By Manny Mogato

MANILA, Dec 4 (Reuters) - The Philippines and the country's largest Muslim separatist group are preparing to sign off on a peace deal after years of tortuous negotiations, but that may be the easy part.

Implementing an agreement to end a conflict that has killed more than 120,000 people, displaced 2 million and stunted growth in the resource-rich southern island of Mindanao will be much more difficult, both sides say.

After decades of rebellion, the government and the Moro Islamic Liberation Front (MILF) agreed a ceasefire in 2003, that has by and large held despite occasional flare-ups of violence.

They have negotiated alongside for setting up an ancestral homeland for 3 million Muslims that will have a large amount of autonomy but not independence.

Even the rebels say signing the deal is only a step forward.

"The problem is not as easy as some people would like to see it," Mohaqher Iqbal, the MILF's chief negotiator, told Reuters in a recent interview at a rebel camp in Mindanao.

"There are still a lot of humps and bumps in the road to peace. Granting that the two parties would be able to sign an agreement next year, there's still a very big problem on how to implement that deal."

The Philippines has claimed an end to the rebellion on the southern third of the archipelago once before -- in 1996, when it signed a peace deal with the Moro National Liberation Front (MNLF), the group from which the MILF was born.

A decade later, the head of the MNLF is in jail and the group is bitterly criticising the government for not keeping to its promises. Many MNLF members have taken up the gun again.

Iqbal criticised MNLF leaders for getting co-opted by the government, saying they weakened the struggle for self-determination by accepting official positions.

"We are not applying for any job in the government," he said. "We want to be masters of ourselves. We want to swim or drown among ourselves. We want self-governance whether it's a sub-state or a state within the Philippines."

'FROM CAMELS TO CADILLACS'

A large part of the problem is the relative weakness of President Gloria Macapagal Arroyo -- she is deeply unpopular although she has survived three impeachment efforts in each of the last three years. She is in power until 2010.

Iqbal said the government has at least three legal mechanisms to implement an agreement with the MILF -- amend the constitution to accommodate a new political set up in the south, implement a treaty or ask Congress to pass a joint resolution.

"All three options are near to impossible for the present president because of the current political situation," he said.

"We feel Arroyo would really have a hard time convincing lawmakers to approve the peace accord. She needs to display a lot of political will otherwise it would be a useless agreement."

The government is hopeful a deal could be sealed late next year although it acknowledged the next phase would be tough.

"These are not easy issues," said Jesus Dureza, presidential adviser on the peace process. "In negotiations, we always do it with our best efforts. These are difficult issues but these are not insurmountable. We're still very optimistic."

Many political analysts share the MILF's concern on whether a deal could be effectively implemented, citing the talks have yet to tackle the most difficult issues, such as a political package and disarming of the fighters.

"The two sides can sign an interim agreement on ancestral domain, but I doubt if a final deal could be reached in 2008," Benedicto Bacani, executive director of the Institute for Autonomy and Government, told Reuters.

"These talks could go beyond the term of President Arroyo. The MILF would not just accept any deal with a government that it knows would not be able to deliver on its political promises."

Moner Bajunaid, a Muslim professor who once headed the MILF peace panel, said the rebels could not be rushed into a deal unless it substantially addressed the root of the conflict.

"Past agreements were half-baked," Bajunaid said. "It was so sudden. It was rushed and Muslims were not ready for the shift. It was like changing from camels to cadillacs." (Reporting by Manny Mogato, editing by Raju Gopalakrishnan and Sanjeev Miglani)

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