Prime Minister Dr Mahathir Mohamad hinted today that he may call early elections, and warned the opposition to prepare for defeat.

"We are prepared to hold election even before the (five year) term ends. We are not worried about elections," Mahathir said.

He was addressing thousands of his supporters in Shah Alam during Umno's 56th anniversary celebration.

"Wait for the next election. If the support continues, see what will happen to our rivals. Our rivals should now be afraid because the time will come. Not too long.

"To my rivals, the man (jailed former deputy premier Anwar Ibrahim) and the issues that you had exploited are no longer relevant."

The next general election is due in 2004 but there is growing speculation it may be held early after the government boosted its majorities in two recent by-elections.

An Umno insider told AFP that Mahathir may call for elections within the next 12 months.

"Young Malays are returning to the Umno fold. We are seeing steady economic recovery. Time is right now," the senior Umno member said, on condition of anonymity.

Uphill battle

In a related development, DAP national chairperson Lim Kit Siang acknowledged that Mahathir was riding a wave of popular support following the Sept 11 terror attacks.

Analysts say fear of Islamic militancy has risen in the wake of the attacks, bringing support back to the ruling coalition.

"There is a sea change after the terror attacks on the US. I do not see Mahathir toppled. It is going to be an uphill battle for the opposition in the coming election," Lim told AFP .

He said Mahathir would regard his meeting with US President George W Bush next week as an endorsement to further tighten his grip on democracy and human rights in Malaysia.

"Mahathir would regard the meeting as an endorsement of his policies which had been questioned by US administration previously. It will accord a blank cheque for Mahathir," he said.

Lim said the divided opposition would have to "make adjustments" and hope to deny Mahathir a two-thirds majority.