Anwar, once the protege of former Prime Minister Mahathir Mohamad, was forced from office in 1998 on corruption and sodomy charges that he denounced as part of a conspiracy to ruin his political ambitions.

Ten years on, he is being backed by the biggest number of opposition MPs in Malaysia's history in his quest to oust the Barisan Nasional coalition that has ruled the country for the past 50 years.

To do this he must win the backing of 30 legislators from the ruling coalition to get a majority in the 222-member parliament. At the same time, he must hold together his sometimes fractious coalition of 82 MPs comprising reformers, Islamists and an ethnic Chinese party.

Anwar must also fight another charge of sodomy in a court case due to start on Sept. 10. All homosexual sex is illegal in this mainly Muslim nation of 27 million people.

He denies the new charge and said on Thursday he was confident he could achieve his aim of taking power by Sept. 16.

I feel vindicated. I feel great that I am back, Anwar told reporters after he was sworn in a day before the government unveils the 2009 budget widely expected to contain populist spending measures.

Cracks started to appear in the ruling coalition on Wednesday when there were calls for Prime Minister Abdullah Ahmad Badawi to quit.

Top leaders from the United Malays National Organisation, the biggest government party, were to meet later on Thursday but the meeting was later cancelled. It was not immediately clear why.

On Thursday, a leading government MP from the state of Sabah said he would speak against a government bill.

CHEERS FROM THE CHAMBER

Resurgent after the lifting of a ban on holding office expired in April, Anwar won a resounding victory in a by-election on Tuesday in a seat vacated by his wife and his success to date has rattled the ruling coalition and undermined Badawi's leadership.

The government has been reeling since losing its two-thirds majority in an election in March.

In parliament on Thursday, Anwar was applauded from almost full opposition benches as he entered the chamber wearing Malay dress and a songkok black hat.

He was formally appointed as leader of the opposition coalition after taking the oath.

The silent government benches were less than half full and state television's live parliamentary coverage did not show Anwar's swearing in, starting only when a government minister rose to speak.

Some legislators have called for Badawi to quit after the by-election and Anifah Aman, a Sabah government MP, said he would speak against a controversial government bill to force criminal suspects to provide DNA.

Anwar fears that the bill, which is being rushed through parliament, will be used to fabricate evidence to convict him. He has refused to give a DNA sample in the latest sodomy case.

AMBITIOUS PLANS, NERVY MARKETS

Anwar wants to put Malaysia back on a fast track to becoming a developed nation and says he will stamp out corruption and end an affirmative action programme for ethnic Malays he says has failed to help them and made the country uncompetitive.

The programme gives ethnic Malays, who make up more than half the population, privileged access to education and civil service jobs as well as preferential loans and company ownership.

Its opponents say it has produced graduates who are unfit for work and engendered a system of cronyism that has stymied economic growth.

They (the voters) want me to articulate an agenda for change, Anwar said.

The prospect of prolonged political upheaval has hit Malaysian assets hard, even though some economists have lauded Anwar's plans and he is viewed by many investors as a safe pair of hands after holding the post of finance minister in the 1990s.