East Timor kicks off presidential election

East Timor's presidential candidate Fernando ''Lasama'' de Araoujo shows off his inked finger after casting his ballot during the presidential election in Aimutin, Dili March 17, 2012.

DILI (Reuters) - East Timor kicked off a peaceful presidential election on Saturday, a critical test to whether Asia's youngest and poorest country can maintain stability and build confidence to develop the economy.

Streets in the capital Dili were almost empty and businesses largely closed as voters walked to polling stations in drizzle in a contest pitting incumbent and Nobel Peace prize laureate Jose Ramos-Horta against 11 challengers. Hundreds queued up before polling stations opened.

Analysts predicted a close finish, with Ramos-Horta facing a battle from four leading rivals to stay in office in East Timor, the eastern half of an island at the eastern end of the vast Indonesian archipelago.

The president plays little role in policy but is vital in projecting stability in East Timor, which has vast offshore gas reserves but is having difficulty unlocking its wealth.

The reserves are the object of a dispute with Australia's Woodside Petroleum (WPL.AX), which heads a consortium of firms developing the Greater Sunrise project gas field. It wants to use a floating LNG plant, while East Timor wants the plant built on shore to create more jobs.

The national election commission was due to announce provisional results late on Saturday, but delays in returns from outlying districts could delay the announcement until Sunday. Official results are to be announced a week after the election.

TWO CONTENDERS FAVOURED FOR RUN-OFF

Two candidates -- Francisco Guterres from the main opposition party Fretilin and Jose Maria de Vasconcelos, the former army chief and guerrilla leader -- were seen as standing the best chance of facing each other in a run-off in mid-April.

Two others, Deputy Prime Minister Jose Luis Guterres and Fernando de Araujoof the Democratic Party, could also go through.

Fretilin's Gutteres was optimistic about his second round chances. His party won the most votes in the 2007 parliamentary poll, punctuated by bouts of violence.

"As a candidate, I am confident that I will win the majority of the vote," he told reporters after casting his ballot in a primary school.

Vasconcelos, who resigned from his military position to run for president, is known as Taur Matan Ruak.

On the eve of the vote, he stressed his credentials as a guerrilla chief during the long process of winning independence. East Timor, a former Portuguese colony, became independent in 2002 after nearly two decades of being under Indonesian control.

Ramos-Horta, who survived an assassination attempt in 2008 and shared the Nobel prize in 1996 for his role in resolving years of deadlock, also told voters he would "continue my success that I have achieved now, which is peace".

For many voters, economic issues are fundamental, as 41 percent of East Timor's 1.2 million people live below $0.88 a day, according to a World Bank report, and malnutrition is a significant public health issue.

"The elected president needs to understand the needs of the poor people and create more job opportunities," said Alfredo Marques, 39, a language tutor.

(Writing by Karima Anjani; Editing by Michael Taylor and Ron Popeski)