* Some in border province say Ankara mismanaged Syria crisis
* Syrian war scares off tourists, harms local economy
* Alevi residents accuse AK Party of sectarian bias
By Humeyra Pamuk
HATAY, March 28 (Reuters) - It is already past lunchtime and souvenir shop owner Halil Santoglu has yet to make a sale - a frequent complaint these days in this once bustling bazaar as the war in nearby Syria wreaks havoc with the economy of Turkey's southern borderlands.
Santoglu and other residents of Hatay say Prime Minister Tayyip Erdogan's ruling AK Party has mishandled the Syria crisis and exacerbated its impact on their province, and they plan to punish the party in Turkey's municipal elections on Sunday.
"Even if I had the right to vote a thousand times, I would not use one for the AK Party," said Santoglu, 54, in his shop in the Long Bazaar by the Orontes river that divides Hatay, the ancient Antioch, administrative capital of Hatay province.
Erdogan has strongly backed opponents of President Bashar al-Assad since Syria's civil war erupted in 2011. Turkey opened its border to let in some 900,000 Syrian refugees, built camps to house them and gave free passage into Syria for the armed fighters, now dominated by hardline Islamists, battling Assad.
Pointing to the deserted stalls and empty alleyways, local critics of Erdogan, especially among Hatay's large Alevi Muslim community, say this open-door policy has fed a sense that Hatay itself is a war zone and has scared away badly needed tourists.
They say the refugees have driven up rents and increased competition for jobs in Hatay, a traditional magnet for tourists on account of a city museum that houses the world's second biggest collection of ancient Roman mosaics and a rock-carved church where Saint Peter is believed to have preached.
The Alevis, who follow a liberal version of Islam in mainly Sunni Muslim Turkey, also accuse the AK Party of stoking Syria's sectarian divisions. The Assad family is Alawite, a branch of Shi'ite Islam, while those trying to oust him are mostly Sunnis.
The Turkish government denies any sectarian bias in Syria.
"Cross-border trade has dried up. No foreign tourists are coming because they consider Hatay a war zone. Look at these men, do they make you feel safe here?" Santoglu said, gesturing to three bearded men with shalwar trousers, suspecting them of being Sunni rebel fighters on account of their dress.
There is no sign of any letup in the three-year Syrian civil war that has killed at least 140,000 people and displaced millions. Fighting is especially intense in and around the city of Aleppo, just 45 km (28 miles) from the Turkish border.
In one of the most serious cross-border incidents since the war began, Turkey shot down a Syrian jet accused of violating its airspace on Sunday.
In an embarrassing twist for Ankara, a leaked recording emerged on Thursday of the head of Turkish intelligence and other top officials discussing a possible military operation over the border into Syria.
The leak, denounced by Erdogan as "villainous", was the latest in a series of anonymous recordings posted on the Internet purportedly revealing graft and other malpractices in his inner circle. He denies the graft claims and says the recordings have been fabricated by followers of ally-turned-foe Fethullah Gulen, an influential Turkish Islamic cleric.
Sunday's municipal elections have turned into a referendum on Erdogan's leadership after 11 years at the helm.
Nationwide, opinion polls suggest the allegations of AK Party corruption and its power struggle with U.S.-based Gulen have not seriously dented its popularity after years of strong economic growth. But in Hatay, the picture looks different.
Sadullah Ergin, the AK Party's mayoral candidate for Hatay and a former justice minister in Erdogan's cabinet, faces a tough task to oust incumbent Lutfu Savas. Savas secured more than half the votes on behalf of the AK Party at the last local election in 2009 before defecting to the main opposition CHP.
And the sectarian issue looms large for some Hatay voters.
"For years, Alevis and Sunnis never had any trouble. I had Alevi business partners. And now we see Sunni fighters walking around in our parks, in our streets and we feel threatened," said Adil Duruk, 45, a shopkeeper. "Who allowed them in here?"
Ankara says Syrian refugees from all backgrounds are welcome in Turkey, but Ali Yeral, a senior figure in Hatay's Alevi community, believes the crisis has been mismanaged.
"People are talking about hundreds of thousands of Sunni Islamist al-Qaeda fighters. This is making us extremely wary. The government has managed this crisis extremely badly. Terror has no religion, no sect. They should have known that," he said.
But not everybody in Hatay province is having a bad war.
Just 40 km (25 miles) to the east in Reyhanli, a border town and hub for aid efforts, trade has flourished on the back of the refugee influx, despite bomb attacks last May which killed 50 people.
"Aid organisations phone up and ask for 10,000 blankets, sometimes our supplies fall short of demand," said linen shop owner Abit Demir, haggling with a stream of customers.
"I can tell you, the business we've had over the past two years is more than all our sales before then." (Editing by Gareth Jones)