* Mali urged to hold vote as scheduled
* Algeria given lead role in mediation
By David Lewis and Tiemoko Diallo
BAMAKO, March 20 (Reuters) - West African regional body ECOWAS urged Mali to hold its presidential election on April 29 "at all costs" despite a rebellion that has displaced nearly 200,000 people it its desert north.
Malian government officials have said the polls remain on track despite a rebel push for independence in the north driving government forces out of several towns since mid-January.
Some local media and politicians, however, have called for the violence to be contained first.
The situation has been complicated by the emergence of a separate group battling to enforce Islamic sharia law, a network of international smugglers and the continued presence of fighters linked to al Qaeda in the Sahara.
"All efforts ... Should be geared at holding the intended election at all costs," Abdel-Fatau Musah, director of external relations at ECOWAS, said in a statement at an African Union conference on the Sahel zone.
Musah said current ECOWAS estimates were that 10 percent of Mali's registered voters are from areas affected by conflict but about half of them should be able to vote in the main northern towns or if special arrangements are made for the displaced.
"It is better to hold an imperfect election than not holding elections at all," he added.
There are about eight million eligible voters in Mali, according to government figures.
A statement issued at the end of the AU meeting gave Algeria the main lead in the mediation process "considering the crucial role this country has always played in the search for solutions to the situation".
Algeria, the region's biggest military power, has brokered previous agreements between Bamako and the Tuareg.
CANDIDATES FAVOUR HOLDING VOTE
Mali's Communications Minister Sidiki Konate said on Tuesday all measures had been taken to ensure the vote could take place.
An official in the ministry for territorial administration, which organises the vote, said it would be up to the constitutional court to give the final ruling if the poll goes ahead.
"It is only the small parties, who don't represent anything, who want to delay the election," the government official said.
Since the fighting erupted, local media have questioned wether an election can take place while rebels are active in three of the country's eight provinces. Malians have been scattered within the country and fled to neighbouring countries.
PARENA, one of Mali's smaller parties, has said the election cannot take place in current circumstances. Hundreds protested in the northern town of Gao over the weekend, calling for security before polls.
However, none of the favourites lining up to take over from President Amadou Toumani Toure have said they want a delay in the vote. Ibrahim Boubacar Keita, one of the favourites, has said holding a vote should be the first step to help Mali end the crisis.
Musah warned that issues ranging from terrorism, rebellion and organised crime in the Sahara to Boko Haram in Nigeria and piracy in the gulf of Guinea had created a "terrifying scenario" that risked undoing progress in the region towards democracy.
"ECOWAS will not accept the transformation of the northern part of this regions into a no man's land of criminality," he added.
The West African bloc said on Monday it would soon launch a mediation effort but also called on member states to back Mali's military in its operations. No firm commitments were publicly made at the AU meeting in Bamako on Tuesday.
"ECOWAS favours a negotiated solution but no option is off the table," Musah added.
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