BANGKOK, June 14 (Reuters) - Thai Prime Minister Abhisit Vejjajiva on Sunday said his government would use development aid rather than aggressive security measures to tackle an escalating insurgency in the country's Muslim south.

In his weekly television address, Abhisit said money would be invested in the region's tourism, rubber, palm oil and fisheries industries to raise living standards and counter attempts by militant groups to derail the government's peace efforts.

"Thailand is a unity country under the same constitution which needs some privileges, such as economic developing programmes, to save people from poor living," Abhisit said.

"The development programmes will range from tourism to farming, including rubber, palm oil and fisheries projects."

Abhisit did not say how much money would be invested or give a timeframe for the implementation of the projects.

Nearly 3,500 people have been killed in violence since 2004 in Yala, Pattani and Narathiwat provinces near the Malaysian border, which provide 10 percent of the rubber output of Thailand, the world's biggest producer.

The violence has intensified in recent weeks, with 27 people killed and more than 50 injured over the last nine days. The victims have ranged from teachers, soldiers and Buddhist monks to Muslims praying in a mosque.

Previous Thai governments have tried "hearts and minds" campaigns to tackle the unrest, offering development aid and even free cable TV, but nothing has worked.

Abhisit said there would be no "iron fist" approach to ending the violence and he urged people to prevent rebels from creating rifts between Muslims and the region's minority Buddhists.

Analysts say aggressive security crackdowns, arbitrary arrests and reports of torture and extrajudicial killings have alienated the local population and aided recruitment of young, disaffected Muslims by rebel groups.

"I insist that the government will not resort to violence," Abhisit said. "I believe that we are on the right track by using development programmes as our mechanism to solve this problem."

Mystery surrounds who is behind the unrest in the deep south, which was once part of an independent Malay Muslim sultanate until annexed by Buddhist Thailand a century ago.

No credible group has stated its aims or claimed responsibility for the near daily gun, bomb and arson attacks. (Reporting by Apornrath Phoonphongphiphat; Editing by Martin Petty and Sanjeev Miglani)

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