Malaysia's ruling party told to get in polls mode

Kuala Lumpur (Reuters): Malaysia's ruling party was told on Friday to crank up the campaign machinery, as speculation grew that the government may call a snap poll sometime this year.

The order by the United Malays National Organization (UMNO) youth wing leader coincided with news that Prime Minister Mahathir Mohamad has dropped bankruptcy proceedings against his jailed former deputy, Anwar Ibrahim.

"We are in an election mode," said Hishammuddin Hussein, leader of the party's campaign vanguard.

"This year is an extraordinary year."

Mahathir, 77, says he will step down in favor of his new deputy Abdullah Ahmad Badawi in October this year, and will not contest the next elections. Polls are only due by 2004.

But while most political pundits believe the election will be held in the first six months of Abdullah's premiership, there have been sneaking suspicions that Mahathir might choose to fight one last battle before he goes, so he can hand his deputy a secure majority.

The wily veteran leader was not giving any clues, though.

"I will let you know. It is my duty to let you know," Mahathir teased reporters on Friday.

Mahathir had "pleasantly surprised "Anwar on Jan. 6 by dropping the bankruptcy proceedings, the former deputy prime minister's lawyer, Sankara Nair, said in a statement on Friday.

Anwar's camp had believed Mahathir had completely hardened his heart to his former protege.

But Mahathir could have backed off from pressing the bankruptcy notice for 35,381 ringgit ($9,310) so as not to alienate voters by humiliating Anwar any further.

Anwar is serving 15 years for sodomy and abuse of power convictions after he was sacked and jailed in 1998 following a challenge to Mahathir's rule during the heat of the Asian financial crisis.

"I have all along refused to accept the bankruptcy notice earlier, purely as a matter of principle, in that I have always maintained that my defamation suit had been dismissed by court unfairly," Anwar said in the statement released by his lawyer.

"Notwithstanding that, the family and I are relieved that Dr Mahathir has withdrawn the suit," he said from his cell in Supgai Buloh prison, on the outskirts of Kuala Lumpur.

Anwar has always maintained that the charges against him were the result of a conspiracy by supporters of Mahathir.