Swedish aid personnel are finishing construction of a lumber mill that is a rarity in the world of international assistance--the $46 million project is being completed under armed guard.

Working in the midst of a war zone in this central Mozambique village, 50 Swedish engineers and technicians have been forced to live a drastically circumscribed life. Most of them live in a camp guarded by hundreds of Mozambican soldiers.

The sawmill and adjoining particle board factory, the largest in Mozambique, are surrounded by two five-strand barbed-wire fences plus an eight-foot-high cyclone fence topped by barbed wire. To increase security further, the Mozambican Army proposed laying mines between the fences but the Swedes demurred, fearing an accident.

Foreign personnel are only allowed to travel by road to the Zimbabwean border, 30 miles to the west, or to Chimoio, the provincial capital 20 miles eastward, and then only with a military escort.

Any other travel must be by air, which prevents visits to the forestry sites that will feed the mill.

There are good reasons for the restrictions. Manica Province, where the project is located, has been one of the hottest areas of the hidden war being waged by South African-backed insurgents against the Mozambican government.

Work on the project was suspended for three months last year and all foreign personnel were moved to Zimbabwe temporarily after a Portuguese and a Mozambican working on the sawmill were killed in a highway ambush by the Mozambique National Resistance (MNR) last May.

Work was resumed on the Forestry Industry of Manica project (known by its acronym Ifloma) in August after the security arrangements were established and a Swedish major was brought in for liaison with the Mozambican Army.

The MNR raids, however, are having a long-term impact on Mozambique's plans to exploit its forest resources. That is just one example of how the hidden war is hampering economic development of this large but poor southern African country.

The Swedish International Development Agency agreed to finish the first phase of the project, its largest aid venture in Mozambique, under the tight security measures, but it has refused to participate in future stages involving technical assistance and construction of a furniture factory, prefabricated housing plant and paper mill.

Without about 15 Swedish technicians the particle board factory, a major part of the construction project that is being completed, will not be able to open. Mozambique is seeking aid elsewhere, but at best alternate assistance will mean a delay of a year or more in opening the particle board plant and most likely greater cost because of less favorable financial terms, according to Luis Astorga, deputy director of Ifloma.

There is also the distinct possibility that no country or international organization will be willing to provide personnel to work at the mill as long as the war continues.

"I'm disappointed that after two years of work, a substantial part of the industry will not start as scheduled," said Torsten Bergstrom, the Swedish supervisor of construction.

My drive to the project with Mozambique government personnel was uneventful. We had no military escort and went through nine cursory roadblocks.

One day before our visit, however, 15 civilians and three militiamen were killed in a rebel ambush on four vehicles less than 20 miles from the lumber mill. Five days later 13 civilians were killed when their bus was ambushed on the highway to the Zimbabwean border.

Dr. Elias Walle, director of Chimoio Hospital, said 10 travelers were shot or stabbed to death and three others were burned alive when the MNR insurgents set fire to the bus.

Noting the continuing violence, a Mozambican praised the potential of the Ifloma project, but added dejectedly, "How can they get the lumber out?"

Some other major international projects have been delayed or stopped because of MNR activity, including Swedish coal and iron-ore prospecting in Tete Province and a French-Italian scheme to help electrify the northern provinces by using power from the giant Cabora Bassa Dam, the largest dam in black Africa. Work stopped on that project when two French engineers were kidnaped, but they were later released in Malawi and work resumed.

The MNR has disrupted daily life and the economy in the port of Beira where electricity is often cut off, sometimes for weeks, because of sabotage of power lines in remote areas that are impossible to defend.

In the central provinces of Manica, Sofala and Inhambane, about half the stores in the rural areas have been burned down by the MNR, according to Aranda da Silva, the minister of internal commerce.

Evaluating the economic prospects for Mozambique, a Swedish aid official said, "They have a lot of plans that cannot be pursued for the time being. Peace would make all the difference."