Asked about an ultimatum by the Gaddafi International Association for Charitable Organizations, which set a deadline of Monday evening to end the mediation if there were no results, the minister told reporters, "we are trying to avoid any escalation that will put the lives of the hostages in danger."

He added, "the mediation ran into trouble mainly because of mistrust between the kidnapers and the government in the Philippines."

Officially the Libyan charitable association is the mediator seeking the release of 12 foreign hostages, including Germans, Finns, South Africans and French, still being held by Moslem rebels.

Later on Sunday, the association issued a statement in Tripoli saying that after requests from governments of countries whose nationals were still being held, it had decided to continue efforts to help.

"The organization refuses to negotiate to pay any ransom to the kidnappers and promises to continue its efforts to find an urgent solution to the crisis," the statement said.

Three Malaysian hostages walked free on Sunday, but prospects for the release of the Europeans and South Africans still in captivity dimmed after the rebels backed off from a deal fearing a subsequent military attack. Negotiators said talks in the four-month-old crisis had collapsed.

Asked about persistent media reports that the Libyans had paid $25 million to the kidnappers, Shalgam said, "We are of the opinion to give aid to the Muslims in the south of the Philippines but we don't believe in paying ransom because this is trade in the lives of people. We reject this completely."

Officials in Tripoli have insisted that the charitable association and not the Libyan government is negotiating the release, but diplomats say the organization draws political status from its chief, Seif al-Islam, a son of Libyan leader Muammar Gaddafi.

Seif al-Islam has traveled to Manila to try to help broker a deal between the Philippines authorities and the Abu Sayyaf rebels.

Abu Sayyaf has maintained links with Tripoli since its emergence in 1994.

The association's role has helped Libya extend its drive to end years of isolation since the 1988 Lockerbie aircraft bombing, for which two Libyans are standing trial in the Netherlands.

Continue

TRIPOLI, Libya (AFP) - The Kadhafi Charitable Foundation announced late Sunday it will continue mediating to free the hostages in the Philippines, despite its earlier threat to halt its efforts.

The foundation, headed by Libyan leader Moamer Kadhafi's son Seif, had warned Saturday that "if there is no positive and concrete development in the next 48 hours, it will pull out of negotiations."

But it issued a statement late Sunday saying it "decided to continue its efforts to help release the hostages."

The foundation said it made its decision after "governments of the hostages' countries contacted the association and appealed for it to continue its efforts to resolve the crisis."

They "considered that stopping the mediation would harm the negotiations under way," the statement said.

Aventajado

President Estrada has asked government chief negotiator Robert Aventajado yesterday to step up efforts to finally, albeit safely, put an end to the protracted hostage crisis perpetrated by the Muslim extremist Abu Sayyaf group.

Press Secretary Ricardo Puno said there is an outstanding directive by the President that Aventajado should finish once and for all the hostage negotiation without leaving anyone behind, including the three French journalists.

"Finish it as soon as possible," Puno said as he quoted President Estrada's verbatim order to Aventajado who is expected to resume negotiation talks with the Abu Sayyaf today.

However, Puno said the safety of the hostages remains the primordial concern of the Aventajado despite criticisms that the government has been taking much time to effect the release of the Abu Sayyaf's hostages.

Villagers

JOLO, Sulu (AFP) - Thousands of villagers have fled their homes on the Philippine island of Jolo, fearful of being caught in a showdown between the military and the growing ranks of guerrillas holding 28 hostages, village chief Asjada Abdu said yesterday.

At least 7,000 civilians had fled nine villages in the area of Bandang where the Abu Sayyaf rebels are holding their hostages, who include 12 Westerners, said Abdu, the village chief of central Talipao and head of the local pro-government private army.

"These villages are virtually a ghost town, in fact we have declared them a no-man's land. There are no more civilians in these areas but guerrillas," he said.

The number of Abu Sayyaf rebels, around 360 before the hostage crisis began four months ago, had swelled to 4,500 and was "increasing drastically" each day, he said, as ransom money from hostages already released was splashed out on new weapons, attracting new fighters.

Abu Sayyaf spokesman Abu Sabaya said on radio DXRZ in nearby Zamboanga City Monday: "We are not ready to release all of the hostages yet as we are preparing for a military offensive."