By Tito Belo

DILI, July 26 (Reuters) - Australian troops will stay in East Timor as long as they are needed, Prime Minister John Howard said on Thursday, pledging Canberra will not turn its back on its tiny neighbour.

Australia has about 1,100 troops and police in East Timor to help maintain peace and order after 37 people died in a wave of violence last year that drove 150,000 from their homes.

"We will stay here as long as we are asked to stay," Howard said in East Timor after talks with President Jose Ramos-Horta.

But separately, Howard told Sky television: "Although we are not setting any dates, we equally are saying to the people of East Timor that our commitment is not indefinite, it cannot be open ended."

Howard told reporters that East Timor had "a special place in the hearts of many Australians".

Ramos-Horta, who became president after a run-off vote in May, said he had repeated an appeal for Australian and New Zealand troops to stay until the end of 2008.

He said even though the Australian and New Zealand forces were not under U.N. command, they had served East Timor and the United Nations very well.

"A few months ago there was a lot of criticism about this arrangement. Well, today in New York and elsewhere they are all very pleased with our effective arrangements," he said.

There are about 1,500 U.N. police in the impoverished country of one million people and violence, often between rival gangs of youths, flares regularly.

Howard's visit came as East Timorese political parties are wrangling over the make-up of a new government after last month's legislative elections.

Howard declined to comment on East Timor's political situation.

"We respect the sovereignty of East Timor and we do not intend to abuse in any way our position by giving public advice to the leadership of this country," he said.

But he told Sky television that he discussed the political situation with Ramos-Horta.

"We are very interested in and very supportive of a bright future for East Timor. We don't want the challenges that the new government faces to be underestimated."

No party won more than half the vote in East Timor's June 30 parliamentary elections.

Ramos-Horta said this month the ruling Fretilin party and an alliance led by ex-president Xanana Gusmao had agreed to form an all inclusive government, seen as crucial to heal deep divisions five years after independence from Indonesia.

But he also said he would have to step in to decide on a new government if parties could not reach an agreement.

The new parliament is due to be inaugurated on July 30. (Additional reporting by James Grubel in Canberra)

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