With tanks, jets, Sri Lanka fetes fall of rebel east

COLOMBO, July 19 (Reuters) With a parade of tanks, military brass bands and the roar of fighter jets overhead, Sri Lanka's government today feted the capture of the Tamil Tigers' last bastion in the east.

Army helicopters whirred past as President Mahinda Rajapaksa led a state ceremony to honour troops who captured vast swathes of territory in the east from the rebels in recent months as a new chapter in the two-decade war deepens.

It is the first time the military has dominated the east since the mid 1990s, and the capture means the Tigers now only control a diminished de facto state in the far north.

But analysts warn that while losing their foothold in the east, the Liberation Tigers of Tamil Eelam (LTTE) still retain their fighting capacity -- and the rebels have vowed to switch to guerrilla warfare tactics and to cripple the economy with attacks on major military and economic targets.

''It was the best news we have heard that the terrorists were chased away from the east,'' Rajapaksa told ministers, guests and Buddhist monks in saffron robes assembled in the capital's Independence Square after hoisting the lion-emblazoned national flag to traditional drumming and a 21-gun salute.

State television showed troops in the captured east watching the ceremony live as armoured personnel carriers paraded through the square. Western ambassadors were conspicuously absent amid fears triumphalism will further erode any chance of a return to the peace table.

''The liberation of the Tamils cannot be achieved through weapons, bombs and cyanide capsules. The LTTE should realise that,'' Rajapaksa added, referring to cyanide vials rebels wear around their necks to commit suicide to avoid capture.

Rajapaksa has said it is now up to the Tigers to decide on whether peace or more war will follow.

The government plans to spend 6.0 billion rupees (53.7 million dollars) over the next six months to develop infrastructure like roads, schools and hospitals in a bid to win hearts and minds, a senior government official said.

The government has also vowed to hold local elections in the east by the year-end to cement a civil administration there.

HEAVY SECURITY Police and troops lined the streets around the square wearing triangular pink identification stickers in a bid to prevent rebel infiltrators from posing as servicemen to mount attacks.

An estimated 4,500 people have been killed since last year after a 2002 ceasefire broke down on the ground and civil war resumed, and the fighting has now spread to the north.

Rajapaksa this week vowed to wrest control of all terrain held by his Tamil Tiger foes following the assassination of a top government official in the restive east.

Analysts say the shooting of Herath Abeyweera, Secretary of the Eastern Province, in the northeastern district of Trincomalee on Monday shows the Tigers are still a force to be reckoned with in the east, and see no clear winner on the horizon.

The country's stock market has fallen sharply in recent weeks as fighting erodes investor sentiment and prompts companies to put investments on hold.

REUTERS GT DS1117