(AFP) - Former finance minister Daim Zainuddin has stayed tight-lipped over the apparent rift with Prime Minister Mahathir Mohamad that sparked his sudden resignation.

But analysts say Mahathir, who has weathered far more serious challenges during his 20-year rule, will survive any political fallout.

Mahathir announced Daim's resignation Saturday, ending months of uncertainty over the former minister's future.

Daim, who has considerable wealth from a previous business career, eluded reporters staking out his palatial home by driving through the gates in a humble Proton Wira instead of his official Mercedes.

Before they realised who was at the wheel, he was inside the grounds. Daim later slipped out of his house to return to his home town in Alor Setar, Kedah.

Analysts said the departure of Daim, credited with pulling Malaysia out of two recessions and widely seen as the most powerful man after Mahathir, was due to policy disagreements with the premier.

Some said the move could set back Mahathir, who is grappling with an erosion of support for his United Malays National Organisation (Umno) and an economic downturn.

Yet other analysts viewed it as positive for the economy.

'Nobody is indispensable'

Newspapers said Daim was believed to have also quit as Special Functions Minister and as treasurer of Umno.

Daim has been associated in the public mind with a series of unpopular bailouts of politically connected campanies - such as the government's decision to buy back a stake in Malaysia Airlines from a private company at twice the current price of the shares.

A Malaysian analyst, who declined to be named, said Daim's ties with Mahathir had soured over criticism heaped on him over recent controversial business deals.

"Daim feels he has been unfairly blamed for many things," he said.

Megat Najmuddin Khas, president of the Malaysian Institute of Corporate Governance, said the rift was over policy.

"You can't call one a hero and the other a villain," he told AFP .

"They were very close friends... I think it is not a fallout because of a division of the spoils but as a matter of principle, a difference of opinion on how to bring about a recovery in the economy."

Megat did not foresee any political damage, saying that while Daim has given "very sterling service" to Umno, "nobody is indispensable."

A source close to Daim denied a rift with Mahathir, saying Daim had wanted to quit way back in 1999.

"His resignation has been delayed. The so-called rift is non-existent because the two men are very much still in touch. Their relationship spans decades, Daim is not a threat to the PM," he said.

Positive for market

One diplomat said Daim had no grassroots support.

"It (the resignation) is a blow because Daim was very close to Mahathir," he said.

"But he was unpopular... if he is out of the cabinet people might take it more positively."

A research chief with a Singapore-based brokerage, who requested anonymity, said Malaysia had lost credibility over certain business deals "seen as Daim rescuing his prodigies and cronies."

"His resignation can be positive for the market. It may signal a clean-up in the government over the blatant use of funds for company bailouts," he said.

The research chief said Daim's move could shake Mahathir's grip on Umno but believed the veteran premier "can weather it - he has seen a lot of other things far worse."

Umno supreme council member Shahril Abdul Samad, quoted in local newspapers, said it was appropriate for Daim to leave.

He hoped it would lead to a "change in the government's financial and economic thinking" towards greater transparency.

Attention is now focused on a successor. There were predictions that Mahathir would assume the finance portfolio himself until he finds a suitable candidate.

"It's not an easy job but one full of pitfalls. The next one will have to deliver, it's crucial," added Megat.