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DILI, East Timor—East Timor risks lapsing into civil conflict if divisions between police and army forces are not resolved, a security watchdog cautioned Friday, calling on the government and United Nations to act quickly.

Clashes between the police and army deserters from April to June 2006 gave way to gang warfare, looting and arson, said the International Crisis Group—a nonprofit conflict resolution think tank. At least 37 people were killed and 155,000—a fifth of the population—were displaced.

Relative calm was restored by foreign troops and U.N. police who supervised 2007 elections in which Nobel Peace Prize winner Jose Ramos-Horta became president. But unresolved tension remains a threat to political stability.

Brussels-based ICG recommended the U.N. play a role in mediating between the police and army to resolve their differences.

With foreign forces on the ground, the government can "conduct a genuine reform of the security sector, but it will have to move quickly", John Virgoe, the group's Southeast Asia project director, was quoted as saying.

East Timor's government, led by former rebel leader Prime Minister Xanana Gusmao, declined to comment on the report.

The U.N. oversaw East Timor's transition to independence in 2002 after the former Portuguese colony's bloody split from Indonesia. Up to 183,000 people died during the 1975-1999 occupation due to killings, disappearances, hunger and illness, a U.N. commission found. The U.N. oversaw East Timor's move to independence from 1999 to 2002.

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