By David Chance
KUALA LUMPUR, May 11 (Reuters) - A Malaysian High Court ruled on Monday that the country's national opposition was in charge in the northwestern state of Perak, the peninsula's second largest, thwarting a move by the national government to take power.
It ordered the state ministers from the National Front coalition that has ruled Malaysia for 51 years to leave office immediately, paving the way for possible early elections. [ID:nKLR437912]
The leader of what is now the state opposition will likely seek an audience with the Regent of Perak, who has the power in the absence of the state's Sultan, to call new elections.
Here are some implications of the court ruling.
* If new elections for the state assembly were held, the People's Alliance would likely be returned to power. The alliance won the state in the March 2008 general election.
* A loss in new state elections would embarrass the National Front coalition and new Prime Minister Najib Razak, who engineered the Perak putsch before he took the top job in April.
Mohd Nizar Jamaluddin won a parliamentary by-election in Perak after his ouster in February, in which he increased the opposition's majority in that constituency, an indication of the sustained popularity of the coalition in the state.
* While that would probably be the cleanest cut option with the least immediate impact on financial markets, a fresh election in the state will not reassure foreign investors, who have pulled billions of dollars out of Malaysian markets, that the government has a grip on policy.
The National Front has lost four out of five by-elections since the March 2008 general elections in which it scored its worst-ever result in national and state elections.
* While new elections would help calm tensions, a further electoral setback could damage Najib's grip on power in the United Malays National Organisation, the party he leads and which is the linchpin of the National Front.
That could put on the backburner any plans to reform economic and social policies that give a raft of preferences to the majority Malay population who are UMNO's core supporters, thus undermining any plans Najib might have to make Malaysia more economically competitive and win back lost foreign investment.
* As well as trying to establish a clear grip on politics in Malaysia, Najib is battling to stave off what is likely to be the Southeast Asian country's first recession since the 1998 Asian Financial crisis.
In doing so, Malaysia is set to post a budget deficit of 7.6 percent of gross domestic product, requiring a massive increase in bond issuance. Those borrowing plans have scared investors and yields on A-rated Malaysian paper are wider than those on BBB-rated Thai paper.
(Editing by Bill Tarrant)