Malaysia's opposition Pakatan Rakyat has been defeated in a northeastern Selangor by-election that had been billed as a referendum on Prime Minister Najib Tun Razak's economic and social policies.

Zaid Ibrahim, a one-time justice minister turned possible successor to the embattled Opposition Leader Anwar Ibrahim, lost the seat to P Kalamanathan, a Malaysian Indian Congress functionary by a relatively healthy 1,725 votes.

The Hulu Selangor race appears to have been the hardest fought and perhaps most significant of the 10 by-elections since the opposition Pakatan Rakyat broke the national coalition's two-thirds hold on the Dewan Rakyat, or parliament in March 2008 national elections and it has raised speculation that Najib believes his strengthening coalition will be able to call national elections in 2011. Most of the previous by-elections took place in safe constituencies where the incumbent had either died or resigned. In Hulu Selangor, Zainal Abidin Ahmad, a Parti Keadilan Rakyat member of parliament, had died on March 25.

While Kalamanathan's 1,725 margin reversed the previous defeat, however, UMNO officials predicted a 6,000 vote margin, perhaps out of bravado. In previous elections, the Barisan pulled victory margins of as much as 10,000 in the constituency. But a win is a win and probably an indication of a rising trend.

Kalamanathan, who was personally selected by Najib against the wishes of MIC head S. Samy Vellu, won 24,997 votes against Zaid's 23,272. The result reduces the opposition's membership in the Dewan Rakyat to 76 against the Barisan Nasional's 138. It was the second straight by-election win for the Barisan.

Voting was heavy early in the Hulu Selangor constituency, a variegated district to the northeast of Kuala Lumpur, with an eventual turnout of 75.8 percent, election officials said. The contest for the seat, in which both sides have spent state funds heavily and often, and each accused the other of such offences as drinking beer and faking college credentials, was also viewed by analysts as a test of whether Najib has been able to rebuild the scandal-wracked Barisan and whether the Pakatan Rakyat's ability to rule the populous state it won in 2008 had found resonance with the voters. Najib appeared three times in the constituency to urge voters to return to the Barisan.

The central lesson of the race appears to have been the division of the electorate along ethnic lines, with the Chinese, who make up 26 percent of the electorate, going solidly for the opposition and Malays and Indians swinging back to the Barisan Nasional, the national ruling coalition. Zaid appeared to be leading initially as votes in the urban areas -- Chinese strongholds -- were counted first. However, as the ballots started to trickle in from rural Malay voters, the count swung back to Kalamanathan.

Najib, who came into the premiership a year ago dogged by scandal and with only a 44 percent approval rating, has now improved his numbers to 68 percent across the country. He has worked assiduously to heal the fractured racial divisions in Malaysia, especially with the Indian population, who make up about 8 percent of the electorate. His 1Malaysia campaign, as it is known, is aided by a US$23 million contract with US public relations giant APCO. The Chinese remain largely disaffected, turned off by factional political infighting and scandal in the Malaysian Chinese Association.

Najib has been aided by a recovering economy, with rising exports expected to push gross domestic product back to 4.5-5 percent in 2010. Some analysts express concern that employment is rising only marginally. However, his so-called New Economic Model, designed to replace the 40-year-old New Economic Policy of affirmative action for ethnic Malays, has stirred concern in the Malay community that they will be forced to give up subsidies and other privileges to the wealthier Chinese.

With Anwar caught in the coils of a long-drawn-out sexual abuse trial that has been nicknamed Sodomy II, Zaid, a highly respected lawyer who was appointed by former premier Abdullah Ahmad Badawi as a minister in the prime minister's office to attempt to clean out Malaysia's scandal-wracked judiciary, was perhaps the opposition's best hope to lead if Anwar is convicted. As an UMNO cabinet official, Zaid stirred the outrage of former Prime Minister Mahathir Mohamad by saying the government should apologize for his firing of the Lord President of the Supreme Court, Tun Salleh Abbas, in 1988. After criticizing the arrests of three individuals - Democratic Action Party MP Teresa Kok, editor Raja Petra Kamaruddin and journalist Tan Hoon Cheng under the Internal Security Act in September of 2008, Zaid was forced to resign and he left the party soon after.

Lim Kit Siang, the head of the DAP, sought to put the best face on the defeat, telling his supporters that the loss was narrower than expected and that Zaid will live to fight again another day. Nonetheless, the defeat still leaves the Pakatan Rakyat struggling to find a leader with the charisma to replace Anwar if he goes to jail in the long-drawn-out sexual abuse trial. Anwar spent six years in prison on similar charges after a 1998 trial that was universally condemned as concocted to drive him out of politics.