VIENTIANE - The Philippines is proposing a 14 percent increase in defense spending next year to buy new ships and aircraft to boost its fight against Islamist militants and enhance maritime security in the disputed South China Sea.

According to internal documents seen by Reuters on Monday, about P130 billion or 96 percent of the proposed defense budget, would go to the Armed Forces.

The push to beef up military spending reflects regional concern about China's maritime assertiveness and the new government's determination to crush the entrenched and lucrative network of the Islamic State-linked Abu Sayyaf rebels behind a spree of kidnappings.

Some P25 billion would go to a modernization program, the Department of National Defense said in the documents, including the acquisition of two surveillance planes and six close-air support planes to fight the Abu Sayyaf.

The rebels, who have their stronghold in two southern islands in the Muslim-majority south, are holding more than 20 hostages of five nationalities.

Abu Sayyaf has this year beheaded two Canadian hostages and President Rodrigo Duterte has ordered the military to "destroy" the group. The government believes it was behind Friday's bombing in Davao city that killed 14 people.

The government has proposed a P3.35 trillion national budget for next year, which the bicameral legislature is expected to approve before the end of the year.

A senior defense official told Reuters 2017 would be the second year in a row that the government is spending P25 billion for the modernization plan, which is slated to cost P82 billion over a five-year period.

The country is set to award contracts for two frigates for navy and three radar systems for the air force, which are designed to improve monitoring in the South China Sea.

Part of the funds will go to installments to pay for 12 Korean-made FA-50 jets, two of which arrived last year.