Ex-Soviet Georgia enters new era with presidential poll
* Election ends Saakashvili's decade in power
* Governing coalition's candidate expected to win
* Prime Minister Ivanishvili plans to step aside
By Margarita Antidze and Timothy Heritage
TBILISI, Oct 27 (Reuters) - Georgia elects a new president on Sunday in a vote that will end Mikheil Saakashvili's decade-long rule and test confidence in the ruling Georgian Dream coalition led by billionaire Prime Minister Bidzina Ivanishvili.
The front-runner to replace Saakashvili, a pro-U.S. leader who fought a war with Russia and has served the maximum two terms, is Georgy Margvelashvili, a member of the coalition which ousted the president's cabinet in an election a year ago.
Saakashvili's departure should end feuding that has hindered policy-making and the investment climate for a year, but the future is clouded by Ivanishvili's decision to step aside as well.
Ivanishvili, 57, has dominated politics in the South Caucasus country since giving up business and entering politics two years ago, but says his job will be complete once the 45-year-old president departs.
The retreat of Ivanishvili, Georgia's richest man, has contributed to uncertainty in a country that is strategically important for Russia and Europe, which receives Caspian oil and gas through pipelines via Georgia.
After the election, constitutional changes take effect which will shift power from the presidency to the government and parliament, but Ivanishvili has not said who will be prime minister.
"This is not only a presidential election, but it's also a major change in the political system in Georgia," said Helen Khoshtaria, an independent political analyst.
"The intention of the prime minister to quit his position after the election raises more questions than answers about who is going to take the lead in this quite hectic coalition."
The arrest of several former ministers, including ex-prime minister Vano Merabishvili and dozens of other former officials, has caused alarm abroad, and two European Union ministers have appealed to Ivanishvili not to try to prosecute Saakashvili.
Ivanishvili denied in an interview that he would seek to jail his rival, and said he would not dictate the government's actions after he steps aside in the next few weeks.
"I will not allow myself to ask questions or give orders from the wings," he told Reuters.
Opinion polls put Margvelashvili, formerly a vice premier, ahead of the two other main candidates - David Bakradze, a member of Saakashvili's United National Movement who was parliamentary speaker, and Nino Burjanadze, a leader of the 2003 "rose revolution" that ousted Eduard Shevardnadze.
The campaign, in contrast to many previous elections in post-Soviet Georgia, has been peaceful.
Margvelashvili, 44, is little known. His main foreign policy goal is to pursue close ties both with the West and with Russia - a balance the country has long failed to achieve.
"Margvelashvili was named by Bidzina Ivanishvili and I have no reason not to believe that his candidate will be a good president," said Nukri Malazonia, a 36-year-old engineer.
Margvelashvili says he will refuse to take part in a run-off if he fails to win outright by securing more than half the votes. But some voters are already fed up with the government.
"I will vote for Bakradze because he's a professional, experienced and balanced politician," Nana Chachua, a 49-year-old doctor, said.
Under Saakashvili, who rose to power after the "rose revolution", the country of 4.5 million fought a five-day war with Russia in 2008, from which Moscow emerged in control of two rebellious Georgian regions.
He won plaudits for reducing corruption and bureaucracy, and for launching economic reforms, but was criticised for not overhauling the justice system, and poverty remains a problem.
Ivanishvili's critics say the economy has deteriorated under him. After years of robust growth, gross domestic product grew only 1.5 percent in the second quarter this year, down from 8.2 percent in the same period a year ago.
Georgia allied itself with Washington under Saakashvili and pushed to join NATO, still a distant prospect. Georgian Dream has taken a similar path but sought better ties with Russia. (Editing by Mike Collett-White)