BEIRUT, June 25 (Yara Bayoumy/Reuters) - A proposed law to grant Palestinian refugees in Lebanon basic civil rights will promote their sense of dignity and well-being, reducing militancy in refugee camps across the country, a UN official said on Friday.

Salvatore Lombardo, the director of UNRWA in Lebanon, also said the legislation was only about granting Palestinians human rights, not promoting their naturalization -- an explosive issue which raises fears of upsetting a delicate sectarian balance.

Palestinian militants have been blamed for attacks on UN peacekeepers in Lebanon, firing rockets from Lebanon into Israel -- most recently during the Gaza offensive -- and forming al Qaeda-inspired cells in refugee camps.

Approximately 425,000 Palestinians are registered as refugees in Lebanon by UNRWA, which provides them services. Many of them live in 12 camps scattered across the country in conditions Lombardo described as deplorable and appalling.

They are descendants of families that fled or were forced to flee during fighting which created the state of Israel in 1948.

Palestinians have long been marginalized in Lebanon, where the 1975-90 civil war was sparked by a conflict between Palestinian and Lebanese Christian factions.

Shunned by many employers, not allowed to own property and facing discrimination, Palestinian refugees are reduced to a miserable existence in overcrowded and unsanitary camps.

Proposals for a draft law due to be debated in parliament in a few weeks would give Palestinians the right to own a residential apartment and would legalise work rights such as medical care in case of work-related accidents and end of service pay.

If you have people living under the poverty line ... and more importantly, there's not an answer both political and economical to their problem, what do you expect? Lombardo said in an interview.

Asked if he thought the law would reduce militancy, he said:

I have no doubt about that. I have no doubt if you give an example to the camps that people can live in dignity and that people can have wishes and dreams and aspirations for their lives, then you will have a population which will be committed to the principle of tolerance, human rights.

Palestinians in Lebanon are barred from working in dozens of professions and employers who do end up hiring them generally pay them wages lower than their Lebanese counterparts. They are not allowed to benefit from public social or medical services and face restrictions in Lebanese universities and schools.


RIGHTS NOT POLITICS

Currently the camps are no-go areas for the Lebanese military, and some extremely well-armed ones such as Ain el-Hilweh in the south, the largest camp in the country, witness frequent inter-Palestinian clashes.

Al Qaeda-inspired militants based in the Nahr al-Bared camp in the north fought the Lebanese army in a 15-week battle during which more than 440 people, including 170 soldiers, were killed.

Let's not forget that this will have a huge impact on Lebanon's stability ... Lebanon will gain, it will have a workforce that will invest here, Lombardo said.

He praised Prime Minister Saad al-Hariri's government for being committed to putting the issue of Palestinian rights on the agenda and including it in a policy statement last year.

However, the proposals have faced hurdles in parliament because of Christian lawmakers' fears that granting Palestinians rights would eventually lead to their naturalization.

The issue is a sensitive topic in Lebanon, where politicians are wary about upsetting a delicate sectarian balance. Palestinians are mostly Sunni Muslims.

Lombardo praised Lebanese civil rights groups which plan a country-wide march on Sunday calling for Palestinian rights.

Participation is ... important for Lebanese themselves to explain to their own compatriots that this is not about politics, this is not about having Palestinians forever in this country.

(Editing by Samia Nakhoul)