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KOTA BHARU (Malaysia) – AP: MALAYSIA'S victorious opposition in weekend polls assured foreign investors on Sunday that pro-business policies would remain intact in Penang, one of Asia's biggest manufacturing hubs.

Opposition parties made major solid gains in Saturday's general elections, taking control of five out of 13 states, including Penang. The opposition also denied Prime Minister Abdullah Ahmad Badawi's National Front coalition a two-thirds majority in Parliament for the first time in four decades.

'There will be continuity. We assure foreign and local investors that Penang will remain business friendly. We will not undertake any policies that will frighten investors away,' Lim Guan Eng, Penang's chief minister-elect, told The Associated Press in a telephone interview.

Penang's new government will be led by Lim's Democratic Action Party, which won 19 of the 40 seats in the state assembly. It will form a coalition with the opposition People's Justice Party, known by its Malay acronym PKR, which won nine seats.

Mr Abdullah's National Front coalition got only 11 seats, losing control of the legislature for the first time since 1969.

The opposition victory had raised fears of an economic slowdown because of its criticism of large infrastructure projects and promises to cut fuel prices. The fears were felt especially strongly in Penang, which is home to major US electronics firms such as Dell, Intel, Motorola and Seagate.

The manufacturing sector contributes to almost half of Penang's economic growth, and provides more than 200,000 jobs in the island of 1.5 million people, Mr Lim said, speaking from Penang.

He said Penang's industrial edge has been dulled by stiff competition from China and cheaper emerging markets such as Vietnam and Thailand.

'We feel Penang has lost its luster. We will pursue pro-business policies to make Penang a competitive and leading manufacturing hub in Asia,' Mr Lim added.

The opposition alliance of DAP, PKR and the Islamic Pan-Malaysian Islamic Party, or PAS, also captured the state legislatures in Kedah, Perak and Selangor states. PAS retained its control of Kelantan, where it has been in power for 18 years.

The opposition victories will not hurt American investment, said Vincent Leusner, head of the American Malaysian Chamber of Commerce, which groups some 800 US companies in the country.

Talking by phone from Kuala Lumpur, he said it was encouraging that stability has prevailed despite the huge change in the political landscape.

'Malaysia is a great place to do business and the government has been business friendly. Regardless of political party, we expect these good things to continue because it is good for their constituents and good for the export-oriented economy,' he told the AP.

Economists said foreign investors may stay on the sidelines in the short-term to see how the opposition strength would influence economic policies.

'There are a lot of uncertainties, a lot of risks, but it may turn out positive. It can be a catalyst for change in the right direction,' said Chua Hak Bin, an economist with Citicorp in Singapore.

The loss of Penang comes as a personal blow to Abdullah who hails from the Chinese-majority state, and underscores deep anger among Malaysia's minority Chinese, who form 25 per cent of the country's 27 million people.

'The government has become too arrogant and people are unhappy. Penangites have finally woken up from their slumber and made history,' said Pat Cheong, 56, who works in a pharmaceutical shop. - THE STRAITS TIMES

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