MANILA, Philippines?Malacañang said Tuesday it was not losing hope that the full automation of the 2010 elections would still push through despite what it called an "internal? squabble between Smartmatic Inc. and its local partner, Total Information Management Corp.

?We remain optimistic,? said Press Secretary Cerge Remonde. ?Habang may buhay, may pag-asa (As long as there is life, there is hope).?

President Gloria Macapagal-Arroyo had expressed full support for the law on the automation of Philippine elections and the earmarking of funds for the purpose.

But the project, aimed at eliminating or at least minimizing fraud, which was rampant in manual counting and canvassing of votes, appeared to be in jeopardy when TIM suddenly withdrew from its partnership with Smartmatic, on Monday, days before the signing of the final contract between the partners and the Commission on Elections.

TIM officials met with Comelec commissioners to explain their withdrawal but would not release details to the media in compliance with a gag order from Comelec chairman Jose Melo.

TIM earlier said in the statement they withdrew because Smarmatic wanted much of the control and power in the partnership, leaving TIM with little say in the 2010 operations.