Malaysian security forces have surrounded about 100 armed men believed to be from a breakaway rebel faction in the southern Philippines, Malaysian police and a government official said today, but a Philippine official said they were unarmed Filipinos who had been promised land.

The standoff in Sabah threatened to stir tension between the Southeast Asian neighbours whose ties have been periodically frayed by security and migration problems caused by a porous sea border.

"Our firepower is more than enough to arrest them but the government has chosen to negotiate with them so they leave peacefully to return to the south of the Philippines," Prime Minister Najib Abdul Razak, on a visit to Sabah ahead of national elections, was quoted as saying by state-run Bernama news agency.

According to AFP , Home Minister Hishammuddin Hussein said security forces were negotiating with the men.

"We know the situation is still under control. I confirm that no Malaysian citizens, to my knowledge, are being held hostage or for ransom," the minister told reporters.

"Security forces are still in control and negotiating with them, some of whom are armed."

He declined to confirm if the gunmen were from the adjacent southern Philippines.

However, when asked whether Philippine authorities were involved in negotiations, Hishammuddin said: "Of course they will have to be involved in the operations."

Malaysian police said in a statement the situation was under control, but did not say whether the men had agreed with a request to surrender.

A high-ranking Malaysian government source with direct knowledge of the situation told Reuters the gunmen were suspected to be from a faction unhappy with the Philippines' recent peace deal with the main Muslim rebel group.

Raul Hernandez, a spokesman for the Philippine Foreign Ministry, said his government was trying to get information about the incident and was in touch with Malaysian officials.

Invited by an opposition politician

A senior Philippine military official said navy boats and an aircraft had been sent to the border area.

He dismissed the Malaysian account of the group, saying they were unarmed Filipinos who had been promised land in Sabah.

He said a meeting over the land claim had attracted a large crowd and drawn the attention of Malaysian authorities.

"We know that these people arrived there five days ago and most of them are from nearby islands," said the official, who asked not to be identified.

"Some of them were already residents in Sabah for a long time and they normally cross the border without any problem."

According to Reuters , another Philippine military officer said the men were followers of the heirs of the Sultan of Sulu - an island group off the southern Philippines - who had been invited to Sabah by a Malaysian opposition politician to discuss land issues.

Malaysia pays a token amount to the Sultanate each year for the "rental" of Sabah state - an arrangement that stretches back to British colonial times.

The number of illegal Muslim immigrants from the impoverished southern Philippines has surged in recent decades, stirring social tension with indigenous Christian inhabitants in

Sabah.

The Philippine government signed a landmark peace deal with Muslim rebels late last year to end a 40-year conflict in the south, but some factions have voiced opposition.

In 2000, a group of militants from the southern Philippines kidnapped 21 tourists from the Sabah diving resort of Sipadan.

In 1985, 11 people were killed when gunmen believed to be from the southern Philippines entered Lahad Datu in Sabah, shooting at random before robbing a bank.

- Agencies

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