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By Tito Belo

DILI (Reuters) - Two veterans of East Timor's long struggle for independence vied for the presidency on Monday in the second round of an election in which voters said they were most concerned about stability and improving the economy.

Former independence fighter Francisco Guterres "Lu Olo", from the opposition Fretilin party, narrowly won the first round in March 17 polls. He faces Jose Maria de Vasconcelos, known as Taur Matan Ruak, a former army chief and guerrilla.

The president plays little role in policy but is vital in underpinning stability in impoverished East Timor, which gained independence from Indonesia in 2002 after a bloody struggle and has vast offshore gas reserves it is struggling to unlock.

Hundreds of people lined up in the sun at polling stations across the country, which makes up half of the island of Timor. Many women wore traditional 'Tais' shawls of woven cloth.

"I have given my vote, and I hope that anyone who is elected president can open more jobs, embrace different parties and work well to maintain peace on this land," said Martinho da Costa, a 31-year-old Dili resident.

Unofficial results could come as early as Tuesday with final results next week.

Economic issues top the agenda for many voters as 41 percent of East Timor's 1.2 million people live on less than $0.88 per day, according to a World Bank Report. The country has the highest population of poor people in Asia, a bank report said.

The election is evenly balanced but Ruak could have a slight advantage if he wins the votes of incumbent Jose Ramos-Horta, according to Sergio da Silva Reis, a political scientist at Timor Lorosa'e National University.

Ramos-Horta won the Nobel peace prize for his role in the independence struggle from Indonesia. The former prime minister, who survived an assassination attempt in 2008, came third in the first round, losing his bid for re-election.

The presidential election will be followed by parliamentary elections on July 7, when 25 political parties are expected to grab seats in the 65-strong parliament.

The former Portuguese colony was occupied by Indonesia in 1975. Its offshore gas reserves are the object of a dispute with Australia's Woodside Petroleum, which heads a consortium of firms developing the Greater Sunrise project gas field.

(Writing by Olivia Rondonuwu; Editing by Matthew Bigg)

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