MANILA, Jan 11 (Reuters) - The Philippines and China have agreed to set up a common fishing area in the disputed South China Sea, the head of the Philippine House of Representatives said on Friday, hoping it would reduce tension in the area.

House Speaker Jose de Venecia Jr said the two countries could expand the fisheries agreement by asking other Southeast Asian states, particularly Vietnam, to take part in the cooperative fishing activities.

"This will turn an area of potential conflict into a zone of peace and development," de Venecia said in a statement, a day after he met Chinese Premier Wen Jiabao in Beijing.

In the late 1990s, a Philippine Navy warship opened fire on three Chinese fishing boats near Scarborough Shoal in the South China Sea, accusing Chinese fishermen of poaching in its territorial waters.

Vietnamese troops stationed on one of the contested islands in the Spratlys had also opened fire on a Philippine fishing boat when it tried to seek shelter during a typhoon.

De Venecia said the creation of common fishing areas in the disputed waters of the South China Sea would help lessen tension in these disputed areas, preventing undue arrests of fishermen from China and Southeast Asian states.

Poaching and illegal fishing have been a traditional irritant among the six claimant states in the South China Sea.

De Venecia said the fisheries deal could also boost existing cooperation among China, the Philippines and Vietnam to conduct scientific research and studies to discover oil, gas and minerals within the Spratlys.

China, Vietnam and Taiwan have conflicting territorial claims over the entire South China Sea while Brunei, Malaysia and the Philippines are claiming parts of the Spratlys.

In the late 1980s, China and Vietnam fought over several tiny and uninhabited isles in the Paracels and Spratlys, resulting in the sinking of three Vietnamese Navy boats, killing at least 72 sailors.

Last month, nationalist street demonstrations were held in front of the Chinese embassy in Hanoi and consulate building in Ho Chi Minh over the long-running dispute on ownership of South China Sea islands.

On Wednesday, De Venecia had called on the three states to start oil exploration in disputed waters in the Spratlys due to rising crude oil prices in the world market. China, Vietnam and the Philippines are heavily dependent on imported crude oil.

In 2002, China signed a non-binding code of conduct agreement with the 10-member Association of South East Asian Nations (ASEAN) in Phnom Penh, helping ease tension after they agreed to a ban on military activities in the Spratlys. (Reporting by Manny Mogato, editing by Raju Gopalakrishnan)

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