MANILAMANILA (Reuters) - A predominantly Muslim area of the southern Philippines has returned a resounding "Yes" in this week's referendum on greater autonomy, boosting hopes for peace in one of Asia's most conflict-torn regions.

The plan to create a self-administered area for the Muslim-dominated parts of Mindanao was backed by 85 percent of voters, the election commission said late on Friday, paving the way for a three-year transition toward elections for a legislature that will choose an executive.

Monday's referendum was the culmination of a tumultuous peace process between separatists and successive governments that aimed to settle decades of conflict, which have hampered development and kept these parts of Mindanao among Asia's poorest regions.

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The instability and high rates of unemployed, unschooled youth made the areas fertile recruitment ground for bandits and Islamist extremists, who exploited grievances about neglect and stoked narratives of government duplicity in the peace process.

The endorsement by some 1.74 million voters comes as no surprise, and the new region to be called Bangsamoro (nation of Moros) will have greater powers to generate and invest more money in infrastructure, schools, healthcare and social welfare for its estimated 5 million inhabitants.

A ballot will now be held on Feb. 6 to ask several other areas if they want to join.

The central government will oversee defense, security, and foreign and monetary policy, and soon appoint a transition authority nominated by the Moro Islamic Liberation Front (MILF).

(GRAPHIC: Philippine referendum on Muslim autonomous region - tmsnrt.rs/2Hk3s7L)

Vice President Leni Robredo said it was vital the central government helps Bangsamoro to build "a progressive economy and responsible local government".

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"Let us guard and support the progress of this process because this is not yet the end of the fight for peace," Robredo said.

The vote came at a critical time for the Philippines, which saw disillusioned MILF factions break away and follow other armed groups in pledging allegiance to Islamic State.

That has stoked fears that fighters fleeing Iraq and Syria would join radicals from Malaysia and Indonesia in gravitating to Mindanao to capitalize on porous borders, jungles and mountains, and an abundance of arms.

Martial law has been in place in Mindanao since an extremist alliance overran Marawi City in 2017 and occupied it for five months, in what was the Philippines' fiercest and longest conflict since World War Two.

The army said three remnants of that alliance were killed on Thursday when troops discovered a makeshift jungle camp. It released images of trenches and what it said was Islamic State paraphernalia.

Mohagher Iqbal, the MILF's top peace negotiator, said on TV on Thursday that he hoped radical splinters of the separatist group, like those of the Bangsamoro Islamic Freedom Fighters (BIFF), would recognize the will of the people for peace.

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"One of the BIFF leaders has already reached out," he said, without elaborating.