CANBERRA, Oct 22 (Reuters) - Australia will reduce the number of peacekeeping troops it has in East Timor as security there continues to improve, the government said on Wednesday.

"The East Timorese authorities have shown through their professional handling of the security situation that the time is now right for some drawdown," Australian Defence Minister Joel Fitzgibbon said in a statement.

East Timor has struggled to achieve stability since independence from Indonesia in 2002. The army split along regional lines in 2006, leading to violence in which 37 people were killed and 150,000 fled their homes.

In February, rebel soldiers carried out un unsuccessful attempt to kill President Jose Ramos Horta, who was seriously wounded and was flown to Australia for surgery. Prime Minister Xanana Gusmao escaped injury in the attack.

Fitzgibbon said about 100 Australian soldiers would return home early in 2009, leaving 650 in East Timor, forming the bulk of a 790-strong stabilisation force that includes troops from New Zealand.

More than 2,500 foreign troops and police remain in the country to help local security forces maintain stability. (Reporting by Rob Taylor; Editing by Andrew Dobbie)

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