The slide in the authority and public image of the government threatens to undermine the economy of what has been a booming south-east Asian nation that has recorded impressive progress over the last 20 years. There are new pressures also on the country's delicate racial balance which has been closely tied to the privileges granted to the Malay majority.

Internal jealousies, rivalries and splits are nothing new in UMNO and a new-look version of the grouping had to be organised after the courts ordered its dissolution during the Mahathir era. But this new trauma comes at a time of unprecedented weakness for the alliance and a new nadir in public support for its leadership allied to a powerful showing for the opposition coalition in the March elections which was the immediate cause of Badawi's problems.

The proximate cause of Dr Mahathir's departure appeared to be an order by Badawi to the attorney-general to investigate the former prime minister and five others on possible offences over the appointment of judges while Dr Mahathir was in power. The judges were removed in 1988 when he wrecked the judicial system after the judges ordered the dissolution of the alliance. The former prime minister's may, in part, be part of a tactic to try and draw attention away from the investigation and many believe that Badawi's initiative will help to cover his embarrassment at his declining power. All of those implicated in the investigation have denied any wrongdoing.

Dr Mahathir appears to hope that his move will provoke more members to quit the party and thus to force a rethink about its leadership. The internal situation within the party had become so bad that the regular party convention normally held in August has been postponed until December. But for many members change needs to come before that since it is rumoured that as many as 30 members of UMNO are ready to defect to the opposition People's Justice Party. The party is headed by Anwar Ibrahim, formerly widely seen as a successor to Dr Mahathir before he was jailed in the late '90s on trumped up sex charges and banned from political activity for an extended period. That ban has just lapsed and Anwar seems well placed to make up for the time he lost in jail. But Dr Mahathir is urging any dissidents not to join the opposition. But even if they do not and decide to run as independents that will scarcely alleviate the problems of UMNO because the resulting balance of power in parliament will mean that no party or group has a majority in the house. The election resulted in Anwar capturing almost half the popular vote and the current balance of power sees the UMNO-led National Front maintaining a 140-82 seat advantage in the federal parliament so the next few months will be vital if Abdullah is to maintain his grip on national power and respect.

In a last-ditch attempt to salvage his reputation Badawi has now set about trying to carry out some of the reforms that he promised when he came to power in 2003. Central to that was his commitment to take on the corruption which became widespread under Dr Mahathir. Unfortunately for Badawi, to judge by the media and the public mood, corruption has only worsened on his watch. Reform of the judiciary was also high on his list after the depradations of the Mahathir years and last month he announced that among the changes to be made would be a new, independent commission that would recommend candidates for the judiciary. Now the six judges that Dr Mahathir sacked in 1988 will get compensation but no apology.

Also undergoing scrutiny are some of the grandiose schemes that first saw the light of day under Badawi's patron. Perhaps the most wasteful was the construction of the new political capital of Putra Jaya. Now the second most ambitious of those projects is looking under threatthe high speed rail link to Singapore. Billed to cost $3.2 billion it is unlikely to survive serious scrutiny when the true economic benefits are totted up.

Although the alternative media has developed rapidly in the repressive atmosphere created under Dr Mahathir when all of the press was under one form of government control or another, Badawi has now moved to loosen government control and Anwar's People's Justice Party has been allowed to publish its own newspaper after 10 years of seeking permission. The government, just as importantly, has revoked the ban on Makkal Osai, the favourite newspaper of the country's ethnic Indian minority. That community has been severely at odds with the government after some Indians were accused of terrorist links, but the lifting of the ban has gone some way to relieving pressures among the Indians who came out in droves to support Anwar's rainbow party during the elections.

And that is the problem for Anwar: it is an easy matter to mobilise sizeable numbers of people who hate the government; the difficult trick for him to pull off will be to keep them allIndians, Islamists, secularists and Chinesetogether when things are less clear-cut.

But for the moment all the signs are that fortune is with him now that Dr Mahathir has elected to do a good deal of his work for him. But Anwar's old nemesis cannot be counted out at this stage. He has plenty of old allies still dining on the old master's finest days and a comebackin the form of a Mahathir political "clone" as prime minister to succeed Badawicannot be entirely ruled out. But whether that will be good for the country is another matter.