Manila — Philippine President Benigno Aquino Monday hailed a power sharing deal with Muslim rebels, saying a final accord to end the decades-long rebellion was within reach but warned that "contentious" issues remained.

The crucial power sharing annex signed in Kuala Lumpur on Sunday 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 the mainly-Catholic archipelago.

But Aquino cautioned that the next round of negotiations could be even more difficult as it involves convincing MILF's 12,000 fighters to hand over their weapons and return to mainstream society.

"This is not going to be simple because here we would have to demonstrate our full trust in each other," Aquino told reporters.

"When we talk of normalisation, this will mean their return to the folds of the law, and one aspect is the safeguarding of their arms."

Persuading the rebels to give up their weapons will be a "heavy and contentious" issue, he added.

But Aquino said he was optimistic that Sunday's agreement would accelerate the peace process.

The MILF has waged a rebellion since the 1970s, and the insurgency has left some 150,000 people dead and parts of the southern Philippines mired in deep poverty and instability.

Apart from the MILF, many other armed groups operate in the south, including former rebels who had resorted to banditry and terrorism.

Sunday's 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 were signed earlier this year.

The fourth and last annex on normalisation will include disarming of MILF guerrillas.

Aquino has promised to end the insurgency by the end of his six-year term in 2016, but other armed groups have violently opposed the talks.

In September, 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, sparking three weeks of fighting which left over 200 people dead.