By Joseph Sipalan
KUALA LUMPUR, Nov 29 (Reuters) - Malaysia's prime minister has expressed support for strict Islamic laws as he seeks to consolidate support of ethnic Malay Muslims at a party meeting this week, as frustration over graft and the economy cloud prospects for the next election.
Prime Minister Najib Razak has battled calls to resign over the last 18 months, as a scandal at his pet project, 1Malaysia Development Berhad (1MDB), drew the anger of the public, opponents and members of his own United Malay National Organisation (UMNO) ruling party.
A new opposition party led by former Prime Minister Mahathir Mohamad and a former deputy prime minister, Muhyiddin Yassin, who Najib sacked for questioning his handling of 1MDB, is threatening to split the majority Malay vote that has handed UMNO victory in every election since independence in 1957.
Ahead of the annual party meeting, Najib said it was the responsibility of Muslims to support a plan by the rival Pan-Malaysian Islamic Party to push for the adoption of hudud, the Islamic penal code, that sets out punishments such as amputation and stoning.
"We want to develop Islam," Najib said in an interview with pro-government broadcaster TV3.
"Non-Muslims must understand that this is not about hudud but about empowering the sharia courts."
With rising prices and poor economic prospects for next year, Najib is expected to bank on ethnic and religious sentiment to woo majority Malay voters. An election is due by 2018.
Najib said his policy speech at this year's UMNO meeting would focus on the interests of Malays and Islam.
"This is my speech as UMNO president, so my main audience are UMNO members and the Malays and bumiputera," he said, using a term that roughly translates as sons of the soil, and includes Malays but not members of the ethnic Chinese and Indian minorities.
"It doesn't mean we don't care at all about the others, but this is an UMNO assembly," he said.
Najib faced the biggest challenge to his leadership last year after reports that hundreds of millions of dollars was misappropriated from state fund 1MDB, which he founded.
He acted swiftly to preserve his position - sacking critics in his administration and closing a graft investigation.
Nevertheless, the scandal clouds prospects for an early election that Najib could call to cement his position, with multiple international investigations going on and a suit related to the case filed by the U.S. Department of Justice.
Adding to his troubles is the plunge of the ringgit currency after Donald Trump's U.S. election win. It is Asia's worst performing currency, shedding nearly 7 percent over the past two weeks.
"Najib's big problem is market confidence," said James Chin, director at the University of Tasmania's Asia Institute.
"Tycoons will move against him if the ringgit keeps going down, but more importantly, SMEs and traders will go to the wall as prices will go up 20 percent across the board," he said, referring to small- and medium-sized enterprises. (Editing by Robert Birsel)
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