Malaysian director-screenwriter Adman Salleh's third feature, Paloh, is proving almost as controversial as his last film, Amok, which was once banned in its home country.

Paloh is claimed to be the first Malaysian film that touches on the sensitive issue of the inter-racial relationship between the Chinese and the Malay. Set in Malaysia in 1945 during the Japanese occupation, the film is a historical drama with the 14 days of horror as a backdrop.

Paloh was released in Malaysia on July 10, but only after Adman was dismissed and rehired twice during the film's editing.

Both Adman and his director of photography, Teoh Gay Hian, were relieved from their duties after the first final cut was made. The Malaysian government - which oversees all film production in the country - appointed a company to manage the making of Paloh which issued a letter to Adman to relieve him of his duties during post-production.

Adman, who won best director for his debut film Bintang Malam at the 1992 Malaysia Film Festival, once thought of disowning the film, but changed his mind when he was reinstated as director. However, he lost his job for a second time while post-production was still being carried out in Bangkok.

Although Adman is disappointed that he could not oversee the final stages of post-production, Paloh stands out as being different from most Malaysian films, which are mostly about romance.

"The local media was shocked when the film was premiered. People did not expect a film of this nature to be made in Malaysia. Although the fighting between the Chinese and the Malay during the war was brought to an end, their relationship remains a sensitive issue even up to now," says Adman.

Amok was banned after Adman refused the censorship board's request to cut six scenes which contain violent and sexual contents. It was released later only when he did the cuts.

Produced by Perbadana Kemajuan Filem Nasional Malaysia (FINAS) and Filem Negara, the US920,000 (RM3.5m) Paloh is the second film project funded by the Malaysian government.

The funding is part of a film funding system that the government initiated in 2000 to boost the local film industry by providing finance to people that are keen to make serious films.

Malaysia makes about 10 films on an average year and the local film industry has poor standards. 'The neighbouring countries such as Thailand and Vietnam are doing very well while Indonesia is making a comeback,' says Adman.

'The Malaysian film industry lacks a balance between mainstream and good quality films. The market is overwhelmed with the commercial films from Hollywood while local films are made only meant to be successful at the box office,' he says.

'It's a good thing that the government decided to help local film people who are willing to try something different to balance the industry and to make films with certain qualities that can be showcased at foreign film festivals,' he adds. Paloh is expected to be screened at the Asia Pacific Film Festival in Iran this October.

Initially, the government was hoping to finance the making of 12 films a year. But only two films have been produced in the past three years: Embun, directed by Erma Fatima, was released in 2002, followed by Paloh this year.

The third government funded film will be Pontianak Harum Sudal Malam, to be made by award winning director Shuhaimi Baba.