CAIRO (Reuters) - Egyptian President Mohamed Mursi submitted to Parliament on Wednesday a controversial Bill regulating non-governmental organisations (NGOs) and human rights groups, but said it did not impose restrictions on their activities.

An earlier draft had drawn criticism from activists, Western governments and the United Nations human rights chief, who said it was more stifling than regulations under deposed former president Hosni Mubarak.

A presidential adviser said on Monday the new draft should ease Western and opposition concerns that the Mursi administration is moving Egypt away from the democratic ideals behind the 2011 uprising that ousted the autocratic Mubarak.

Restrictions on civil society have remained a source of friction with Western states that help to finance NGOs working on human rights and economic, social and political development.

Mr Mursi said in a speech that the new Bill drafted by his administration did not signify a crackdown.

"It enables civil society to be assured that the state will not... restrict civil society organisations that work in service of the sons of the nation," he said.

The new draft does away with controversial language that considers NGO funds as public money. A presidential adviser said it also ensures that security officials cannot serve on a steering committee, though they can still be consulted.

Activists who have seen the new draft say it is similar to earlier proposals backed by the Freedom and Justice Party, the political arm of Mr Mursi's Muslim Brotherhood.

"This law remains restrictive because it allows the government to control NGOs' access to funding, both foreign and domestically and it allows for government interference in NGO activities," said Human Rights Watch's Egypt director Heba Morayef.

The new draft stipulates that a steering committee supervising NGO activities "may seek assistance" from whoever it wants, including security officials.

"This is a way to control the activities of NGOs," said Mohamed Zaree of the Cairo Institute for Human Rights Studies, who called the law "very repressive".

He said he feared the steering committee would block funding to groups working on politically sensitive issues like abuses by security forces.

Egypt is polarised between supporters of Mr Mursi's Brotherhood and secular liberals who accuse him of attempting to stifle dissent.