By Marat Gurt

ASHGABAT (Reuters) - Turkmenistan's president was sworn in for a second five-year term on Friday in a ceremony that lauded the former dentist for his purported greatness after he clinched a new landslide election victory.

Kurbanguly Berdymukhamedov won 97 percent of the vote this week in an election so devoid of competition that the Organization for Security and Cooperation in Europe declined to send observers.

The re-elected leader, 54, swore he would faithfully serve the Turkmen people before reclining in a gilded throne as performers sang: "May your good deeds continue, Arkadag!"

"I pledge faithfully and honestly to serve the people of Turkmenistan ... and to protect the independence and neutrality of Turkmenistan," he said to rapturous applause.

Berdymukhamedov - also known as Arkadag, or The Patron, by his subjects - listened to a series of eulogies in his honor, as a 3,000-strong audience, that included representatives of international energy companies vying for a share of the world's joint fourth-largest natural gas reserves, looked on.

They included representatives of Chevron Corp and ExxonMobil Corp. Turkmenistan holds 4 percent of global gas reserves. It also controls significant oilfields in the Caspian Sea.

No foreign heads of state attended the ceremony, which took place amid tight security in the showpiece capital of Ashgabat. The audience was largely made up of Turkmen elders and political leaders who joined foreign diplomats and youth organizations inside the Palace of Congress.

Berdymukhamedov's word is final in this former Soviet republic of 5.5 million people which borders Iran and Afghanistan and is ranked by rights groups among the world's most repressive countries.

Anxious to win foreign investment and markets for the country's gas, Berdymukhamedov has steadily tried to bring Turkmenistan out of the isolation that accompanied the eccentric rule of his predecessor, Saparmurat Niyazov, who banned opera, circus, ballet and gold teeth.

Berdymukhamedov came to power in a February 2007 election, weeks after Niyazov's sudden death, and swiftly set about dismantling the cult of personality that had surrounded Turkmenistan's first post-Soviet leader.

HORSES AND FOLK SONGS

But although his absolutist tendencies pale next to those of his predecessor, there are signs that Berdymukhamedov is cultivating his own colorful image.

As performers sang eulogies to the president, video images showed him galloping on the back of a thoroughbred Akhal Teke horse - a national symbol of Turkmenistan - and playing folk melodies on a synthesizer.

School children released thousands of white balloons into the air as the presidential party left the palace.

Berdymukhamedov will appoint a new government within a month. In his first public comments since winning re-election, he pledged to build a market economy and a multi-party political system, as well as to fight drug trafficking and to relax controls on the media.

"We will create the conditions for a multi-party system in Turkmenistan," he said in comments broadcast on state television two days before his inauguration.

A law permitting the registration of opposition parties came into force last month, only five days before registration of presidential candidates closed. Any locally-based party would be unlikely to threaten the dominance of the ruling Democratic Party.

Turkmenistan's exiled opposition did not take part in the election and said Berdymukhamedov did not make good on a promise to invite his opponents back home to contest the vote.

Human Rights Watch has criticized "draconian restrictions" on media and religious freedoms in Turkmenistan. Media watchdog Reporters Without Borders ranked only North Korea and Eritrea below it in the organization's 179-country press freedom index.

(Writing by Robin Paxton, editing by Andrew Osborn)