In the latest clash this week Kachin rebels claim they killed 60 Burmese soldiers, forced 40 others to flee and had another 30 surrounded in Kachin State, northern Burma.

The surge in fighting in the world's longest running civil war threatens to derail efforts by Mr Thein Sein and other reformers in his government to convince Western nations to lift economic sanctions.

US Secretary of State Hillary Clinton told Mr Thein Sein during her landmark visit to Burma last week that the army must end its brutal repression of ethnic minorities if the impoverished nation is to emerge from 50 years of international isolation.

While the rebels' claims to have killed soldiers have not been independently verified, more than 34,000 people have been forced into refugee camps near the Chinese border as several thousand rebel fighters abandoned their bases and engaged in guerrilla tactics against Burmese soldiers, according to aid workers and human rights organisations.

At least 7000 local civilians were displaced from 30 villages near the Chinese border in the first week of December alone, aid workers said.

''No international aid has arrived in those areas,'' said La Rip, an official with the Kachin Development Group.

In a speech in March, Mr Thein Sein also promised to make ending conflict with ethnic groups the top priority of his government.

By June, a 17-year ceasefire with Kachin rebels had collapsed after soldiers overran a rebel outpost, prompting frequent battles during which both sides have been accused of human rights abuses.

During recent secret meetings in northern Thailand, government envoy Aung Min - the railways minister and a former intelligence officer - has reached out to the Kachin rebels and four other armed groups, promising to drop an earlier demand for them to become border forces under Burmese army command.

Other incentives offered to the groups include economic development, freedom of travel for unarmed ethnic leaders and a national conference to seek political solutions to ethnic divisions.

In a significant breakthrough, the government has reached a preliminary ceasefire agreement with the Shan State Army, one of the biggest groups, which includes the opening of liaison offices, co-operating in combating narcotics and promises of talks about an area of demarcation.

The talks have further stirred excitement about Burma's future following a series of social, economic and political reforms by the government since August.

Dave Mathieson, researcher on Burma for Human Rights Watch, said that while the government had the right to conduct counter-insurgency operations against rebels, years of war have produced a culture of impunity for serious crimes such as forced labour, use of child soldiers, sexual violence against women and young girls, extrajudicial executions and torture of civilians.

Mr Thein Sein responded to Mrs Clinton by detailing his government's plan to end the conflicts that have raged almost since independence in 1948.

Jim Della-Giacoma, South-east Asia director of the International Crisis Group, said a ''lasting solution to the problem requires going beyond just stopping the wars''.

''Multi-ethnic, multilingual and multi-religious Myanmar [Burma] can only achieve genuine national unity and reconciliation by embracing its diversity,'' he said.

Burma's veteran pro-democracy leader Aung San Suu Kyi expressed strong concern over the fighting, sending a letter to Mr Thein Sein and ethnic leaders calling for ''immediate ceasefires''. Ms Suu Kyi has long advocated autonomy under a federal system for the main ethnic groups.

She has called for the revival of an autonomy plan drafted in 1947 that was backed by her late father, independence hero Aung San.

Grievances run deep among ethnic minorities who comprise about one-third of Burma's 55 million mostly impoverished people.

The Kachin rebels led strong opposition to a $3.6 million Chinese-backed hydroelectric dam project which the government unexpectedly halted in September, removing one issue of contention.

Ethnic minorities have never received direct benefits from Burma's most valuable resources found in ethnic areas, including timber, jade, gemstones, gold, silver and other minerals.