Prominent politician Anwar Ibrahim has accused Thai Prime Minister Thaksin Shinawatra of "arrogance" over Muslim unrest in the south of the country and warned that his attitude could spark further terrorism.

Thaksin's initial response to the deaths of 87 Muslim protesters two weeks ago, most of them in army custody, was "pathetic", Anwar told AFP in an interview at his home here.

"What's brewing up in Thailand is causing concern," said the former Muslim youth leader and deputy premier who was once tipped to become Malaysia's prime minister.

"Either you resolve it and make a political resolution now or you are just inviting this utter disgust and frustration that will lead to the mushrooming of terrorist cells."

"Thaksin's initial reaction seems to be pathetic, to completely ignore the problems and to be so arrogant and to accept in total the arguments by the security forces," Anwar said.

He was voicing a popular view among Malaysian Muslims, who share a kinship with Muslims across the border in mainly-Buddhist Thailand, although the government of Prime Minister Abdullah Ahmad Badawi has been more restrained in its criticism.

Moot ceasefire

Anwar, who was released two months ago after six years in prison on a charge of corruption which he says was trumped up to destroy his career, is barred from holding public office but remains a force in Malaysian politics.

He said Thaksin should call for an immediate ceasefire and replace the army in the area with other security personnel.

Those responsible for the deaths of the protesters, most of whom suffocated after being packed on top of each other in army trucks, should be "dealt with severely", he said.

"You legitimise the perception that there is oppression by condoning this sort of activity. They say they don't condone it but are slow to act, they try to rationalise and protect the perpetrators of the crime."

Describing the situation as a "national crisis", Anwar said Thaksin "should appeal to the king to come into the picture.

"I know for a fact that even the radical Muslims who are very angry in the south look up to the king as their king and view him as a great man of wisdom of compassion who loves his citizens and is completely just."

Corrupt cops

Anwar said the lack of economic development, often cited as one of the main reasons for Muslim unrest in the south, was only part of the problem, pointing out that some other areas in the country were equally underdeveloped.

"It is also the issue of having to deal with some of the state apparatus and the police who are deemed to be very corrupt and high handed in their manner," he said.

"If there are radical cells deal with the cell as a cell; you don't deal with a cell as a community."

Anwar's comments drew an immediate rebuke from the Thai government.

Thai foreign ministry spokesman Sihasak Phuangketkeow rejected Anwar's allegation that Thailand's handling of the situation was fuelling terrorism in the south.

"He is not consistent with reality and does not closely follow the policies and actions of the Thai prime minister and Thai government," Sihasak told AFP .

"The Thai government doesn't discriminate against Muslims and the incident at Tak Bai was not about ethnicity."

Thaksin, under pressure at home and abroad over the Tak Bai deaths, has set up an independent inquiry into the Tak Bai tragedy.

Only four percent of the population in Thailand are Muslims but they are in a majority in four southern provinces where separatists, religious extremists and the disaffected are battling the authorities.

More than 540 people have died this year in an insurgency that flared in January.