MANILA President Gloria Arroyo was optimistic Saturday that the release by communist guerrillas of an army officer held captive for 21 months should accelerate peace talks with the government, AFP reported.

However, just hours earlier two communist rebels were slain in a clash with the military.

"With the positive response of the NPA (New People's Army) and the participation of the NDF (National Democratic Front), we can all move forward to the next phase of the peace process," Arroyo told journalists, referring to the release Friday of Major Noel Buan.

The NDF, based in Utrecht, Netherlands, is the political leadership of the 11,500-strong NPA which has been waging a Maoist rebellion for over three decades.

Buan, a captive of the NPA for almost two years, was released to a government delegation as a gesture of the guerrilla's sincerity about upcoming peace talks.

"I am optimistic that this confidence-building measure will help pave the way for a successful negotiation," Arroyo said as she presented Buan to the press.

Rebel leaders on Friday said peace talks were scheduled to begin in Oslo, Norway on April 27 although Arroyo said that a formal venue had yet to be agreed.

She said her cabinet on Monday would discuss the possibility of extending a 30-day unilateral cease-fire with the NPA which took effect on March 12.

The cease-fire, covering 11 provinces, was declared to give the NPA an opportunity to safely release Buan following the death in a gunbattle last month of a policeman the communists were also holding.

Arroyo added that she was committed to "peace in our time" and that she had been in touch with communist insurgent Chief Jose Maria Sison in the past as part of the push for Buan's freedom.

Buan, who emerged ragged, long-haired and unshaven after months of captivity in the mountains, fronted the media Saturday clean-shaven, with a fresh haircut and wearing his formal military uniform.

He declined to comment until after a debriefing.

From his exile in Utrecht, Sison said that he hoped Buan's release would "enhance the favorable atmosphere" for the resumption of the peace talks which he insisted would be in Oslo.

He said in a statement that the officer's release proved that the communists deserved to be considered a "belligerent community under international law", entitling them to special diplomatic recognition.

The Philippine government has consistently refused to recognize such a status. Arroyo's deposed predecessor, Joseph Estrada, called off peace talks in 1999 amid a flurry of kidnaping by the rebels.

Despite Arroyo's optimism on the peace process, violence continued Friday.

Two NPA guerrillas were killed in Sorsogon Province, south of Manila, a local military spokesman said.

Troops were responding to a reported shooting incident in Castilla town when they encountered a group of NPA guerrillas, Colonel Pendatun Guro said.

After a brief gunbattle, the communists fled leaving two dead NPA fighters, three handguns and a two-way radio, the colonel said.

The clash took place outside the area covered by the government's cease-fire.