CEBU - At least 17 people died while nearly 600 others were rescued after a ferry collided with a cargo ship in the Philippines on Friday, authorities said.

The Thomas Aquinas ferry, which was believed to be carrying about 700 passengers, sank quickly after colliding with a freighter near the port of Cebu, the country's second biggest city, coastguard spokesman Commander Armando Balilo said.

A rescue mission involving coastguard, navy and local boats was launched immediately after the collision, which occurred about 9:00 pm (1300 GMT) around two kilometres (1.2 miles) from shore.

"The Aquinas has sunk and we have sent a navy patrol gunboat to join the coastguard in the search and rescue effort," navy spokesman Lieutenant Commander Gregory Fabic told AFP.

Within about three hours of the accident, rescuers had saved 573 people but 17 people were confirmed killed, Joy Villages, an official at the coastguard's public affairs office headquarters in Manila, told AFP.

"Those rescued are with the coastguard and with other vessels who helped in the effort."

However she said it was still unclear how many people were missing.

There were 692 people on board, according to the manifest, but ferries in the Philippines are often overcrowded.

"We are still checking the manifest as to how many exactly are aboard," Villages said.

Rachel Capuno, a security officer for the ferry's owners, told Cebu radio station DYSS that the ship was sailing into port when it collided head-on with the cargo ship.

"The impact was very strong," she said, adding that the ferry sank within 30 minutes of the collision.

Cebu coastguard commander Weniel Azcuna told reporters the accident occurred about two kilometres from the Cebu port.

He said the cargo ship, Sulpicio Express 7, had 36 crew members on board, but it did not sink.

Ferries are one of the main modes of transport across the archipelago of more than 7,100 islands, particularly for the millions of people too poor to fly.

But sea accidents are common, with poor safety standards, lax enforcement and overloading typically to blame.

The world's deadliest peacetime maritime disaster occurred near the capital, Manila, in 1987 when a ferry laden with Christmas holidaymakers collided with a small oil tanker, killing more than 4,300 people.

In 2008, a huge ferry capsized during a typhoon off the central island of Sibuyan, leaving almost 800 dead.