The Philippine government and Muslim rebels on Sunday signed a crucial power sharing accord, paving the way for a final peace agreement aimed at ending a decades-long insurgency that has killed tens of thousands.

The power sharing annex had been considered highly contentious, with Moro Islamic Liberation Front (MILF) rebels seeking greater authority over a proposed autonomous region in the south which will cover Muslim-dominated regions of this mainly-Catholic archipelago of 100 million.

The accord, signed by negotiators from the government and MILF representatives in Kuala Lumpur, is yet another step towards finally ending the bloody insurgency in the southern Philippines.

A joint statement said both sides had signed "the agreement on the delineation and sharing of power between the central government and the Bangsamoro (Filipino Muslim) Government" within the projected autonomous area.

The statement added that both parties were now "confident" that they could soon sign the last remaining annex on normalisation and complete the comprehensive peace agreement by January 2014.

"The signing of the Annex on Power Sharing ensures the achievement of a genuine and viable autonomy for the Bangsamoro," Teresita Deles, the head of the government peace panel, said in a statement.

"It has been a very difficult round but we were able to overcome a lot of obstacles."

President Benigno Aquino congratulated both parties on the annex, his spokesman Herminio Coloma said.

Copies of the agreement, released late Sunday, outline the powers that will be reserved by the national government, those that will held by the government of the autonomous area and those that will be shared by both.

The accord also sets the parameters of the "Bangsamoro assembly" that will govern the autonomous area while ensuring that tribal groups, Christian settlers and women are represented.

While foreign policy, defence, monetary policy, immigration and global trade will remain under the control of national government, the Bangsamoro government will have powers over agriculture, employment, urban development, public works and environmental protection, the agreement said.

In an interview with ABS-CBN television, Deles described the move to power-sharing as "the heart of the entire peace accord."

The two sides in October last year had signed an initial pact on ending the conflict that has claimed an estimated 150,000 lives, in preparation for a final agreement.

Under the plan, the 12,000-strong MILF would give up its quest for an independent homeland in the southern island of Mindanao in return for significant power and wealth-sharing in a new autonomous region there.

Lingering obstacles

The newly-signed power sharing annex had been one of four preliminary accords that had to be completed before a final peace deal could be signed.

Two other annexes on transitional arrangements and sharing of revenues had already been signed earlier this year while a fourth annex, on normalisation, including the possible disarming of MILF guerrillas, is still being discussed.

The normalisation annex may also prove difficult as the rebels will likely be reluctant to lay down their arms.

MILF negotiator Mohagher Iqbal was quoted by ABS-CBN as saying that the next round of talks would also be difficult and that both sides should not be complacent.

Even after the treaty is signed, the Philippine parliament would still need to pass a "basic law" for the Muslim self-rule area, and people in the planned autonomous region would need to ratify it via a regional plebiscite.

However President Aquino in October had expressed confidence that the insurgency could be settled before he steps down in 2016.

Completing the agreement during Aquino's term is considered vital as there is no guarantee his successor would have the political strength or enthusiasm to push ahead with the peace process.

Muslim rebels have been fighting since the 1970s for an autonomous or independent homeland in the southern Philippines in a conflict that has left the resource-rich region mired in poverty and instability.

Other Muslim armed groups have violently opposed the MILF's moves towards peace.

Followers of Nur Misuari, founder of the older Moro National Liberation Front (MNLF), from which the MILF sprang, besieged the southern Philippine city of Zamboanga in September, sparking three weeks of fighting which left over 200 people dead.

Misuari allegedly ordered the assault, fearing a peace accord with the MILF would leave him sidelined.

The Bangsamoro Islamic Freedom Fighters, a guerilla group that splintered from the MILF, has also tried to derail the peace process, launching bloody attacks against government forces in the south.