* Sees large gap between reform at top and reality
* Warns that Rakhine crisis could undermine reforms
By Stephanie Nebehay
GENEVA, March 7 (Reuters) - The crisis in Myanmar's Rakhine state, where sectarian violence erupted last year, risks spreading and endangering democratic reforms undertaken since military rule ended in 2011, a U.N. investigator said on Thursday.
Myanmar should release the remaining 250 political prisoners, end torture by police and address root causes of ethnic conflicts, the independent investigator Tomas Ojea Quintana said.
"There remains a large gap between reform at the top and implementation on the ground," he said in an annual report to the United Nations Human Rights Council.
"Rakhine state is going through a profound crisis that threatens to spread to other parts of the country and has the potential to undermine the entire reform process in Myanmar."
Ojea Quintana visited Myanmar for five days last month and held talks with ministers, opposition leader Aung San Suu Kyi and prisoners. He also visited camps for displaced people uprooted by ethnic clashes in Rakhine and Kachin states.
"While the process of reform is continuing in the right direction, there are significant human rights shortcomings that remain unaddressed, such as discrimination against the Rohingya in Rakhine State and the ongoing human rights violations in relation to the conflict in Kachin State," he said.
They must not become entrenched and destabilise the reform process, said Ojea Quintana, an Argentine human rights lawyer.
Deadly sectarian violence erupted last June and October in Rakhine state between Rakhine Buddhists and Muslim Rohingyas.
"Both Muslim and Buddhist Rakhine communities continue to suffer the consequences of violence that the government has finally been able to control, though question marks remain over the extent to which excessive force has been used," he said.
The Nasaka, a border security force accused of committing serious violations against Muslims, should be suspended.
Ojea Quintana voiced concern at the "endemic discrimination" against the estimated 800,000 Muslim Rohingyas who lack legal status, and called for discriminatory regulations to be removed.
The Yangon government says the Rohingyas are illegal immigrants from Bangladesh and does not regard them as citizens. Bangladesh also denies them citizenship.
More than 1,100 people, the vast majority of them Rohingya men and boys, are reported to be detained, the U.N. envoy said, urging authorities to ensure that they are not mistreated.
Despite a more open environment after decades of military rule, people in Myanmar can be imprisoned for taking part in a peaceful march, he said, calling for the law to be amended.
He saw "no evidence that the judiciary is developing any independence from the executive branch of government".
The quasi-civilian government of President Thein Sein must address serious abuses by the junta and prosecute perpetrators. "Measures to ensure justice and accountability, and access to truth, must therefore remain part of Myanmar's reform agenda."
Ojea Quintana welcomed increased freedom for Internet users and the reopening of prisons to visits by the Red Cross.
The conflict in Kachin, a volatile area bordering China, escalated in recent months, with the military using air power and heavy artillery to attack targets in Laiza, he said.
He cited continued allegations of "attacks against civilian populations, extrajudicial killings, sexual and gender-based violence, arbitrary arrest and detention, as well as torture".
Kachin men suspected of having links to the Kachin Independence Army have been arrested and possibly tortured.
Authorities must pursue negotiations with armed groups and protect civilians in Kachin, he said. "Any durable political solution must address the root causes of the conflict and should address the particular concerns of ethnic minority groups." (Editing by Sonya Hepinstall)