The PAS state government in Kelantan, which is now reduced to a one-seat majority, will find it hard to rule effectively and pass legislation.

The Barisan Nasional coalition won a key by-election in the Muslim heartland after a recount today, narrowly beating arch-rival PAS.

The recount in yesterday's poll for the Pengkalan Pasir state assembly seat showed the coalition - which controls the federal government and every other state - winning by 134 votes.

The ballot was widely seen as a test of multiracial Malaysia's appetite for fundamentalist Islam. Coalition leaders hailed it as a victory for their moderate brand of Islam, which promotes development, against the policies of PAS.

Religion is "not the real issue for people here," said Annuar Musa, who heads BN's main party Umno.

"That is not the priority. The religious policies they (PAS) have put into action are extremely inconsistent and are implemented on an ad-hoc basis. They are just gimmicks," he said, adding that people wanted "progress and development".

PAS has controlled Kelantan since 1990 but it suffered a drubbing in last year's elections, coming within a whisker of losing to Prime Minister Abdullah Ahmad Badawi's Umno-led BN.

With the lost of Pengkalan Pasir, PAS now clings on to the state assembly with 23 seats against the coalition's 22.

Setback for Anwar

The coalition's win is also a setback for former deputy prime minister Anwar Ibrahim, who has been eyeing a political comeback since his release from jail last year.

The charismatic Anwar campaigned during the by-election for PAS, with which he has formed an opposition alliance for the next general election.

"At the end of the day, it is all about economics," said Abdul Razak Baginda, executive director of the Malaysian Strategic Research Centre.

However Abdullah's "image of being islamic" also helped boost support for the coalition, he said.

"It's not so much a rejection of PAS, there's just no clear divide any more" between the two parties, he said, adding that Abdullah's moderate "Islam Hadhari" approach to the religion appealed to voters.

Abdul Razak and other observers said the result did not signal the beginning of the end for PAS.

Not a clear signal

Political analyst Sayuti Omar, who is a Kelantan native, said the coalition's win was not a "clear signal by the electorate that they wanted change."

"It's a very slim majority so I think the desire for change amongst the electorate is not that pronounced," he said.

PAS was under "serious pressure this time, especially due to the ruling coalition's last-ditch efforts and tactics," he added, pointing to allegations the ruling party had trucked in extra voters - so-called phantom voters - to the electorate.

Deputy Prime Minister Najib Razak, who was prominent in the election campaign, denied the accusations.

BN is expected to call for fresh statewide election in Kelantan following today's result.