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* Kisumu businesses looted, burnt in riots after 2007 vote
* Some firms draw down stock, shut before Monday's ballot
* Bloodletting five years ago brought economy to standstill
By Duncan Miriri
KISUMU, Kenya, Feb 26 (Reuters) - Some businesses in Kisumu, Kenya's third-largest city, have reduced stock or closed ahead of Monday's presidential elections for fear of a repeat of the tribal violence that killed more than 1,200 people at the last such vote five years ago.
On the outskirts of the Lake Victoria port city, abandoned ruins still bear witness to the weeks of looting and torching that brought East Africa's biggest economy to a standstill.
"Last time most of what was targeted was alcohol, foodstuffs and non-breakables," said Saga Shah, who works for a firm that runs a supermarket on the city's main street that rioters turned into an inferno after the close race of 2007.
"So a lot of people are reducing these items and stocking basics that are required on a day-to-day basis," he said.
The ethnic tensions that led to violence in 2007 still linger. And, as in the past, tribal loyalties will trump policies for many of Kenya's 14 million eligible voters.
In a worrying sign, leaflets have been scattered in Kisumu calling for the eviction of Kikuyu and Kalenjin tribes, which have formed an alliance against Prime Minister Raila Odinga, of the Luo tribe, who is seeking the presidency.
Odinga is running in a neck-and-neck battle with Deputy Prime Minister Uhuru Kenyatta, a Kikuyu who backed President Mwai Kibaki in 2007. The two are well ahead of the other six hopefuls, according to opinion polls.
Kenya cannot afford a re-run of the violence as it struggles to lift the nation out of poverty, which will depend on enticing tourists and drawing in investment needed to improve creaking infrastructure and develop a nascent oil and gas industry.
After the last election crisis, Kenya's growth tumbled to 1.7 percent in 2008 from 7.1 percent in 2007.
This time round, none of the main candidates offers a vision that would change the course of Kenya's broadly open economy, which analyst say means that growth now running at almost 5 percent is not threatened by the result itself.
"Kenya's growth prospects look very good and are unlikely to be affected by the election outcome one way or other," said Mwangi Kimenyi, senior fellow of global economy at The Brookings Institution in Washington.
"The critical issue is whether the elections are free, fair and peaceful," he added.
Investors have so far brushed off worries about violence, encouraged perhaps by candidates' pledges to respect the outcome. The main share index has climbed 8 percent so far this year, and the Kenyan shilling has held broadly steady to the dollar - with occasional help from the central bank.
But some are nervous. Tom Gichuhi, chief executive of the Association of Kenya Insurers, said demand for political risk cover by businesses had risen in the last six months.
"This has picked up purely because of the fears that members of the public have over the risk they face," Gichuhi said.
In Kisumu, which was virtually shut down by the violence, the burnt-out stone and concrete shells of once-thriving businesses are a constant reminder of those risks.
Abbysinia Iron and Steel, a plant that makes reinforcement rods for construction, closed up in late December. The owners told workers the factory would re-open after the vote, residents and employees said.
"They were fearing the type of chaos that erupted after the 2007 election so that was the main reason they shut down," said George Onyango, a father of two working at the plant's furnace.
With a 2,000-strong workforce, the factory was one of the biggest employers in the area. Its temporary closure has had a ripple effect on the local economy, down to the 60 or so women who sell food at its gates.
Lucy Awino, a 23-year-old mother of one who sold chapatis, beans, fish and juice, lost her only source of income.
"My stock would sell out. I would get a decent profit," she said of business before the closure. "After the workers were told about the plant's closure, demand for our food went down."
Kenyan security forces have said they are prepared this time. Joseph ole Tito, head of police in the Kisumu region, has doubled his force to 6,000 for the vote and said he would have a helicopter on standby to look out for trouble spots.
That has not reassured some residents after skirmishes accompanied voting in January for party primaries to choose candidates for governor, senator and other posts to be elected alongside Monday's presidential vote. Youths armed with stones barricaded roads and looted shops.
However, some executives are more upbeat. They say a new constitution passed in 2010 could encourage Kenyans to turn to the judiciary, not the street, to resolve disputed results.
"Under the new constitution, the judicial arm is stronger and people should go to court if they are aggrieved," said Vimal Shah, vice chairman of the Kenya Private Sector Alliance, a national business lobby.
A reluctance to use courts perceived as inefficient and corrupt was blamed for exacerbating the 2007 crisis, analysts say. This time, Chief Justice Willy Mutunga, appointed in 2011, has been praised for reforms that included firing corrupt judges and setting up special teams of judges to handle vote disputes.