Arroyo vows a stable Philippines within 3 years

MANILA, July 3 (Reuters) President Gloria Macapagal Arroyo promised today a more stable and secure Philippines before she steps down in 2010, modernising an ill-equipped military to end decades of communist and Muslim insurgencies.

Arroyo also vowed to forge a long-delayed peace deal with Muslim separatists to end nearly 40 years of rebellion on its resource-rich southern island.

''In the next three years, we will deal a strategic defeat in the insurgency and modernise the military in its twin roles of defence and development,'' Arroyo said, adding about 17 billion pesos (370 million dollars) were available to acquire new equipment.

She was speaking on the 60th anniversary of the Philippine Air Force at an airbase in Manila.

Arroyo said the bulk of the funds would be used to buy new helicopters to help troops track members of the Maoist New People's Army (NPA) as well as the Abu Sayyaf, a Muslim terrorist group notorious for bombings, kidnappings and beheadings.

For decades, the largely Catholic Philippines has been battling communist and Muslim rebels. More than 160,000 people have been killed, millions displaced, and investment and development stunted.

While Manila, backed by US support, has successfully weakened the Abu Sayyaf, the NPA remains a major threat and Arroyo ordered an all-out war against the communists in 2006.

A peace agreement with the Moro Islamic Liberation Front (MILF), the largest of the country's four Muslim rebel groups, also remains elusive despite nearly a decade of talks.

Disagreement over the size and wealth of a proposed homeland for 3 million Muslims in the south has stalled formal discussions since September 2006 but talks are set to resume this year after Manila appointed a new chief negotiator.

Arroyo, who is also the commander-in-chief, has rewarded the 120,000-member armed forces, raising soldiers' hazard pay by 100 per cent, from 120 pesos to 240 pesos a day.

She said a new anti-terrorism law, which will take effect on July 15, would help Manila ''crush the terrorist movement in the country''.

Arroyo reiterated her commitment to human rights but did not mention possible prosecutions for soldiers found guilty of murdering left wing activists.

A UN report in February said the military was likely responsible for hundreds of extrajudicial killings and this week, the European Union called on Arroyo to punish those involved.

The army has said it is investigating 94 cases of suspected unlawful executions but no one has been prosecuted. Human rights groups accuse the military of conducting a ''dirty war'' against the left. The military has denied the allegation.

REUTERS GT ND1642