* Kyrgyzstan makes crucial step to parliamentary democracy
* Governing coalition still divided on nation's future
* Regional instability a headache for giant neighbour China
(Adds context, background)
By Olga Dzyubenko
BISHKEK, Dec 17 (Reuters) - Kyrgyzstan's governing coalition elected a parliamentary speaker on Friday in a bid to end months of upheaval and violence and build Central Asia's first parliamentary democracy.
Central Asia is watched with unease by the West, Russia and China which look to its natural resources. Turkmenistan, Kazakhstan, Tajikistan and Uzbekistan have authoritarian presidential systems they deem essential in an area marked by ethnic and clan rivalries as well as Islamist insurgency.
Under the new model of government, backed by the United States but previously criticised by former imperial master Russia, parliament will be the main decision-making body and the prime minister will assume more power than the president.
Tensions still run high in Kyrgyzstan after more than 400 people were killed in June clashes between ethnic Kyrgyz and Uzbeks in the volatile south of the country.
"The main task now is to move quickly to form a legitimate government which will be accountable to us," the new speaker, Akhmatbek Keldibekov, told parliament after his election.
Deputies were expected to hold a vote on the new government later on Friday.
Kyrgyzstan, a former Soviet republic that hosts Russian and U.S. military air bases, held elections on Oct. 10 that resulted in five parties winning seats in a new legislature designed to devolve power from the president to the prime minister.
ETHNIC TENSION, CLANS AND RADICAL ISLAM
Kyrgyzstan, a mainly Muslim nation of 5.4 million, lies on a drug trafficking route out of Afghanistan and is regionally and culturally divided into north and south. Clan rivalries and widespread cronyism are additional threats to the fragile peace.
Adding to general instability is the government's tenuous control of southern Kyrgyzstan which shares the Ferghana valley with Uzbekistan and Tajikistan where radical Islam is rising.
Longtime president Askar Akayev was forced to flee the nation in 2005 after mass protests. Successor Kurmanbek Bakiyev, who deposed him, suffered a similar fate in April this year and fled to Belarus following violence in which at least 85 were killed.
Proponents of parliamentary democracy argue Kyrgyzstan's experience has shown the inefficiency of authoritarian rule and a lack of public control that allowed the plundering of state coffers by family clans.
Earlier this week three parties -- Ata Zhurt (Motherland), the Social-Democratic Party of Kyrgyzstan and Respublika -- formed a governing coalition after a previous three-party grouping had lasted just two days, failing to elect a speaker.
Three failed attempts to build a coalition and elect a speaker and prime minister would have forced interim leader Roza Otunbayeva to dissolve parliament and hold a new election. Keldibekov, 44, was elected as speaker by a 101-14 vote in the 120-seat legislature. He heads the faction of Ata Zhurt and ran the state tax committee under Bakiyev.
Keldibekov's swift election, however, could not hide sharply contrasting views on Kyrgyzstan's future in the coalition.
Ata Zhurt is strongly opposed to parliamentary rule and was fiercely critical of the interim government during the election campaign. The party's supporters include many of those who favoured Bakiyev's leadership.
The Social Democrats are ardent supporters of Otunbayeva's plan to build the first parliamentary democracy in ex-Soviet Central Asia. Respublika also supports a parliamentary model.
(Writing by Dmitry Solovyov; Editing by Ralph Boulton)
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