A Muslim doctor has denied that she paid about $400,000 (P20m) ransom to the Abu Sayyaf for the release of two teenaged hostages who were abducted from a resort in Palawan, southwestern Philippines.

Despite lack of confirmation, President Gloria Macapagal-Arroyo would be very happy if the report was true, a senior official said. "If that's true, we are happy because their ordeal would have finally ended. I am happy for that, for whatever reason they were rescued," said Presidential Spokesman Rigoberto Tiglao, adding, "There is no confirmation, but rumours are flying all over Zamboanga (about this release)."

The two hostages who were supposed to have been released were Lalaine Chua, 13, and Letty Jao, 16. The Abu Sayyaf abducted them including three American nationals and 15 other Filipinos from Dos Palmas Resort on May 27.

"The two belong to rich Chinese families. They could not withstand life in the mountains," said a source, adding that Kimberly Uy and Janice Go were who freed by their abductors on June 2, helped the Chua and Jao families to raise the ransom money.

The Philippine Daily Inquirer quoted an official who spoke on condition of anonymity, that physician Huda Lim received the $200,000 (P 10m) ransom from the families of Chua and Jao which allegedly gave $100,000 (P5m) each for the freedom of their children.

The report said Lim helped the release, after she went to the Abu Sayyaf's mobile camp in a town in Basilan for the payoff. But arrangement for the ransom payment was allegedly finalised in Zamboanga, the report added.

"If it happened, the hostages should have surfaced by now," said a source in Zamboanga, but added that released hostages were often ordered not to say anything to the press, following the president's order for a news blackout on the issue.

"Maybe the pursuit operation hampered the release," said the same source, adding, 'Some officials must have prevented the ransom payment because it would be used by the group to purchase new firearms."

Philippine National Red Cross (PNRC) administrator Vic Liozo clarified that if Lim negotiated with the group, it had nothing to do with the PNRC. "We did not send a doctor there (Abu Sayyaf hideout) to negotiate. If she did, she went there voluntarily," Liozo said, adding, "If it were true (that they were released), then that's good for the hostages."

"I was in Basilan the other day. I went there with a volunteer. We did not meet with any doctor to enter (the camp) and negotiate," Liozo said, adding "Negotiating with rebels is against Red Cross policy."

Denying her alleged participation in the ransom payment, Lim said, "I was surprised when journalists deluged me with calls, saying I was named as a negotiator. I have not spoken to any members of the families of the hostages."

"There is no truth to the report that the hostages are with me)," Lim said, adding she had no knowledge of any negotiation or efforts to reach the bandits. Lim could go in and out of the Abu Sayyaf den when she helped in medical missions of the Philippine Red Cross during a similar hostage crisis spawned by the Abu Sayyaf Group in Jolo last year.