(Adds election body on turnout, incidents)

By Ed Davies and Tito Belo

DILI, June 30 (Reuters) - East Timorese voted on Saturday in a parliamentary election that could put the impoverished young country on a new path after communal violence last year.

The election campaign was mostly peaceful and security in the capital low-key, with small groups of U.N. police wearing blue berets at polling stations.

Voting ended at 4 p.m. (0700 GMT) after streams of people in the former Portuguese colony had queued from early morning under fierce sunshine to cast their ballots in the third election in three months, following a presidential vote and run-off.

Fourteen parties contested the poll, widely regarded as a showdown between the ruling Fretilin party and CNRT, a party launched by Xanana Gusmao.

The election organising body said in statement that early estimates suggested a lower turnout than in this year's previous polls.

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.

"I don't care which party is elected, but I hope one of the 14 will soon form a good government and national parliament so that our interests are defended by creating jobs and setting laws... that soon end the crisis," Joao Pinto, 35, said at a polling station in the capital soon after casting his ballot.

The Fretilin government sacked 600 rebellious soldiers to trigger violence last May that killed 37 people and drove 150,000 from their homes.

Foreign troops, with Australia providing the largest contingent, were brought in to restore order, but sporadic violence and unrest have continued.

"Across the country voting has just come to a close and I'm pleased to say that so far polling has gone smoothly and there have been no major security incidents," Allison Cooper, a U.N. spokeswoman, told a news conference.

Officials noted some problems, however, including a polling station being briefly attacked in Viqueque, while one person was arrested at a polling station in Ermera for carrying arrows.

Mari Alkatiri, secretary general of Fretilin, said after voting in the capital he was confident his party would win and urged all East Timorese to accept the result.

"Fretilin will form an inclusive government and will see to peoples' necessities and restore security," said Alkatiri, who stepped down as prime minister after last year's turmoil.

FOREIGN OBSERVERS

CNRT spokesman Dionisio Babo also expressed confidence, but was concerned over reports of marked ballot papers in some areas.

An electoral official said later eight pre-marked ballot papers were found in Bobonaro district, but had been disqualified.

The recent presidential polls also saw claims of fraud and intimidation, although observers said the voting was mostly fair.

Nearly 500 foreign observers monitored Saturday's polls.

Julio Tomas Pinto of the University of Timor Leste said he did not expect either Fretilin or CNRT to win a clear majority in the 65-seat parliament.

"I predict both will get about 20 seats in parliament but to form the government in parliament they each need 35 or 34 seats... so they will have to form a coalition with other parties," he told Reuters Television.

Under a new system, ballot boxes will be transferred to regional counting centres, using helicopters in remote spots.

Vote counting will start on Sunday and preliminary results may emerge by early next week, officials say.

President Jose Ramos-Horta told Reuters in an interview on Friday that East Timor's leaders needed to unite to fight poverty and improve security.

East Timor voted overwhelmingly for independence in a 1999 ballot surrounded by bloodshed blamed mostly on pro-Indonesian militia and Indonesian military elements.

The tiny, predominantly Catholic nation became a full-fledged nation in 2002 after a period of U.N. administration.

East Timor is one of the world's poorest countries but is starting to tap rich energy resources that over time could significantly raise standards of living.

Ramos-Horta said the country should use interest earned from a $1.2 billion oil fund, together with international aid and, possibly, bilateral borrowing to create jobs and slash poverty.

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