Zamboanga City, Philippines  - The Philippines succumbed on Saturday to the demand of Muslim militants holding captive three International Committee of the Red Cross (ICRC) personnel and agreed to pull out troops near the area where hostages were being held.

The Abu Sayyaf rebels have given the government until the end of the month to pull out troops surrounding the redoubt in Indanan town on Jolo island, 1,000 kilometres south of Manila, or said they would behead one of the hostages.

Interior Secretary Ronaldo Puno admitted that pulling back the troops was a "difficult decision" and not all members of the committee handling the hostage crisis agreed to it.

"We are giving them a breathing space where they [the Abu Sayyaf rebels] feel safe to negotiate," he said at a press briefing in the southern city of Zamboanga, 875 kilometres south of Manila.

"I think we are more than bending over backwards in order that the kidnappers will not feel threatened," Puno added.

Puno said the withdrawal of the troops would start immediately.

Governor Abdusakur Tan, head of the committee handling the hostage crisis, admitted he was not amenable to the pullout but said the move was necessary to ensure the continued safety of the hostages.

"For the sake of ICRC safety, we have to give in," he said.

Earlier on Friday, Puno said the government was firm in its decision not to pull out troops from the area.

He warned that such a move could lead to 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.

Later on Friday, ICRC president Jakob Kellenberger made a rare appeal to the Philippine government to consider the demands of the abductors regarding the repositioning of troops.

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

Last week, clashes erupted between the Abu Sayyaf and marines encircling 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 a larger pullout.

The new threat to behead a captive was issued 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)