Australian Prime Minister Julia Gillard has dropped controversial plans to implement a refugee swap deal with Malaysia, after facing almost certain defeat in the Australian House of Representatives.

The plan which involved sending 800 asylum seekers to Malaysia in return for 4,000 UN approved refugees over a four year period, was deemed illegal by the Australian High Court in September as the safety of the refugees could not be guaranteed in Malaysia.

Malaysia is not a signatory to the UN Refugee Convention. 

Gillard withdrew the bill after it was staring parliamentary defeat, which would have made it the first bill since 1929 to have been defeated in the lower house.

Commenting that Australia would still accept the 4,000 refugees from Malaysia, Gillard said,

"It's clear that the migration law of this country will not be amended, and as a result the government is not in a position now... to have asylum-seekers processed in third countries."

Graham Thom of Amnesty International, hailed the withdrawal as very significant but warned Australia still has a long way to go.

“I think we need to remember that this just brings Australia back into line with most Western democratic countries. So, it’s only a first step; an important step, but a first step that brings us into line with other like-minded countries.” 

See him talking to Al Jazeera below.

The Australian Greens urged Gillard to go further and close down detention centres holding the refugees, including the infamous Christmas Island centre off the coast of Indonesia, which has been plagued by riots and suicides.

The United Nations High Commissioner for Refugees backed the Greens call saying Australia should explore alternatives,

"that would allow asylum-seekers to avoid prolonged periods of detention in isolated and sometimes crowded conditions".

The UNHCR also said Australia should,

"help to provide asylum-seekers with viable protection options other than through dangerous and exploitative boat journeys to Australia".

Greens senator Sarah Hanson-Young said,

''It's a welcome move from the government to accept we have to start working on onshore processing.''

Asylum seekers arriving by boat will now be processed in the community, giving them “bridging visas”, allowing them to work but with limited governmental support, until further alternatives are explored.

See our earlier post: 'High Court rules against Australia-Malaysia refugee swap' (Sep 2011)