Peace talks between Moro Muslims and Philippine government was unlikely during the term of President Gloria Macapagal Arroyo, the senior MILF official said on Wednesday.
The government's proposal made when talks in Malaysia resumed last month, was "unacceptable", the negotiator for Moro Islamic Liberation Front (MILF), Mohagher Iqbal, said.
Iqbal dismissed the proposal as a resurrection of two previous offers under which "government would continue to rule the lives of the Muslims".
"What we want is a real state and sub-state relationship where we can have real governance and control over our lives," Iqbal said. "We don't want to be a mere token administrative arm for the region."
In Manila's proposal, the government offered to share power in areas such as tax collection and control of natural resources the MILF considers as its 'ancestral domain' on the southern island of Mindanao.
Filipino military launched an offensive in Moro region later since August, 2008, when Supreme Court cancelled an agreement, signed between the Philippine government and MILF.
After four decades of armed conflict between the Filipino state and the Moro Muslims, the two parties agreed to sign an agreement that would end battle. However, the supreme court of the Philippine declared the agreement "illegal" on August 4, which caused the conflict to resume.
The displaced families are staying in tents pitched on marshlands.
Meanwhile, Executive Secretary Eduardo Ermita said a peace agreement with MILF could not be attained before Arroyo leaves office in June since the rebels were standing pat on their demand for a federal state.
In January, peace negotiations between the two sides resumed but a new round of meetings scheduled this week was shelved after Arroyo avoided the greater autonomy demand of Muslims and an expansion of the current Muslim autonomous region.
He said that MILF and government negotiators were trying to break the deadlock, but he said any deal before Arroyo ended her term as president on June 30 was unlikely.
Government chief negotiator Rafael Seguis urged the MILF to continue the negotiations under the auspices of the Malaysian government.
"We have to agree on how to move forward," he said. "We have to sit down and talk. We need to clarify and discuss the modalities."
The Moros formally acknowledged themselves as "Moro", which is a separate nationality from Filipinos, in a petition addressed to the United States President and Congress on February 1, 1924.
The biggest new internal displacement of people last year was in Muslim region in Philippine, where 600,000 fled fighting with government and MILF in Muslim region, a United Nations-backed report said.