In the midst of the country’s deepening political turmoil, Malaysian police suddenly announced on Saturday that they were investigating charges of sodomy against de facto opposition leader Anwar Ibrahim. Saying that he feared an attempt on his life, Anwar, on the advice of his Peoples Justice Party (Keadilan), went straight from a party meeting in Kuala Lumpur to seek refuge in the Turkish Embassy.

Both Anwar and senior Keadilan leaders have dismissed the charges as politically motivated and pointed the finger at the Barisan Nasional (BN) government. His wife Wan Azizah Wan Ismail branded the investigation as a political conspiracy to marginalise her husband and “a repeat of what happened 10 years ago”.

In 1998, amid bitter divisions in the government over economic policy, Anwar was sacked from his posts as finance minister and deputy prime minister then detained and beaten when he began organising anti-government protests. He was convicted on trumped-up charges of corruption and sodomy, but was freed in 2004 after the latter conviction was overturned on appeal. Sodomy is outlawed in Malaysia and carries a sentence of up to 20 years jail.

Anwar emerged from the Turkish Embassy late on Monday only after he and his lawyers received personal safety assurances from government ministers. He has initiated defamation action against his accuser—23-year-old Saiful Bukhari Azian, who has worked for Anwar as an assistant since March. Senior Keadilan officials claimed to have evidence that Saiful had been planted by pro-government supporters. At a news conference on Sunday, Anwar’s wife produced a photo allegedly showing Saiful with top officials from the ruling United Malay National Organisation (UMNO)—the main party of the BN coalition.

Prime Minister Abdullah Badawi has denied any involvement in the case. But there is little doubt that members of the government and ruling coalition are complicit, if not directly involved, in orchestrating new accusations aimed at undermining Anwar. It is a desperate attempt to cling to power under conditions where the opposition is threatening to replace the BN government for the first time in more than 50 years.

Anwar recently claimed that enough disgruntled BN parliamentarians would defect to his Pakatan Rakyat (PKR), or Peoples Front, to form a new government by September 16—the anniversary of the establishment of the Malaysian federation. The opposition made major gains in national elections in March due to growing anger over rising prices and hostility to the government’s anti-democratic methods.

Support for UMNO is continuing to hemorrhage due to Prime Minister Abdullah’s decision early in June to slash subsidies and allow energy and fuel prices to rise sharply. Petrol prices rose by 41 percent to 2.70 ringgit per litre or $US0.87 and diesel by 63 percent to 2.58 ringgit or $0.80. Electricity prices went up by 18 percent for millions of households and by 26 percent for commercial and industrial customers. Inflation was already at a 10-year-high of 3.8 percent in May, in large part due to rising food costs, and will now rise further.

The government claimed that the price hikes were necessary because increasing global oil prices meant it could no longer afford to subsidise fuel. The oil subsidy this year would have risen to 56 billion ringgit ($US17 billion). Overall, subsidy schemes consume one third of the state budget.

The justification had little impact on public opinion. Abdullah himself described the reaction as “furious”. On June 14, more than 1,000 people marched through Kuala Lumpur, chanting “Down with Barisan Nasional” and demanding the prime minister’s resignation. Other demonstrations were held throughout the country.

The Peoples Front and consumer groups such as the Peoples Anti-Oil Manipulation Movement have called for a mass anti-government demonstration in Kuala Lumpur on July 5. They are expecting a large turnout, with figures of over 100,000 being cited by organisers. If such numbers do take to the streets, it will be largest political rally in Malaysia since the turmoil during the Asian financial crisis in 1997-98.

The BN was already racked by internal divisions after serious losses at the March 8 elections. The coalition won only 140 seats in the 222-seat parliament, losing the crucial two-thirds majority needed to amend the constitution—a power it has often used to shore up its position. Opposition parties gained 82 seats, compared with just 19 in the previous house. If 30 BN members cross the floor, the government will fall.

Anwar is not currently in the parliament because at the March election he was still banned from standing for public office as a result of his earlier convictions—his five-year ban ended in April. He is planning to reenter parliament via a by-election before September. He already campaigns as the de facto opposition leader, castigating the government in populist terms.

Public anger over cronyism and corruption is high. While fuel and electricity costs have skyrocketed for the majority of the population, the so-called Independent Power Producers (IPP)—privately-owned electricity generating corporations—continue to receive both subsidised gas and lucrative prices for power sold to the state-owned distribution company.

Prime Minister Abdullah is desperately seeking to shore up his position by promising relief measures for the poor to offset the price hikes, and offering concessions and more development funds to Sabah and Sarawak, the two states where Anwar claims most BN politicians are waiting to defect to the opposition.

At the same time, Abdullah is facing calls within UMNO for him to step down. Former Prime Minister Mahathir Mohamad quit UMNO in May to demonstrate his lack on confidence in Abdullah and has publicly called for Deputy Prime Minister Najib Razak to be installed as the new leader. Abdullah has said he will contest the party leadership in December and not hand over to any successor for some time after that.

On June 23 the opposition parties turned a parliamentary vote on the price increases into a vote of no-confidence in Abdullah’s government—a move that was defeated. Earlier in the day, the government avoided another no-confidence motion that was to be moved by two parliamentarians from the East Malaysian-based Sabah Progressive Party (SAPP)—part of BN. The motion was ruled out of order due to insufficient notice. In the event, the Sabah MPs did not turn up. SAPP officials claimed that threats had been made against them.

The media had anticipated that the SAPP would use the occasion to formally break with BN and become the first of the defections that Anwar claims to have organised. Nervousness in government ranks is apparent. Housing and Local Government Minister Ong Ka Chuan, who heads the Malaysian Chinese Association (MCA), was earlier forced to deny opposition claims that MCA parliamentarians were preparing to join Anwar and the People’s Front.

Conflict over economic policy

Anwar’s imprisonment in 1998 and defiance of the frame-up attracted sympathy from substantial sections of the population who oppose UMNO’s authoritarian rule. His condemnation over recent years of UMNO’s discriminatory New Economic Policy (NEP), which gives preference to ethnic Malays in business, jobs and education, has won him broader support. The NEP only benefits a relatively small layer, especially the Malay business elite around UMNO.

What was at the centre of the 1998 dispute, however, was a bitter conflict within the Malaysian ruling elite and UMNO over economic policy. Anwar, who was finance minister, advocated the free market restructuring being pushed by the World Bank and IMF in the midst of the Asian financial crisis. Prime Minister Mahathir Mohamad, who imposed capital and currency controls instead, expelled Anwar from UMNO then had him arrested.

Anwar’s populist condemnations of a reduction in fuel and energy subsidies, however, are cynical and politically dishonest. His perspective is diametrically opposed to the aspirations of working people for democratic rights, economic security and social equality. His essential disagreement with Abdullah is that the BN government has not moved quickly enough to meet the demands of international capital, which he championed in 1998.

In 1998, the majority of the ruling elite sided with Mahathir. The subsequent global and regional economic changes, particularly the staggering growth of China as the world’s leading cheap labour platform, have produced a marked shift. With the growing signs of an economic slowdown and sharp inflationary pressures, a substantial layer of the business elite now believe there is no alternative but to accelerate free market restructuring.

Many in ruling circles also believe that Anwar and the opposition are best placed to implement such an agenda and contain the inevitable social backlash that will flow from cutbacks to government spending, privatisations, job cuts and deepening social inequality. UMNO, which is notorious for its corrupt practices and nepotism, was never going to surrender its power and its privileges without a bitter fight.

The latest accusations against Anwar highlight the desperation in UMNO ranks and indicate that the regime is in deep crisis.