUALA LUMPUR/CANBERRA (Reuters) - Malaysia and Australia will begin swapping thousands of boatpeople by the end of the year in a deal signed on Monday, seen as a crucial step for Australian Prime Minister Julia Gillard to lift her sagging approval ratings.
Both countries described the one-off deal involving 4,800 refugees and asylum seekers as an effort to combat people smuggling and protect genuine refugees.
"This is a pilot project, if it works well we will consider our next steps at the appropriate time, and under a regional framework Australia is always open to talk to other countries," Australian Immigration Minister Chris Bowen told reporters after signing the deal with Malaysia's home minister, Hishammuddin Hussein.
Under the arrangement that comes into effect on Tuesday, the first 800 asylum seekers to arrive by boat in Australian waters will be screened, then sent to Malaysia within three days of their arrival.
They will be placed in a transit centre in Malaysia for up to 45 days where their refugee status will be processed by the UNHCR.
They will then be relocated into local communities in Malaysia and given access to jobs, education and healthcare pending resettlement to their destination countries.
In exchange, 4,000 asylum seekers now in Malaysia and registered with the U.N. body will be re-settled in Australia if their refugee claims are approved. The swap will cost $321.4 million and will be paid for by Australia.
Bowen said the arrival of the first refugees from Malaysia "will happen very quickly", while Hishammuddin said Malaysia could begin accepting the 800 refugees from Australia before the end of this year.
Asylum seekers are a hot political issue in Australia, although U.N. figures show the country ranks 46th on a list of nations hosting refugee hopefuls, with just under 0.5 percent of the world's asylum total.
The refugee swap is badly needed by Gillard to turn around public perceptions that the ruling Labor Party is soft on border protection and unable to stop a steady flow of people-smuggling boats sailing to Australia from Indonesia.
Gillard, whose popularity is near record lows, went into last year's elections promising asylum seekers would be sent to East Timor, but the plan collapsed when Dili refused to take part.
The Australian Greens condemned the new deal as inhumane, but will be unable to stop the plan as it does not need parliament's approval. Gillard's minority government relies upon Greens support for her one seat majority.
Human rights groups from both countries also criticised the deal over possible mistreatment of asylum seekers in Malaysia, which is not a signatory of the UN convention on refugees and imposes harsh punishments for illegal entry, including caning.
"Australia together with other countries must act to address the root causes for the increase of refugees in the world and not turn vulnerable communities into commodities for political gain," said Malaysian human rights group Tenaganita in a statement issued after the signing.
Gillard sought to allay those fears, telling reporters in Canberra that the refugees sent to Malaysia will be treated with dignity and respect in accordance with human rights.
"This is a ground-breaking agreement which is designed to smash the business model of people smugglers," Gillard said.
"My message to anyone who is considering paying money to a people smuggler and risking their life at sea ... is do not do that in the false hope that you will be able to have your claim processed in Australia."
The UNHCR said in a statement on Monday that the critical test of the arrangement will be its implementation, "particularly the protection and vulnerability assessment procedures under which asylum-seekers will be assessed in Australia prior to any transfer taking place".
Australia currently has more than 6,000 asylum seekers in detention, originating from countries including Iran, Iraq, Vietnam, Sri Lanka and Afghanistan.
Malaysia last year saw 25,600 refugees registering with the UNHCR to seek asylum, the highest among all countries where the refugee agency has offices.
They bring the number of registered refugees and asylum seekers in the Southeast Asian country to 93,600, mostly from Myanmar, Sri Lanka, Somalia, Iraq and Afghanistan, according to the UNHCR's Malaysia's office.
Editing by Sugita Katyal