* Move aims at halting chaos in rebel-held areas of Syria
* But exiled opposition exerts scant control over rebels
* Opposition: initiatives must emerge from collective leadership (Adds Bunni's remarks, second candidate)
By Khaled Yacoub Oweis
CAIRO, Feb 22 (Reuters) - Syrian opposition leaders will meet in Istanbul on March 2 to choose a prime minister to head a provisional government that would operate in rebel-controlled areas of Syria, coalition officials said on Friday.
The move was aimed at halting a slide into chaos in regions captured by insurgent brigades and estimated to comprise over half of the country, although exiled coalition leaders exert little control or influence over rebels in Syria.
The date was set after a compromise was struck within the Syrian National Coalition between a bloc that includes the powerful Muslim Brotherhood and others who favour speedy formation of a government, the sources told Reuters at the end of a two-day meeting of the coalition in Cairo.
"A compromise was reached. The coalition agreed to meet again in Istanbul exclusively to choose a prime minister," a coalition source, who did not want to be named, said.
The source said the premier would then name a government, but it was not clear if it could operate immediately from rebel zones given that President Bashar al-Assad's forces still wield formidable air, artillery and missile power all over Syria.
Veteran opposition campaigner Walid al-Bunni, one of the 12-member collective leadership of the coalition, said the prime minister would lead a government of technocrats able to deal with pressing problems on the ground.
"There has to be an executive authority capable of caring for millions of Syrians in the liberated territories who need water, electricity, security and protection. Hospitals also have been destroyed by the regime and humanitarian aid needs to be managed," Bunni said.
Coalition leaders renewed their efforts to form the provisional government a day after insisting that any peace talks must result in the removal of Assad, whose family has ruled Syria with an iron fist for 42 years.
Almost two years after an anti-Assad uprising erupted, the absence of a political leadership from land under rebel control has been a glaring weakness of opposition leaders, who have no authority over Islamist brigades making advances on the ground.
"You have a situation developing where chaos reigns in liberated areas while, relatively, there is still fuel, electricity and basic services in the Assad-held regions," a diplomat in contact with the opposition said.
"If the situation persists like this popular support for the opposition will dwindle and they could lose the war."
On the second day of meetings of the opposition Syrian National Coalition, members heard reports from a committee formed to help decide whether a provisional government can be viable while civil war still rages and whether it would attract enough international financial and diplomatic support.
Opposition sources estimate several billion dollars is needed every month for a government to function in rebel-held areas, mostly countryside and desert estimated to comprise more than half of the major Arab state's landmass.
The coalition's current financial backing falls way short of that, the sources said. However, they said, Qatar, a major Gulf Arab supporter of the revolt, this week pledged $100 million for humanitarian aid to be administered by the Assistance Coordination Unit, a non-partisan wing of the coalition.
The opposition's failure to provide services in rebel-controlled areas and increasing reports of rebel indiscipline and looting have cut into public support for their cause.
Opposition brigades have wrested large swathes of Syria from Assad's military but these areas remain vulnerable to artillery, air strikes and, increasingly, missiles.
But a coalition member said: "Even if a government is not viable right now we should name a prime minister and let him start forming it to send a message to the people on the inside who are demanding one."
Opposition by the Muslim Brotherhood helped scuttle an attempt backed by coalition secretary general Mustafa al-Sabbagh, a businessman with good links to the Gulf, to name former Syrian premier Riad Hijab as prime minister at a meeting in Istanbul last month, the sources said.
Hijab, the highest-ranking defector from Assad since the beginning of the revolt, lacks good ties with the Brotherhood. But several liberals in the coalition also oppose him because was a long serving, ruling Baath Party operative.
"Hijab has said the right things and is an administrator. He is qualified but his history in the regime plays against him," a coalition member said.
Another name that circulated in the meeting on Friday is Asaad Mustafa, a former agricultural minister during the 30-year rule of Assad's late father.
Mustafa, who lives in exile in Kuwait, is seen as more acceptable to the Brotherhood than Hijab, and to other coalition members uneasy about Hijab's long association with the regime, the sources said.
The meeting of the Western, Arab and Turkish-backed coalition began on Thursday, ahead of a planned visit by Syrian Foreign Minister Walid al-Moualem to Moscow, one of Assad's last foreign allies.
One diplomat said that the coalition spent a long time debating a peace proposal that appeared to "be going nowhere" and it was time it got to the nitty gritty of governance, such as how to administer the newly pledged aid from Qatar and building an alternative administration.
Coalition president Moaz Alkhatib came under strong criticism from Islamist and liberal members alike for proposing talks with Assad's government without setting what they described as clear goals.
The coalition adopted a political document that demands Assad's removal and trial for the bloodshed, members said.
A coalition statement said any political solution must be based on "the removal of Bashar al-Assad and the heads of the military and security apparatus responsible for the decisions that led the country to this stage".
The statement said any future initiatives must emanate from the 12-member collective leadership of the coalition. (Reporting by Khaled Yacoub Oweis; Editing by Mark Heinrich and Stephen Powell)