Australia and Malaysia are set to finalise a deal next week under which hundreds of asylum seekers will be sent to the Asian country in exchange for thousands of refugees, an official said today.

The pact has come under heavy criticism because Malaysia is not a signatory to the United Nations convention on refugees, raising questions about the treatment of the 800 asylum seekers it has agreed to accept.

But Canberra, which is battling to reduce the numbers of boatpeople arriving on its shores, hopes the policy will hurt people smugglers and stop asylum seekers from making the long and dangerous sea journey to Australia.

A Malaysian Home Ministry official confirmed the two countries would put pen to paper next week. Asked whether they would sign the agreement in Kuala Lumpur on Monday, he replied: “Yes”.

The source could not immediately give further details, and other officials familiar with the agreement, which involves Australia taking 4,000 of Malaysia’s registered refugees, could not be reached.

Australian Immigration Minister Chris Bowen refused to confirm the details, but his spokesperson said an agreement was imminent.

“It’s close, we will be able to say more in coming days,” the spokesperson said of the pact under which Australia will reportedly cover the costs of caring for the 800 sent to Malaysia, including paying for their children’s schooling.

Resolving the issue of asylum seekers arriving by boat would be a political victory for Australia, where all boatpeople are held in mandatory detention and where the government has pushed for a regional solution.

A deal with East Timor suggested by Prime Minister Julia Gillard has already foundered while negotiations to establish a centre in Papua New Guinea have been set back by political instability there.

As two more boats carrying a combined total of 114 asylum seekers were intercepted in Australia yesterday, Canberra is facing growing unrest at its main detention centre on the remote Indian Ocean territory of Christmas Island.

Symbolic burial

Refugee advocates said inmates were burying themselves in shallow graves as a symbolic gesture after unrest and fires erupted for a third night, prompting police to use tear gas against the 100 detainees involved.

Campaigner Ian Rintoul said some inmates were digging graves in frustration at the processing of their claims for refugee status.

“Some asylum seekers have already staged mock burials and buried themselves up to their necks in a symbolic protest that detention is killing their bodies and their minds,” he said.

Bowen said yesterday there were 4,557 people in immigration detention facilities around the country and the unrest likely stemmed from the fact that more boatpeople were being refused refugee status.

“The majority of people on Christmas Island - the Christmas Island detention centre - have been told they’re not refugees; they’re at various stages of appealing that,” he told reporters.

Conservative opposition leader Tony Abbott, who wants Australia to consider sending boatpeople to the tiny Pacific nation of Nauru for processing, described the Malaysian agreement as “a bad deal”.

Some 1,800 asylum seekers have arrived in Australia on 31 boats in 2011, following a record influx of some 7,000 boatpeople in 2010.

- AFP