Malaysia's opposition parties agreed on Tuesday to form a coalition in an effort to present themselves as a credible alternative for government, while the main ruling party sank deeper into dissent.

The three main opposition parties won a record number of seats in parliament at elections on March 8, dealing the ruling National Front coalition the biggest setback in its 50-year reign and spelling trouble for the prime minister's future leadership.

'In today's meeting, it was proposed to consolidate the cooperation among the three parties under the name Pakatan Rakyat (People's Pact),' de facto opposition leader Anwar Ibrahim told reporters, after a meeting with fellow party leaders.

Malaysia's opposition has been weak and ideologically divided for many years, comprising two parties that appeal mainly to urban, liberal voters and an Islamist outfit that attracts mainly rural votes and wants to turn Malaysia into an Islamic state.

The three parties tried before to form a coalition with a single policy platform, during an election campaign in 1999. But the pact fell apart two years later over the issue of Parti Islam se-Malaysia's (PAS) call for the creation of an Islamic state.

Anwar, a former deputy prime minister, said the parties were still working on a common policy platform, and detailed policy steps would be hammered out at a meeting of parliamentary and state assembly deputies of all three parties on April 27.

But he insisted PAS's stand on an Islamic state would not sink the new alliance, which also includes his Parti Keadilan Rakyat (People's Justice Party) and the Democratic Action Party.

'It is not an issue as far as we are concerned,' Anwar said, flanked by leaders of both PAS and the Democratic Action Party.

'If there are differences, we will try to respect those differences,' PAS leader Hadi Awang said when asked if his party was giving up its Islamic state ambition to join the coalition. 'We cannot force Islamic law on the people.'    

In a recent Reuters interview, Anwar said PAS had agreed not to make an Islamic state a condition of its involvement in a governing alliance, assuming PAS was a junior partner.

The failure of the opposition's previous coalition had convinced the parties to join hands on the basis of common principles Malaysians could support, said Lim Kit Siang, leader of the Chinese-dominated Democratic Action Party.

'And if we hold to these principles, as the public very clearly expects, from the results of the March 8 elections, then I think a new political scenario will be formed,' he said.

As Anwar sought to present an ideologically united opposition, the main ruling party faced an open revolt, with hundreds of supporters meeting at a Kuala Lumpur hotel on Tuesday to demand Prime Minister Abdullah Ahmad Badawi's resignation.

More than 500 people, members of Abdullah's United Malays National Organisation (UMNO), cheered as former premier Mahathir Mohamad and his son, elected MP Mukhriz Mahathir, called for Abdullah's leadership to be challenged to save the party.

'UMNO risks becoming no longer relevant because there are now more 'yes men' than those who are willing to give dissenting views,' said Mahathir, 82, himself intolerant of dissent during 22 years in power which ended when he retired in late 2003.

'We must look at ourselves and be brave and take action to correct UMNO.'    

Mahathir and Mukhriz were joined at the meeting by another senior UMNO figure, Mohammed Khir Toyo, voted out as chief minister of central Selangor state on March 8.

Khir stopped short of asking Abdullah to quit, but indirectly criticised his leadership, calling for urgent reform of UMNO and its policies. - Reuters