By Rob Taylor and Razak Ahmad
KUALA LUMPUR/CANBERRA, July 22 (Reuters) - Malaysia and Australia will sign a pact on Monday to swap thousands of boatpeople, a source with direct knowledge of the deal said on Friday, possibly helping Australian Prime Minister Julia Gillard turn around growing unpopularity with voters.
In what the source said was a one-off deal, 4,000 asylum seekers now in Malaysia and registered with the U.N. High Commissioner for Refugees will be re-settled in Australia. Australia in return will send 800 still-unprocessed asylum seekers to Malaysia for refugee assessment.
"For Malaysia, the deal will be beneficial because it will help us to deal with a long-standing problem of refugees who continue to come to our country in search of asylum when we have limited means to help them," said the source.
Asylum seekers are a political flashpoint 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 ruling Labor is soft on border protection and unable to deliver on its promises in the fragile parliament, where it holds just a one-seat majority.
Gillard, whose popularity is a record lows, went into last year's dead-heat elections promising to sign a deal to process asylum seekers in East Timor, but that proposal collapsed when East Timor refused to take part.
The one-off arrangement may not be strong enough for Labor to convince sceptical voters it can stop surging asylum boat arrivals, with conservative opponents making ground on Gillard with claims border security is a shambles.
The source, who declined to be identified, also warned the deal could take several years to execute, meaning divisions among Australians on the issue could stretch dangerously close to elections due in 2013.
Conservative opposition leader Tony Abbott described the Malaysian agreement as "a bad deal" and said it would not stop a surge in boat arrivals.
"It is another broken promise from a prime minister who said that she would never send boatpeople to a country that hadn't signed the UN Refugee Convention," Abbott told Australian television.
The agreement, in negotiation since May, could also strain relations with the influential Greens party, which is opposed to the deal and which wields balance of power in Australia's upper house Senate.
But the Sydney Morning Herald newspaper, citing unnamed sources, said the deal had the support of the United Nations, which had originally been concerned that the agreement could breach international refugee rights.
Fortunately for Gillard, the deal to be signed by Immigration Minister Chris Bowen in Malaysia will not require legislation in the restive parliament, where Labor relies on Green and independent MPs to stay in power.
Australia currently has more than 6,000 asylum seekers in detention, originating from countries including Iran, Iraq, Vietnam, Sri Lanka and Afghanistan.
Malaysia, on the other hand, has a much larger problem of dealing with refugees.
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.
Much of the criticism over the arrangement has focused on concerns over possible mistreatment of the refugees, especially those coming to Malaysia, which imposes harsh punishments for illegal entry that include caning.
"The arrangement that both countries will sign on Monday will take into account concerns over the human rights of the asylum seekers based on the input that the Malaysian government has received," said the source. (Editing by Liau Y-Sing and Nick Macfie)