(AFP) Islamic extremists were using religion to ignite hatred of the government and setting up militant wings to seize power, Prime Minister Mahathir Mohamad said today.

"Because of their political ends, these people persistently deny Malaysia's Islamic characteristics," he said in an address to the nation on the eve of the 44th anniversary of independence.

"Spurred by a desire to create an Islamic state of their dream, today they face the law dealing with people committing armed insurgency," Mahathir was quoted as saying by Bernama news agency.

His remarks reflect repeated allegations that a so-called 'Malaysian Mujahideen Group' is responsible for a spate of crimes that include the bombing of a church and an Indian temple.

Ten alleged members of the group, including seven members of the opposition PAS, were detained last month under the Internal Security Act, which allows detention without trial.

PAS is the main opposition party in Malaysia and accuses Mahathir's government of trying to label its members as militant extremists to curb the party's appeal among ethnic Malays.

Malays, who are mostly Muslim, make up more than half of Malaysia's 23 million population, while ethnic Chinese account for 25 percent and Indians about seven percent.

Mahathir said the Muslim world not only rated Malaysia as an Islamic nation but as a model for other Muslim countries to emulate.

He called on Malaysians to renew their commitment to remain united, saying the country belonged to all of its citizens.

On the economic front, he said Malaysia had succeeded in opening up new markets and luring more tourists in its efforts to cushion the country's export-led economy from the impact of the US slowdown.

"The government has been actively seeking new markets to counter falling exports. There are signs that West Asia and Africa will emerge to be our new export markets.

"What is gratifying is that these new markets will be importing non-electronic goods made by Malaysia's home-grown industries."

Malaysia, a key manufacturer of electronic goods for multinational corporations has been hit hard by the sector's global downturn.

Mahathir said more "cheerful news" was that tourist arrivals had been rising and that many of the tourists were from Arab countries, who tended to stay longer than others.

Tourism is now a key foreign exchange earner for Malaysia.