MANILA (AFP) - In her first overseas foray since taking office in January, Philippine President Gloria Arroyo will visit Malaysia this week as the two neighbours try to end a long and bloody Filipino Muslim rebellion.

Predominantly-Muslim Malaysia is currently hosting talks between Manila and the largest Philippine separatist Muslim group. There are expectations of a peace pact being clinched during Arroyo's trip.

Malaysia once provided arms and sanctuary to rebels fighting for a separate Muslim state in the southern third of the predominantly-Christian Philippine archipelago.

Kuala Lumpur's tacit support for the armed rebellion stemmed from Manila's historical claim over Malaysia's Sabah state, revived by Arroyo's father the late President Diosdado Macapagal in 1963.

Analysts said Arroyo and Malaysian Prime Minister Mahathir Mohamad would sidestep "prickly issues" and focus on ending decades of fighting in the southern Philippines so that they could speed up development of border areas for mutual benefit.

"President Arroyo's visit is significant to improve relations with Malaysia as it highlights positive elements of the bilateral ties rather than the more difficult aspects," Carolina Hernandez, political science professor at the University of the Philippines, told AFP .

Difficult issues

"Difficult issues like the Sabah dispute, Malaysia's alleged past involvement in the Muslim rebellion as well as overlapping claims over several islets in the South China Sea will be put on the back burner," Hernandez said.

But she added, "this is a good strategy" by Arroyo, who wants Malaysia to mediate and end Manila's costly war with the Muslim rebels to pave the way for investments to revive the Philippine economy.

The Philippines is being shunned by many foreign investors concerned over a spate of kidnappings, mostly in the southern Philippines.

A smaller Muslim rebel group, the Abu Sayyaf, has been responsible for the kidnappings of several foreigners over the last year and Arroyo hopes to pin them down once peace is forged with the MILF.

Arroyo had been pushing for a lead role by Malaysia in bringing about peace in the war-wrecked Mindanao region way back when she was vice president in her predecessor President Joseph Estrada's government.

Estrada, who was not on good terms with Mahathir and who pursued an all-out war against the MILF, was toppled by Arroyo in a popular military-backed uprising in January.

Arroyo said she chose Malaysia as her first overseas destination to "thank Prime Minister Mahathir for helping us attain lasting peace in Mindanao."

Close neighbour

Malaysia's envoy in Manila Arshad Hussain said if a peace agreement emerged Arroyo's two-day trip from Tuesday, "it will add meaning to the visit not just in the context of Malaysia-Philippine relations but in the context of bringing peace and stability in the Philippines itself.

"Malaysia as a close neighbour will leave no stone unturned to bring about peace and stability in the southern Philippines," he told AFP .

Arshad said officials were preparing for the inking of memoranda of understanding in information technology, tourism and health during Arroyo's state visit, the first by a Philippine leader since 1993.

Trade between the Philippines and Malaysia last year was more than 2.4 billion dollars. Malaysia is the Philippines' eighth largest trading partner.

The balance has been in the Philippines' favour since 1998, when Malaysia began importing more of semiconductor and electronic components which are key inputs for its manufactures.

Arroyo said she would discuss with Mahathir efforts to revive the so-called East Asian Growth Area covering the southern Philippines, eastern Malaysia, Brunei and northern Indonesia.

She is also scheduled to hold talks with top potential investors and meet the thousands of largely semi-skilled Filipinos working in Malaysia.