Muslim separatists waging a decades-old armed campaign in the southern Philippines today said they are ready to resume stalled peace talks with Manila early next year.

The two sides held fresh consultations in Malaysia and agreed in principle to resume formal negotiations, chief Moro Islamic Liberation Front (MILF) negotiator Mohager Iqbal said.

Malaysia hosted the talks that ran into difficulties over the past few months.

They had stalled over which areas the Muslims, who make up a large minority in the south of the mainly Roman Catholic nation, could claim as their "ancestral domain".

The concept would entitle them to a share of the proceeds from the economic use of the land.

"We are always optimistic and we agreed to resume the peace talks early next year in Kuala Lumpur. We may discuss the issue on ancestral domain," Iqbal told reporters.

Negotiations stalled in September due to the MILF demand that 1,000 parcels of land on the southern island of Mindanao and the Sulu archipelago be set aside as "ancestral domain" under special control of the minority Muslims.

Manila has said it can only give 600 parcels and that such a move would be subject to congressional approval.

The 12,000-strong MILF has been waging a 28-year separatist rebellion in the southern third of the Philippines. More than 50,000 people have been killed in the conflict.

Arroyo opened negotiations with the group in 2001 and two years later signed a ceasefire in exchange for the MILF publicly disowning links with extremist groups like the Al-Qaeda-linked Jemaah Islamiah network.