MANILA - Philippine President Gloria Arroyo and Prime Minister Dr Mahathir Mohamad have agreed to take steps to stem the influx of hundreds of thousands of Filipino economic migrants to Sabah, the Philippines presidential palace said Wednesday.

A palace statement said the two leaders agreed during talks in Kuala Lumpur on Tuesday to set in place a mechanism that would allow the two countries to jointly develop Mindanao, the rebellion-torn southern third of the Philippine archipelago that is home to more than three million Muslims.

Arroyo said the plan would involve peace and development in Mindanao. "I think it's a better solution rather than just always asking for an extension of the amnesty on undocumented aliens."

She noted that the lack of security and jobs forces many of Mindanao's 18 million residents to relocate to other places, including Sabah.

Without development, "every time (Sabah authorities) send Filipinos home, they always come back (to Malaysia)," she added.

Up to half a million Filipinos live in Sabah, many of them having entered illegally to work in the resources-rich territory. Malaysia has deported thousands of Filipinos in recent months.