Bazuki Muhammad / Reuters Malaysia's opposition leader Anwar Ibrahim during a protest against election results in Petaling Jaya outside Kuala Lumpur, May 25, 2013.

Malaysia is fond of presenting itself as a beacon of multiculturalism, but intolerance and division are increasingly the hallmarks of this southeast Asian nation of just over 29 million.

The return to court on Tuesday of 66-year-old opposition leader Anwar Ibrahim — who has spent the last five years fighting “sodomy” charges that he insists are politically motivated, and now awaits the verdict of a government appeal against his acquittal in January — is the latest fissure in the nation’s fractious politics. Others include the announcement of $9.4 billion worth of race-based incentives and a worsening climate of racial bigotry and hate speech that has seen Malaysia declared one of the world’s least tolerant societies.

General elections on May 5 saw the incumbent National Front coalition government of Prime Minister Najib Razak returned to power despite only getting 47% to the opposition’s 50% of the popular vote. But this translated to 133 to 89 parliamentary seats due to the “first past the post” electoral system, alleged electoral irregularities and apparent widespread gerrymandering.

The opposition Pakatan Rakyat (People’s Alliance) coalition, led by Anwar, complained bitterly and tens of thousands took to the streets to demand an investigation. In response, several opposition figures were arrested amid a crackdown that saw democracy take “significant steps backward,” according Bridget Welsh, an associate professor in political science at Singapore Management University.

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Despite lauding itself as a democracy, Malaysia has been characterized by racial politics since 1971, when statutory privileges for the Bumiputra, or “sons of the soil” as the Malay and smaller indigenous minorities call themselves, were introduced in the wake of bloody race riots. Ethnic Malays make up roughly two-thirds of the population, but Malaysians of Chinese immigrant ancestry are generally wealthier and better educated. (According to Najib, they are 50% wealthier.)

On Sept. 14, statuary entitlements for secondary education, government-linked jobs, entrepreneurship and housing were increased for ethnic Malays at the expense of the Chinese and Indian population. “[The government is] insisting on a racist agenda at the expense of the country,” Anwar told TIME from the Court of Appeal in Kuala Lumpur. Najib, however, insists that the policy is fair. “We are doing what is right and we are doing what is equitable,” he said upon announcing the move.

Curiously, Najib, an economist, previously described himself as a reformer who wanted to dial back Malay entitlement through his 1Malaysia drive, which championed ethnic harmony, national unity and needs-based instead of race-based assistance. The promises did not last long, however. “This guy has portrayed himself as a reformer of the highest level, but what he is actually doing is very much against reform,” says Welsh.

Instead, Najib appears to be focusing on hardliner support, which he needs in order to avoid losing his job at the United Malays National Organization (UMNO) annual general assembly on Oct. 5. “Najib is in a contest with hardliners for the hearts and minds of his party,” says Phil Robertson, deputy Asia director at Human Rights Watch. The Prime Minister’s “complete turnaround,” Robertson says, is due to his “fighting for his political life” after a disastrous performance at the ballot box.

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The near unanimous opinion among economists is that racial entitlements for Malays come at a cost for the country. Reserving key posts for unqualified people, for example, simply drives talent away. One out of ten Malaysians with a tertiary degree migrated in 2000 — twice the world average — while 90% of Malaysian migrants to Singapore were educated Chinese. Currently more than one million Malaysians work abroad out of a voting population of around 13 million.

“Economic advancement and progress will suffer and we will lose competitiveness because of the brain drain,” says Anwar. Last month, Malaysia cut its 2013 growth forecast from around 6% to as low as 4.5%. “Using the race card is not helping Malaysia but just family members and cronies,” Anwar adds. “This is 2013 and nobody is questioning your right to help those who need help, but it should not be based on race.”

The same Malay supremacist elites championing racial entitlements are also driving the charges against the opposition leader. “I can think of no other politician in Southeast Asia that’s been more persecuted over the last ten years than Anwar Ibrahim,” says Robertson. UNMO’s motivations are plain. As the head of a coalition of secular, Chinese and Islamic parties, Anwar “is the one person that everyone agrees has the stature to step up and be a legitimate candidate for prime minister,” Robertson explains.

The father-of-six was accused of consensual sexual relations with his political aide Mohammed Saiful Bukhari Azlan in 2008, but High Court Judge Mohamad Zabidin Diah ruled in January that the DNA evidence presented by the prosecution had not been handled properly and could have been tampered with. (Anwar was originally charged with forcible sodomy until the defense questioned how a man in his 60s with a history of back complaints could have overpowered a healthy 20-something.) Nevertheless, the government chose to appeal the acquittal, with the case described by Welsh as “flawed at best” and indicative of the “tragic comedy” that Malaysian politics has become.

“We saw this in the May election, we saw it with the arrests of people after the election, we saw this with the dismissal of both the electoral officials,” says Welsh. Now, she adds, Malaysia’s tragicomedy can be seen in “the fact that [the government appeal against Anwar] is even moving forward.”

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