* PM to vie with southern candidates for presidency
* Russia backs PM Atambayev, second round run-off possible
* Voters, investors seek rule of law, end to corruption
By Olga Dzyubenko
BISHKEK, Oct 27 (Reuters) - Kyrgyzstan's presidential election on Sunday could deepen a north-south divide in the volatile Central Asian state as it seeks to complete the first experiment with parliamentary democracy in the strategic former Soviet republic.
Instability in the mainly Muslim republic of 5.5 million concerns the United States and Russia, which operate military air bases in the country and share concerns over the drug trade and a spillover of Islamist militancy from nearby Afghanistan.
Prime Minister Almazbek Atambayev, with firm backing from Moscow, is a front-runner to become Kyrgyzstan's first elected president since reforms last year made parliament the main decision-making body, ending nearly two decades of authoritarian rule in the gold-rich nation.
But Atambayev, a pro-business opposition figure in the April 2010 revolution, faces a stern challenge from heavyweight southern candidates, who can draw on the fervent nationalism of voters in comparatively poor regions of the agrarian south.
"We once left the fate of Kyrgyzstan in the hands of people who let blood flow," said Shailoo Atazov, a 36-year-old Kyrgyz man in the ethnically divided southern city of Osh. "We won't let them cheat us now. There will be a southern president!"
Some analysts suggest that, were he to win, Atambayev could appoint southerners as prime minister and speaker of parliament in an effort to bridge the north-south divide.
Osh, Kyrgyzstan's second city, was the epicentre of an outbreak of violence in June 2010 that killed nearly 500 people and forced hundreds of thousands of mainly ethnic Uzbeks from their homes.
Though both ethnic Kyrgyz and Uzbeks suffered casualties, most of those prosecuted over the violence have been ethnic Uzbeks. An independent commission found that Kyrgyz security forces may have been complicit in attacks on Uzbek communities.
More than a year later, tensions between the communities in this densely populated region of the Ferghana valley are high. In Osh and neighbouring Jalalabad, the population is split roughly evenly between the two groups.
"We're tired of living in fear. Every single one of us wants a just and honest president," said Mukhiddin Sattarov, a 58-year-old ethnic Uzbek resident of Osh.
Central government in Bishkek, where the Russian language of the country's Soviet-era master is more widely spoken than in the south, has only a tenuous grip on power in the south.
Hardline nationalists in the south, many of them sympathetic to Kurmanbek Bakiyev, the president driven into exile in Belarus after the April 2010 revolution, argue that a strong leader is needed to restore the rule of law nationwide.
Such passions play into the hands of two presidential candidates, Kamchibek Tashiyev and Adakhan Madumarov, who are campaigning on a pro-Kyrgyz platform to restore the power of the presidency diluted by the constitutional reforms.
Atambayev is the flag-bearer of the reforms introduced by incumbent President Roza Otunbayeva, who has masterminded the switch to a parliamentary democracy.
Otunbayeva, a former ambassador to London and Washington, has always said she would stand down at the end of 2011, making way for a president elected for a single six-year term. The presidency, although stripped of many of its former powers, appoints the defence minister and national security head.
While many in the south blame Otunbayeva and her associates for the absence of law and order, the view from Bishkek is different.
Asked about the threat of violence under a new president, 57-year-old social worker Elmira Usenova said: "Wouldn't the menfolk be embarrassed to go and ruin the stability brought by a woman?"
BATTLING CORRUPTION
Atambayev, 55, has visited Moscow on many occasions and analysts say he can count on the support of influential Russian Prime Minister Vladimir Putin, in whose honour parliament named a peak in the Tien Shan mountains this year.
Russia wants to keep Kyrgyzstan within its sphere of influence, and has received positive noises from Atambayev that the U.S. military base may no longer be required after troops complete their pullout from Afghanistan in 2014.
"Everything is going according to Russia's plan. It has made clear who its favourite is, while the West has not taken a strong stance," political analyst Mars Sariyev told Reuters.
Atambayev has also vowed to stamp out corruption that was rampant under previous regimes in a bid to entice foreign investors to a country sitting on hundreds of untapped metals deposits and a potential wealth of hydroelectric power.
Change, however, will not be easy: anti-corruption watchdog Transparency International ranked Kyrgyzstan joint 164th of 178 countries in its Corruption Perceptions Index for 2010, level with the Democratic Republic of Congo.
Recent attacks on geological camps have also spooked foreign investors, including Western and Chinese companies. A joint venture run by South African miner Gold Fields this month suffered an arson attack by men on horseback.
David Grant, Gold Fields' general director in Kyrgyzstan, said investors would be expecting the new president to impose more discipline to control criminal elements. Protection from corrupt officials would help attract major investors, he said.
"Such investors could transform the fortunes of a country like Kyrgyzstan and guarantee the country independence by generating economic growth from internal resources," he said.
"The country needs to keep moving in a positive direction, inclusive of all citizens, not backwards to single family or clan control."
Per capita GDP, at below ${esc.dollar}1,000, is less than a tenth of that in Kazakhstan, its oil-rich neighbour to the north. The economy relies on remittances from migrant workers and derives nearly half of industrial output from a single gold mine.
And poverty makes voters more susceptible to corruption. "Money talks. The majority of the population will sell their votes," said Bishkek-based human rights worker Cholpon Jakupova. "It's a situation of chronic instability."
SECOND ROUND?
As well as the favourites, two dark-horse candidates from the south, Kubatbek Baibolov and Omurbek Suvanaliyev -- both of whom have held high-ranking security positions -- may attract votes with pledges to root out corruption and restore order.
A total of 16 candidates are standing but the winner must secure more than 50 percent to win outright, leading many to predict a run-off ballot. That contest, between the two leading candidates, must by law be called at least two weeks after the announcement of Sunday's results.
Atambayev's immediate challenge will be to secure enough votes on Sunday to avoid a run-off, which would probably be against Tashiyev or Madumarov, that could accentuate the north-south divide.
His advantage, as the main candidate representing the political establishment in the north, will be to play off a split vote in the south.
"Atambayev's team is working with the southern elite," said political analyst Sariyev. "Atambayev is very persuasive. The prime minister and the parliamentary speaker will be from the south."
He added: "There are factors preventing Madumarov and Tashiyev from uniting the southern clans. If they were to unite, every southerner would vote for Madumarov and then the regional divisions would become clear.
"It would be apparent that there are two republics here." (Additional reporting and writing by Robin Paxton; Editing by Jon Boyle)
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