JAKARTA, Jan 18 (Reuters) - East Timor needs to reform its police and army rapidly to head off the risk of renewed violence in the tiny country, a report by the International Crisis Group said on Friday.

Asia's youngest nation plunged into mayhem in 2006 when the army tore apart on regional lines and foreign troops had to be brought in to restore order.

The ensuing factional bloodshed killed 37 people and drove 150,000 from their homes, setting back development in one of the world's poorest nations.

"The government has a chance -- while international troops maintain basic security and the U.N. offers assistance -- to conduct a genuine reform of the security sector, but it will have to move quickly," John Virgoe, the group's Southeast Asia project director, said in a statement.

The report urged the government to carry through quickly a comprehensive security review, as recommended by the U.N. Security Council.

In the meantime, it said the government should try to establish clear internal complaints mechanisms for both forces, address legislative gaps and improve disciplinary procedures.

The report highlighted a need to clarify who had the lead role in security policy between the president and prime minister.

The risk remained that political players could try to manipulate the police or army for their own purposes, it said.

"The police suffer from low status and an excess of political interference. The army still trades on its heroism in resisting the Indonesian occupation but has not yet found a new role and has been plagued by regional (east-west) rivalry," an excerpt from a separate summary statement of the report said.

It also urged the United Nations, which launched a new mission in the country after the violence of 2006, to increase its support for security sector reform.

The United Nations will decide in February whether to extend the mandate of UNMIT, its fifth mission to East Timor since 1999.

The report said that the United Nations, which has 1,500 police in East Timor to help maintain security, should ensure that a process of police mentoring now underway was carried out thoroughly.

East Timor voted for independence from Indonesia in a violence-marred referendum in 1999. It became fully independent in 2002 after a period of U.N. administration. (Reporting by Ed Davies; Editing by Bill Tarrant)

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