"The cancellation of these exercises is a setback to our military modernisation programme, the interoperability of Philippine and US forces and the strategic alliance of both countries," said Arroyo's spokesman Ignacio Bunye.

Bunye said that Arroyo understood and respected the US decision, adding "we hope that the exercises can be put back on track as soon as possible".

The US cancelled its annual joint military exercises with the Philippines due to the continued detention of US Lance Corporal Daniel Smith following his conviction earlier this month for raping a Filipina.

The US embassy said on Friday that next year's annual "Balikatan" or "Joined-Arms" military exercises between Filipino and American troops will be cancelled due to concerns over the legal rights of US troops following the jailing of Smith.

The US embassy says that under the visiting forces agreement (VFA) between the two countries, Smith should remain in the embassy's custody until all appeals in his case have been exhausted.

However, the local judge who convicted Smith ordered him to be detained in a suburban Manila jail.

Bunye stressed that the Philippines remained committed to the VFA and that the Arroyo government had endorsed calls for Smith to be turned over to the US embassy.

However Anak Mindanao party-list Representative Mujiv Hataman said the decision of the US government to cancel the military exercises next year was an act of blackmail.

"They [United States] know that the Philippines is very dependent on them, as Philippines is weak in terms of countering insurgency and terror problems and they are using this weakness to blackmail our government," Hataman said.

"The US government should respect the judiciary system of our country; in a democratic country like ours that has been patterned after them [US], they should respect the maturity of the democracy here," he said.

Meanwhile, Senate Minority Leader Aquilino Pimentel Jr said yesterday that Philippines should explore the possibility of entering into security arrangements with countries other than the US to protect itself from external security threats.

Pimentel called it "unfortunate and a cause of dismay" that the unresolved issue was used by the US as a basis for the decision to scrap the exercises. If the exercises were cancelled by the US due to an absence of security threat, that would have been understandable, he said.

"Balikatan exercises arise from security needs. Maybe the US no longer sees the need for them. If the Philippines thinks otherwise, we should talk with other allies and explore the possibility of entering into less iniquitous pacts," Pimentel said.