Philippine troops rescue last hostages, kill 15 rebels - army

By Manuel Mogato

MANILA (Reuters) - Philippine forces said on Friday they had rescued the last civilians held by Muslim rebels on a southern island after nearly three weeks of fighting that has raised doubts about government efforts to end decades-old insurgencies.

Hundreds of members of a Muslim rebel faction, angered by a pact struck with the main Muslim rebel group, marched into Zamboanga City on Sept 9. They took hundreds of hostages and began battling the security forces.

The violence has sat uncomfortably with the new-found reputation of the Christian-majority country as an emerging market success and one of Asia's fastest-growing economies.

About 200 people, including 166 rebels, have been killed and more than 100,000 residents of the port city on the main southern island of Mindanao were displaced.

Fifteen members of the breakaway faction of the separatist Moro National liberation Front (MNLF) were killed in a Thursday night clash, an army spokesman said.

"We have secured the last six hostages," the spokesman, Lieutenant-Colonel Ramon Zagala, told a new conference in Zamboanga.

"We were told these were the last group of people held by the rebels. We now have accounted for 195 hostages."

About 300 of the gunmen had surrendered or been captured, Zagala said.

But the city is not fully secure.

There was sporadic gunfire on Friday and two powerful explosions were heard in areas where U.S.-trained commandos were doing house-to-house searches, Zagala said.

The violence could make investors think twice before venturing into the poor but resource-rich south, which has untapped deposits of oil, gas and minerals.

It has also raised questions about the government's ability to handle such challenges to its authority.

"I think the entire affair has been an embarrassment for the government: an armed band of thugs taking over parts of a major urban centre for nearly three weeks," Richard Jacobson of the security consultancy Pacific Strategies and Assessments (PS&A) told Reuters.

The Zamboanga fighting has also cast doubts on the government's efforts to bring an end to 40 years of Muslim rebellion that has killed 120,000 people, displaced 2 million and created a cycle of humanitarian crisis. About 750,000 people were displaced in 2008 by conflict in another part of Mindanao.

The MNLF leader behind this month's fighting signed a peace deal with the government in 1996.

Despite the pockets of lingering trouble in Zamboanga, Mayor Isabelle Climaco-Salazar said large parts of the city had returned to normal with most offices, banks, shops and schools open. The airport and port were also back to work.

(Editing by Robert Birsel)

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