By Erik de Castro
ZAMBOANGA CITY, Philippines (Reuters) - Rogue Muslim rebels seeking to declare an independent state put a dozen civilians tied together by rope on display as a human shield on Wednesday as a standoff with security forces in a southern Philippine city entered its third day.
Waving white flags, the hostages shouted "please don't shoot" at soldiers as rebel snipers perched on roof of a residential block fired at the troops about 500 meters away in the Santa Barbara district of Zamboanga, a key port on the southern island of Mindanao.
In another part of the city, three wounded rebels were arrested after exchanging gunfire with police manning a road block to stop the rebels, a breakaway faction of the Moro National Liberation Front (MNLF), from occupying other districts of the city.
Four decades of conflict in the south have killed 120,000 people, displaced two million and stunted growth in the poor but resource-rich area of the mainly Roman Catholic country.
Last year, another separatist group, the Moro Islamic Liberation Front, signed a deal with the government, agreeing to a new autonomous region that gave it more political control.
That agreement, which spurred hopes of an economic revival, was opposed by the MNLF faction involved in the current standoff. It signed a deal with government in 1996, but complained Manila did not fulfill its side of the bargain.
"Our troops are only returning fire. We are not launching an offensive," army spokesman Lieutenant-Colonel Ramon Zagala said. "Our mission is to contain them not to rescue hostages."
The standoff has paralyzed the port with as many as 170 civilians believed to be trapped, if not physically held hostage.
Schools, shops, offices were closed for the third day. Flights and ferry services were also suspended. Around 12,000 people have been displaced in five districts of the port, known as the city of flowers.
Zamboanga is the main commercial, educational and government centre of the south. It is also a gateway for goods like sardines and a major oil depot.
Isabelle Climaco-Salazar appealed to rebels to free the hostages and discuss their grievances with Manila, suggesting a third-party mediator intervene.
"This is no longer a local problem, this is an international problem," she said in a television interview.
(Additional reporting by Manuel Mogato in MANILA; Editing by Nick Macfie)