By Tito Belo
DILI, July 5 (Reuters) - East Timor's leading parties from a weekend parliamentary election have rejected a proposal by the president to form a unity government, saying the best thing for the young nation is a strong opposition.
With 99 percent of votes counted, the ruling Fretilin party has 29 percent, ahead of the CNRT party of former president Xanana Gusmao with 24 percent. A handful of smaller parties share the remainder of the vote.
With no party winning more than half the votes, politicians are now shifting their focus to forming a coalition. President Jose Ramos-Horta had suggested a unity government, but Fretilin Secretary-General Mari Alkatiri told Reuters on Thursday this would not be good for the development of democracy.
"The door is open for any party to make an alliance, except CNRT," Alkatiri, who was deposed as prime minister in the wake of violence last year, said in an interview.
"I think democracy will grow if we have a strong opposition in national parliament," he said. "If we form a unity government, it means that every party is involved in the government and we don't have an opposition."
CNRT's secretary-general, Dionisio Babo Soares, said his party was still in talks with opposition parties to discuss a possible coalition.
"I don't think we will work with Fretilin. We want to be a constructive opposition in parliament if we fail to form a government," he said.
After serving as the country's first president, Gusmao -- a charismatic hero of the resistance to the decades of Indonesian occupation that followed Portugal's withdrawal in 1975 -- now wants the more hands-on post of prime minister.
"We want Xanana Gusmao to be prime minister and we think that his leadership will help end the crisis and unify all citizens, including East Timor's police and army," said Soares.
Julio Tomas Pinto, an analyst at the National University of Timor Leste, said a coalition would likely bring stability in a nation that has seen divisions in security forces.
"A one-party government will not create stability and resolve the crisis. An alliance or coalition is very important for the next government," Pinto said.
ALKATIRI WANTS TO BE PM
Fourteen parties contested the election, which proved as expected to be a showdown between Fretilin and CNRT. Analysts had not expected any single party to win a majority in the 65-chamber parliament.
Fretilin, which led the 24-year struggle against Indonesia, remains popular, especially in the east of the country, but its candidate fared badly in the recent presidential election.
"We are negotiating with some parties. We want to make an alliance with other parties to govern because the results show that people still want Fretilin to govern," Alkatiri said, without mentioning the names of the parties.
Alkatiri said he was ready to assume the post of prime minister again in the next government because that is what his party wanted.
Factional bloodshed broke out in East Timor last year, triggered by the Fretilin government's sacking of 600 rebellious soldiers. As a result 37 were killed people and a further 150,000 driven from their homes.
Foreign troops led by Australia were brought in to restore order, but sporadic violence and unrest have continued.
The former Portuguese colony is one of the world's poorest countries but has rich energy resources that are only starting to be developed.