Canada and the Philippines signed a deal Saturday to help Manila buy military equipment to defend its territory, Canadian Prime Minister Stephen Harper and Filipino President Benigno Aquino said.

The Philippine defence department and state-run Canadian Commercial Corp. signed the agreement as Harper met Aquino at Malacanang Palace in Manila, the two leaders announced at a joint news conference.

The deal was inked amid a territorial dispute between the Philippines and China over islands and waters in the South China Sea.

"This memorandum of understanding will enable the Philippines to acquire the equipment and expertise it needs to fulfil the country's defence and security agenda," Harper said.

Under the deal, Filipino purchases of equipment and expertise from Canada's $12.6 billion (US$12.6 billion) defence industry are guaranteed by the Ottawa government, according to a Canadian government statement.

"This will help us in our efforts to build our defence and security capabilities," Aquino said, declining to elaborate.

"I cannot go into specifics lest they be observed by less friendly individuals," he added.

Faced with communist and Islamist insurgencies and an increasingly assertive China, Aquino noted that the military had just two transport aircraft, no fighter jets and just 132 mainly World War II-era ships.

"The fundamental issue is that we have a lot of outmoded equipment," he said.

The Canadian Commercial Corp. serves as a go-between between Canadian suppliers and foreign governments to transact defence and security contracts.

The Philippines has been in the market for patrol vessels to protect its waters, including areas that overlap with territory claimed by China.

Manila's military treaty ally the United States is set this year to deliver a second refurbished Hamilton-class cutter, previously used by the US Coast Guard, to the Philippine Navy.

Last month the Philippine Coast Guard announced it would buy five patrol boats from France for about 90 million euros ($116 million), partly to guard disputed areas in the South China Sea.

The Philippines and China began a stand-off in April over the Scarborough Shoal, a group of islets in the Sea which the Philippines says are well within its 200-nautical-mile exclusive economic zone.

China claims the shoal as well as nearly all of the South China Sea, even waters close to the coasts of neighbouring countries.