KUALA LUMPUR - MALAYSIA'S Prime Minister said yesterday that his final mission is to cool racial and religious tensions, as he rushes through a raft of reforms in his last weeks in office.

Datuk Seri Abdullah Badawi said a shrinking economy and deepening divisions between the majority Malays and minority Chinese and Indians are the biggest threats facing the country.

'Since I am retiring earlier than I was planning to, (the reforms) have to be done very quickly,' said Mr Abdullah. He will hand over power to his deputy, Datuk Seri Najib Razak, in March.

Facing a virtual rebellion from his colleagues, Mr Abdullah agreed to step down four years before the end of his term after the opposition made tremendous gains in the March elections.

The results robbed the ruling coalition of a two-thirds majority for the first time in four decades.

The opposition's gains have been attributed to anger among ethnic Chinese and Indians who complain of discrimination in jobs, education and other areas by the Malay-dominated government. They say their religious rights have also become secondary to Islam.

Malays, who are Muslims, form 60 per cent of the country's population of 27 million and control the government, judiciary and security forces.

'I am thinking of how to handle the issue of race relations and the issue of religious tensions because of so many things that are happening,' Mr Abdullah said.

'Muslims think from their own perspective. Non-Muslims think from their own perspective,' he said.

Critics say racial polarisation has increased since Mr Abdullah took office in 2003.

'There has been a lack of leadership to bring divisive forces under control', which has emboldened religious extremists, said veteran opposition leader Lim Kit Siang.

Mr Abdullah suggested he could establish an institution 'where all communities' can take their grievances. The answer could also lie in new legislation, ostensibly clarifying grey areas in laws on religious disputes, he said.

Muslims in Malaysia are governed by syariah laws in family and personal matters. Ethnic Chinese, Indians and other races come under civil courts.

There is no clear-cut guidance on which court has greater authority when it comes to disputes between Muslims and non-Muslims, but civil courts have always allowed syariah courts to adjudicate and verdicts generally favour Muslims.

The ambiguity of the law has allowed religious authorities to occasionally claim the bodies of dead Indians or Chinese by asserting they had secretly converted to Islam, leaving relatives heartbroken. Muslims are not allowed to renounce their faith, raising questions about religious freedom.

'Some people (outside Malaysia) laugh at it and say, 'What the hell is it about?' But it's not funny at all. These are very, very serious issues,' Mr Abdullah said.

In recent weeks, he introduced legislation in Parliament to set up an anti-corruption agency and create a committee to appoint senior judges in a bid to ensure judicial independence.

Judges are currently appointed by the prime minister.

The anti-corruption Bill was passed on Tuesday, but the opposition has refused to vote for the judicial committee because it can only recommend the appointment of judges while final approval remains with the prime minister.

Mr Abdullah said he does not intend to abolish the Internal Security Act, which allows indefinite detention without trial. It was used against communist insurgents decades ago and Islamic extremist suspects after the Sept 11 attacks in the United States.

More recently, the law was used against two journalists and an ethnic Chinese lawmaker, triggering a nationwide uproar.

ASSOCIATED PRESS