The two neighbors must invest in each other and encourage their businesses to join forces to venture offshore in new areas amid growing competition from China, India and Southeast Asian nations like Vietnam and Thailand, said Deputy Prime Minister Najib Razak.

He noted that Singapore's acquisitions of Malaysian companies far outnumbered purchases of Singaporean assets by Malaysians and urged the island-state to "show a greater degree of reciprocity" to achieve equitable partnership.

"For Malaysia and Singapore, the stakes are high. We are no longer the darling of foreign investors as we were in the previous decade," Najib told a regional business conference.

The conference was attended by Singapore Deputy Prime Minister Wong Kan Seng.

"We must raise our political will to work together where we can and accommodate each other in areas where we cannot," he said. "We have no real choice. The economic logic is as clear as the day. We must build the necessary partnerships in order to take advantage of new opportunities present within the region."

Najib said Malaysia and Singapore can together become winners in the global landscape. "But if we choose to remain aloof, to go it alone, we risk being torn apart by the competition," he warned.

The two countries, which briefly united in the 1960s, share close social and historical ties but have had a history of testy relations. Disputes have ranged from the price of water to airspace use to territorial disagreements.

In September, Singapore's elder statesman Lee Kuan Yew sparked a furor in Malaysia when he told an international conference that Malaysia and Indonesia "systematically" marginalize Chinese minorities.

Malaysia's government strongly protested Lee's remark, warning it could stir up Malaysian Chinese, who make up about a quarter of the country's 26 million people. Lee apologized for causing "discomfort" to Malaysia's leadership but didn't retract his criticism.

Najib reiterated that Lee's comments were not appreciated and described it as "little bumps in the road" that the two countries must contend with.

"Whether we like it or not, our two nations are joined at the hip," he said. "With increasing competition, it simply makes common sense for Malaysia and Singapore to invest in each other's future."

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