Historical All Saints Church in Taiping being sealed off by police after Saturday, Jan 9, 2010 attack. (AP Photo)

The fire-bombing of a number of suburban Kuala Lumpur churches over the past few days have highlighted the delicate balance of ethnic and religious interests in this generally peaceful, Muslim-majority nation. But just as importantly, the incidents have focused attention on Malaysian Prime Minister Najib Razak’s leadership. After only nine months in office, he is facing a major challenge to his authority.

The church attacks are directly related to a recent High Court decision permitting non-Muslims to use the word “Allah” in Malay-language publications. For many Muslim Malays—and especially those from Mr. Najib’s party, the United Malay National Organization (Umno), the decision constitutes an unprecedented affront to Malay dignity and Muslim sensitivities.

Yet other Malay Muslims, principally from the opposition Pakatan Rakyat coalition led by Anwar Ibrahim, perhaps mindful of their mounting political support from the country’s sizeable minorities, have rejected this approach. Even Mr. Anwar’s conservative Muslim party coalition partner, Parti Se-Islam Malaysia, has surprised middle-class Malaysians by joining the voices of moderation. Hadi Awang, a prominent leader of that party, chose to visit a wrecked church Saturday in a show of sympathy.

Mr. Hadi’s gesture is important, and not only as a sign of respect for freedom of speech and religion. With large Chinese, Indian and Christian Bornean minorities, Malaysian politics has long been a deft exercise in power-sharing and mutual tolerance. The country’s political landscape is in the process of being redrawn as Umno, once the arbiter of middle-of-the-road Malay decency, lurches towards an atavistic and extremist future.

This is all the more unfortunate given Mr. Najib’s well-meaning—if ineffectual—attempts to move his party back to the center. His record since his accession to power in April last year has generally been positive. Understanding the extent of popular disenchantment with the Umno-led, National Front government after their drubbing in the March 2008 national polls, the prime minister has launched a number of reform initiatives, especially on the economic front.

In anticipation of the 10-member Association of Southeast Asian Nations Free Trade Agreement, Mr. Najib, who is also Finance Minister, announced a major service-sector liberalization in April 2009 that centered around scrapping certain provisions of the pro-Malay, affirmative-action New Economic Policy. The NEP, a mainstay of Malaysia for decades, was long seen as an impediment to foreign and local investment.

The prime minister is also embarking on a major reformulation of the Malaysian economy, recognizing the need to push the country into more innovation-driven, high-value industries and sectors. Moreover, to tackle the perennial problem of red-tape, Mr. Najib’s administration is slated to deliver a series of “National Key Result Areas” directives to various ministries this year, which will ostensibly guide reforms and ensure better delivery of public services. Malaysians have responded positively to these initiatives. The prime minister’s fondness for fancy abbreviations, such as the 1Malaysia slogan, is ridiculed by detractors, but it reflects his results-oriented approach.

However, Mr. Najib’s deep roots in the ruling Malay elite (he’s the son of a former premier) have also imbued him with an innate conservatism and caution when it comes to handling communal issues as well as the civil-liberties agenda. Here, catchy and upbeat slogans like the 1Malaysia campaign are not enough. Malaysians want root-and-branch institutional reform. Public trust in the police and the judiciary remains extremely limited. While Mr. Najib has indicated a willingness to curtail the ruling coalition, the National Front’s interventionist approach in the economic sphere, he has been unable to loosen his government’s stranglehold on the media and civil society.

Many Malaysians, particularly the young, want greater political freedoms, transparency and accountability. This has not happened, and justice remains elusive. Deaths in police custody and numerous corruption scandals continue to haunt the administration, eroding public confidence day-by-day. Thus the recent attacks jeopardize Mr. Najib’s reforms as well as his credibility. Is his a government for all Malaysians? His inability to achieve a breakthrough in the nation’s ethno-religious divide is becoming a palpable weakness.

Mr. Najib is also facing vociferous criticism from the far right-wing of Umno, led by the still-influential former Prime Minister Mahathir Mohamad. This group contained some of Mr. Najib’s staunchest supporters as he rose to power, replacing his hapless predecessor, Abdullah Badawi. Unfortunately, Mr. Najib, whose inclinations have generally been moderate, is now in danger of being identified—if not overwhelmed—by the Mahathir camp’s exclusivist agenda. Moreover, his inability to quell their rhetoric is also undermining his support amongst the non-Malay communities and indeed, many moderate Malays.

Adding to the complex situation, Umno’s ethno-nationalist conservatives are becoming increasingly disgruntled with what they see as Mr. Najib’s weakness in the face of challenges to Malay supremacy. The real or perceived dilution of Malay power and patronage is liable to cause a backlash. The vitriol attached to the “Allah” decision may well reflect this sentiment.

Mr. Najib is at a critical juncture. He must overcome Umno’s right-wing constituency, which represents a serious threat to his government’s success, to say nothing of his own personal legacy. To do that, he must take charge of the racial and religious agenda personally. Nor can he continue to ignore Malaysia’s lagging civil liberties. Instead, he must display the same determination and courage that he brought to economic arena and steer his country back to calmer waters. — WSJ

Mr. Raslan, a syndicated columnist and self-employed consultant, is the author of “Ceritalah 3: Malaysia a Dream Deferred” (Marshall Cavendish, 2009).