"The most important thing is to accelerate the reforms of the military, the police and other groups," Arroyo said in an interview with Al Jazeera on Monday.
Last week, two Abu Sayyaf leaders, Abu Sulaiman and Khaddafy Janjalani, were killed by Philippine troops.
Some Muslims fear that the militarisation of the southern region would turn provinces such as Sulu into a war zone.
"Hard power has fallen short of expectations the world over. In the Philippines, we have a unique combination of soft and hard power," Arroyo said.
"We have melded together confidence-building measures that is focused on inter-faith dialogue and cultural awareness, on economic and infrastructure development, and on mutual security arrangements in addressing the peace in Mindanao."
She rejected claims that Muslim-majority areas in Mindanao continued to be neglected despite the 1996 peace accord with the MNLF (Moro National Liberation Front), which seeks to establish an autonomous Muslim state in the south.
"Many of them have graduated from the 10 poorest-province list… like Sulu, Tawi Tawi, Lanao del Sur, Basila - they're no longer on the list.
"In fact, Sulu used to be the poorest province of all... It doesn't even belong in the bottom 10 anymore."
Arroyo, in acknowledging her country's poor human rights record based on the high number of political killings, said she intended to end all forms of violence.
"I deplore killings, whether they are perpetrated by the left or the right, they are wrong, especially the killings of journalists and political activists.
"We have had a sorry history of political violence in our country for more than a generation now. I would like that to stop once and for all."