KUALA LUMPUR: This is an exhilarating time in Malaysia, with the prospect of new political direction in the wake of an unprecedented setback last month to the governing Barisan Nasional, or National Front, coalition. But hope is tinged with fear - not so much of the old enemy, communal violence - but that events will end in some grubby compromises that leave politics stuck in a ghetto of patronage and racial division.

Attention is focused on two issues. First, there is the fight for the leadership of the United Malays National Organization, or UMNO, the dominant party in the National Front. Prime Minister Abdullah Badawi is being bitterly attacked by his predecessor, Mahathir Mohamad, and openly challenged by the former Finance Minister, Tunku Razaleigh Hamzah. Abdullah says he will make way for his successor at a time of his choosing, but he will remain under constant pressure, with party elections later this year culminating in a leadership vote in December.

Second, there is the problem of cohesion in the opposition coalition, Barisan Rakyat, or Peoples' Front, which now controls 5 of the 13 states. Embracing parties once identified with Islamic fundamentalism and Chinese chauvinism, the coalition is held together by the former Deputy Prime Minister Anwar Ibrahim, leader of the multiethnic Parti Keadilan Rakyat, or People's Justice Party. The coalition has its work cut out to stay together.

To many Malaysians, both issues are straddled by one man: Anwar. His ambition to be prime minister is undoubted, as is his stature. Can he persuade enough National Front legislators to jump ship and give the opposition a majority in Parliament? Or will he be seen by enough UMNO members to be the BN's savior so that some deal with Keadilan will emerge, culminating in Anwar becoming prime minister? Neither, especially the latter, looks likely in the near term, but given the fluidity of personality, money and opportunistic politics there are many scenarios.

Meanwhile, the broader public is concerned with what lessons, if any, UMNO and the BN have learned from their electoral setback. The vote was clearly against a variety of ills, including corruption, nepotism, undermining of judicial independence, marginalization of minorities, inflation, rising income differentials, and weak leadership.

Abdullah was rightly blamed for promising much and delivering little. In defeat, he is showing greater resolve, and some of his cabinet appointments have raised hope for real change. But it is not only Mahathir and other old-timers who blame him for defeat, rather than two decades of sleaze and power abuse.

Some UMNO delegates want reform to revive the party's fortunes with the electorate. Others want to change a system where the sons and in-laws of prime ministers past and present dominate the party hierarchy. Yet other UMNO delegates need the support of these political aristocrats who can dispense patronage.

Deputy Prime Minister Najib Razak is the son of a former prime minister; the education minister, Hishamuddin Hussein, is the son of another. Abdullah's son-in-law Khairy Jamaluddin is bidding to succeed Hishamuddin, but is being challenged by Mahathir's son, Mukhriz.

Abdullah's ability to deliver change and address public dissatisfaction is constrained by his weakness within UMNO. The abysmal performance of his Chinese and Indian partners in the BN makes it difficult to give the minorities a bigger say in government.

Yet Abdullah still has a chance of survival if he has the will to fight, because party unity has emotional appeal and his opponents are not united. Mahathir now has more bark than bite - and even he would prefer to see Abdullah remain than Anwar come to power. Najib, once the unchallenged heir-apparent, has clouds over his reputation that will not disperse quickly. Less controversial candidates may well emerge, the most likely being the international trade minister, Muhyiddin Yassin.

For now ,UMNO infighting gives breathing space to the opposition, but also presents dangers. One is that the relatively honest and open-minded Abdullah will be ousted in favor of an authoritarian who will crack down on dissent. Another, that in desperation some UMNO figures will attempt to fan Malay fears in order to emphasize the party's role as defender of Malay privileges rather than as leader of a multiracial Malaysia. That danger would increase if opposition cohesion breaks down on racial lines.

Despite these worries, it is hard to find Malaysians who do not welcome the new uncertainties and the chance that the political structure will adjust to the enormous social and economic progress of the past four decades.