Manila - The Philippines said Friday it was "impossible" for government forces to pull out from a large portion of a southern island where Muslim militants have been holding captive three Red Cross workers for more than two months.

Muslim Abu Sayyaf rebels have threatened to behead one of the hostages if the government did not reposition soldiers, policemen and militiamen away from their encampment in Indanan town on Jolo island, 1,000 kilometres south of Manila, by the end of the month.

The threat has prompted the International Committee of the Red Cross (ICRC) to urge the Philippine government consider the kidnappers' demands.

"We are extremely concerned about the fate of our colleagues," said Alain Aeschlimann, the committee's head of operations for East Asia, South-East Asia and the Pacific. "Their safety is of paramount importance."

"In the interest of our three staff, the ICRC asks the authorities to consider the kidnappers' demands regarding the position of troops," he added.

But Interior Secretary Ronaldo Puno warned of an escalation of crime and eruption of violence in many parts of Jolo if the government gives in to the "unreasonable" demands of the rebels.

"It is impossible to accede to the demands of the kidnappers now," he told a news conference. "We believe that the actions of the kidnappers are unreasonable, clearly cannot be accepted by the Philippine government or any government for that matter."

Abdusakur Tan, governor of Sulu province, which covers Jolo island, said the Abu Sayyaf demands would limit the movement and presence of government forces to just 4 per cent of the island.

"That would be tantamount to abandoning the interests of the people," he said. "It would be like there is no government in the area."

Tan said the government was open to discussing reasonable demands from the kidnappers but would not let the rebels "break loose" around the island, which could lead to hostilities spreading to other towns on Jolo.

The hostages - Swiss Andreas Notter, Italian Eugenio Vagni and Filipino Mary Jean Lacaba - were abducted on January 15 after visiting the Jolo provincial jail to oversee a water and sanitation project.

Last week, clashes erupted between the Abu Sayyaf and Marines circling the kidnappers, killing three government troops and six guerrillas.

Abu Sayyaf leader Albader Parad threatened to behead one of the hostages if the military continued its offensive or launched a rescue. He also promised to free one of the Red Cross workers if the troops moved away from their encampment.

While the military repositioned its forces, the rebels did not free a hostage and demanded for a larger pullout.

The new threat to behead was issued on Monday as the military refused to move further away and blocked food and supplies.

The Abu Sayyaf has been blamed for some of the worst terrorist attacks and high-profile kidnappings in the Philippines. In the past, the rebels have beheaded hostages, such as an American tourist in 2001, when the government refused to give in to their demands. (dpa)