Peace talks between the Philippine government and Muslim rebels may restart as soon as next week, an official from the war-torn island of Mindanao said, but the guerrillas insisted on Thursday that troops must pull back first.

Ending the 31-year separatist conflict that has killed at least 120,000 people would go far in burnishing the image of the Philippines in the eyes of foreign investors and companies seeking to tap Mindanao's agricultural and mineral wealth.

Malaysia has again offered to act as host and broker of the talks between Manila and the Moro Islamic Liberation Front (MILF), the largest Muslim rebel group in the overwhelmingly Roman Catholic nation, that have been stalled since late 2001. A cease-fire is holding on Mindanao but Kuala Lumpur has yet to issue the formal invitation. Philippine government officials had said the talks were expected to restart in mid-August.

"We should get the letter by next week," Mahid Mutilan, vice governor of the Autonomous Region of Muslim Mindanao, was quoted as saying by the Philippine Daily Inquirer newspaper.

Neither of the two government officials most involved in the peace process, negotiator Eduardo Ermita and presidential adviser for Mindanao Jesus Dureza, could be reached for comment.

Eid Kabalu, the spokesman for the 12,500-strong MILF, said the group had not received any timetable for the talks but that several issues -- including the pullout of troops who overran a key rebel stronghold in February -- had yet to be resolved.

"What is lacking is a presence of the third-party (cease-fire) observer team led by the Malaysian representatives, but I believe this is underway," he told Reuters by telephone.

"Until and unless the realignment or repositioning of troops has been fully complied with, as agreed upon by the parties, the schedule will take time."

President Gloria Macapagal Arroyo said in early August she hoped a peace pact could be signed in time for a visit by President Bush in October.

But there is no certainty the talks will bear fruit this time when previous attempts have failed.

Two weeks ago, Kabalu said it would be "next to impossible" to meet Arroyo's goal if the government insisted that the rebels must disarm as part of a settlement.

The delay in restarting the negotiations was at least partly due to Malaysian authorities wanting to allow time for new MILF chairman Al Haj Murad to consolidate his position, government negotiator Ermita told Reuters on August 8.

Murad, the MILF's military chief, took over as leader after long-time chairman Hashim Salamat, an elderly Islamic preacher, died of a heart attack on July 13.

Murad, a civil engineer by training and a Muslim militant since the 1960s, is seen as more of a moderate than Salamat.

"It's smooth sailing," Kabalu said. "The leadership is committed to pursue and continue what has been started by the previous leadership."

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