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  In spite of the drop in violent attacks, ICG said, the insurgents were far from being defeated, and so-called advances had come at a price.

ICG said "sweeping operations" kicked off in June last year involved the "indiscriminate detention of thousands of suspected insurgents and sympathisers, and there are credible reports of torture of detainees."

The report pointed to the fatal beating of Narathiwat imam Yapa Kaseng, 56, who died at the hands of military officials while in custody. And there has been little progress in holding security personnel accountable for notorious past abuses, the report said.

ICG said the fact that the insurgents lacked a declared leadership or platform was "a major obstacle in the search for a negotiated settlement".

The report continued: "Nonetheless, there is much that the government could do unilaterally to address Malay grievances in the realms of education, justice, language, history and economy.

"But this requires a rethinking on the part of the predominantly-Buddhist state, which needs to recognise the distinct ethnic identity of Malay Muslims and find ways of allowing them to be Thai citizens without having to compromise their cultural differences."

The ICG said the ongoing violence was still driven by local Malays' historical grievances but warned it was possible that Islamic radicals from abroad could be drawn to join the conflict. The report pointed to the arrest of two Malaysian citizens in Narathiwat on June 28.

One of the arrested said they had come to "help our Muslim brothers fight Siamese soldiers" and had hoped to ambush a military patrol.

"He had wished to wage jihad and had chosen Thailand as it was the closest destination. However, he said, they had not succeeded in establishing contact with the insurgents," the ICG said.

The report said the political crisis in Bangkok made it unlikely the government would be able to turn its attention to the deep South anytime soon. "The longer this is put off, the harder it will become to contain, let alone resolve the conflict," the ICG said.