KUALA LUMPUR (May 19, 2008): Former premier Tun Dr Mahathir Mohamad quit Umno today and urged others to follow suit in a move that could weaken its (Umno) hold on power and unsettle financial markets.

The still influential Mahathir, who was prime minister and leader of the United Malays National Organisation for 22 years until 2003, said he would only return to Umno after Prime Minister Abdullah Ahmad Badawi quit as leader.

Mahathir, 83, had stepped up pressure for Abdullah to resign as premier after the latter led Umno and the ruling Barisan Nasional (BN) coalition to a dismal showing in the 12th General Election on March 8.

"I will write a letter to Umno headquarters to inform that I had quit the party," Mahathir told a news conference in his home state of Kedah. He said he had lost confidence in Umno's ability to safeguard the interest of the ethnic Malay majority.

Mahathir urged other Umno members to quit but not to join the opposition which is seeking to seize power from the ruling BN by wooing defectors.

"It's like pulling another brick out of the crumbling wall," said Tricia Yeoh, director of the Centre for Public Policy Studies. "Once Mahathir resigns, some others will too."

If UMNO lawmakers quit the party and declare themselves independents, meaning no party commands a clear majority in parliament, it will send Malaysia into the political wilderness.

Umno, the backbone of the 14-party BN that has ruled since independence from Britain in 1957, holds 79 of BN's 140 seats.

The opposition, led by former deputy premier and Mahathir's foe, Datuk Seri Anwar Ibrahim, needs to gain just 30 seats to win a simple majority and form the government.

"Mahathir's resignation highlighted the precarious political situation in Malaysia and could be negative to the ringgit currency," markets consultancy 4CAST said in a commentary.

Research house Informa Global Markets (IGM) said the resignation was more likely to undermine Abdullah's hold on the party rather than remove a thorn from the premier's flesh.

But it added: "It is too early to determine if it will split the party, and thereby weaken Umno further, which already is facing prospect of defections."

Mahathir announced the resignation three days after the government ordered the Attorney-General to investigate him and five others over the appointment of judges while he was in power.

Analysts said Mahathir was apparently upset over the allegations. "His departure can bring harm to Umno and weaken the PM's leadership," said political analyst Yahya Ismail.

Mahathir said at the weekend he was willing to be investigated and taken to court over the allegations. - Reuters