KUALA LUMPUR: Malaysia's reputation of being rife with corruption is harming the nation's prospects, Prime Minister Abdullah Ahmad Badawi said yesterday as a new anti-graft body was proposed in Parliament.

Datuk Seri Abdullah also tabled a Bill that will create a nine-member panel to advise on the selection of judges, addressing criticism that the judiciary is corrupt and incompetent.

"It will give a level of confidence in these institutions... and negative perceptions will hopefully be reduced," he said of the two proposals.

"We have to deal with the perception by businesses and industry that corruption here is king, that the judiciary is unsatisfactory and is not credible, as all of this will affect our competitiveness," he told reporters.

The Anti-Corruption Agency which is being replaced has been criticised as toothless, and the new version is meant to have more independence and greater accountability.

Mr Abdullah has been forced to hand over power in March to his deputy, Datuk Seri Najib Razak, after the government was punished in general elections this year over his failure to introduce promised reforms.