Fielding questions on the last day of his informal visit August 17, he showed he was as sharp as ever. He stripped away questions that came loaded with assumptions and innuendoes, corrected errors in the journalist's question, and made sure nobody got away with putting words in his mouth.

At the same time, he sought to be fair, making sure that both local and foreign journalists had an equal chance to quiz him.

He dealt candidly with a range of issues, from bilateral ties to his relationship with Malaysian Prime Minister Dr Mahathir Mohamad, and his impressions of the political mood in Malaysia.

Political Correspondent IRENE NG in Kuala Lumpur excerpts the press conference:

Bernama: You've met different groups of people here, young professionals, academics, the media and so on. What are your perceptions of Malaysians and Malaysian politics?

A: First, the positive. I think Malaysia has made tremendous strides forward. The infrastructure is so much better than it was when I was last here in 1990. The North-South highway is a credit, an economic value.

I had a smooth ride. KL and the complex around the twin towers are impressive. I also saw Putrajaya, met Dr Mahathir yesterday, and saw his residence. It is a spectacular set of buildings on hillock, reminded me of Islamabad.

I would say, on the physical side, the achievements are considerable.

On the political situation, I leave somewhat more bewildered than when I came. I just don't understand why there is this questioning of the statements by the government.

I met Datuk Najib this morning; I asked him what was the purpose of this three Pajeros (four-wheel drive) and the packing of the arms and the ammunition. He said, well, the government was challenged by the opposition, Hadi Awang, who said it was all sandiwara (Malay drama) so they had to debunk the opposition's claim.

I find that a little perplexing. Surely, no government in this world would go and stage a seizure of arms and recover those arms at the cost of two of its officials killed and being mutilated cruelly. But Datuk Najib told me he had to prove this. I am perplexed.

So when I met some top journalists from all the major newspapers this afternoon, I was bewildered because they were questioning what I thought were given facts.

I think the problem is too much cynicism. I don't know how it has arisen.

But if the editors accurately reflect the ground, then there is a lot of cynicism and scepticism. As one incisive lady journalist put it to me: ""People don't accept things at face value.'' Which is a bewildering position for me. I am perplexed.

The Straits Times: You've met a series of Malaysian leaders. Has there been any progress in resolving the outstanding bilateral issues?

A: On bilateral issues, the discussions were with Dr Mahathir. We had nearly two hours. Half to three-quarters of an hour, we talked randomly about the changed situation and these new surroundings, both physically and political terms.

Then we discussed the main issues which are outstanding between us.

I leave more optimistic than when I came. I believe that, if there is enough give on both sides on the key points, it is possible within two, three months to tie up the details.

It is on the big issues that the problems are, and we can't move unless both sides give on key issues.

I think there's a chance, and if we can work out the nuts and bolts, assuming that there is enough give, then in two, three months, the two prime ministers can meet and put our problems behind us and move on.

It has been stalemated for many years. It is not to our advantage.

I think both sides will gain if we move on and restore international confidence in the ability of two countries to cooperate at a time of great travail in the region.

BBC: In the question-and-answer session following your lecture at the Institute of Strategic and International Studies (Isis) yesterday, you spoke on the importance of credibility in government. Today you touched on the scepticism or cynicism of the people. Do you think that it is because the government here has a credibility gap?

A: I do not want to be used as a sounding board or a reflector for your views. If you want to put that over BBC as your views, I will listen to it and learn from it.

But I have not been here long enough to be able to check whether or not what the journalists told me is in fact widespread, because journalists take in each other's washes, they influence each other.

But it could be that you are all well-connected with the ground, you get these vibes, that in fact there is a certain unwillingness to accept at face value whatever is said.

I am just dumbfounded that you have to re-enact how you stack rifles and ammo of the quantities you have seized with three Pajeros. Datuk Najib pointed out to me that it had to be done in four minutes.

If any of my journalists cast doubt after we've lost two officers, I will line them up against the wall and say, 10 of the best.

The Straits Times: Going back to bilateral issues, you said that, if there is enough give from both sides, in two to three months, the two PMs can meet and put the issues behind them. Do you expect civil servants to work out the details or should it be settled at the political level?

A: I think it is beyond the civil servants now. We have got to make political decisions. It's no longer just fiddling around with details. There are basic principles.

For instance, do we amend the Points of Agreement (on railway land) to accommodate the wishes of Dr Mahathir? It's a complete contract.

I would recommend to the PM: Yes, provided there is give on the other side, which means, a fair deal on other issues, like our water supply and on fair terms.

And then there are other issues, like the siting of the Customs, immigration and quarantine facility, and the Central Provident Fund.

It has to be a package; one which is balanced, with both sides getting more out of it, than if we both stood still.

The Star: There's a lot of mistrust between both countries, with Malaysia wary and suspicious of Singapore. Is this mistrust justified?

A: (Laughs) The mistrust is on your side, and you are asking me to say: ""Yes, you are justified; yes, indeed I am not being on the level with you.'' Are you asking me this?

The Star: Is the mistrust on both sides justified?

A: No, there is no mistrust on our side. All we are saying is, look, when we reach an agreement, and it is spelt out in a form of words, let's stick to it because, otherwise, there would be no end to it.

The Australian: In regards to the differences that have arisen between you and Dr Mahathir in the past, how would you categorise your relationship with Dr Mahathir today?

A: Let me correct you. I had differences with Dr Mahathir going back to the 1960s. But in the late 70s, long before he became Prime Minister, I reached out to him because I knew he was going to become Prime Minister after Hussein Onn.

This was because, if we continued our duelling, then both sides would be injured. So I invited him down, and on several occasions, we had very long and very frank exchanges.

As a result, we established a personal relationship for nine years. From 1981 to 1990 when we were both PMs, I had no conflicts with him.

The conflicts that have arisen started after I left my job as Prime Minister, and Goh Chok Tong inherited the POA (Points of Agreement) which Dr Mahathir wanted to have altered, and after that, it led from one to another. But it was never with me. I did not have difficulties with Dr Mahathir as PM to PM.

The Australian: How would you characterise your relationship with Dr Mahathir?

A: We have kept in touch, not on business. I've met him in Davos, in various meetings in Tokyo.

I would say we can speak quite frankly to each other. We are of the same generation. We have been through similar experiences.

We have not always agreed but we have found ways to live with each other, and that is true of my meeting with him on Tuesday (August 15).

It is not an adversarial relationship.

Nihon Hoso Kyokai: How do you see the role of Japan in the future?

A: I do not share the contemporary view that Japan is in a morass, that it is slow and unable to slim down its workforce.

I have seen them go through the crisis in 1945, when they were devastated. I've watched them adjust to the oil crisis in 1973, and I learned from them.

Their telecoms sector is opening up.

They will learn to compete. The electronics and computer industries are restructuring very fast... Mr Yoshiro Mori is learning how to e-mail, which is significant for a man who has so much to do.

He knows it is necessary, and if he knows that is necessary, then he will know that the whole economy has to undergo a revamp.

They may be a little slower than America, but I would put my money on them. I think they will bounce back. Maybe not in two, three years, but definitely in five to 10 years.

They will give the world a run for their money. They'll come up with products, including software, which will compete with the world.

Channel News Asia: You've said that if Malaysia and Singapore could work together, international confidence in the region could be restored. In your speech at Isis, you've also said Malaysia and Singapore are the two best-performing economies. Are you saying that Malaysia and Singapore should work together to play a greater leadership role in the region?

A: I wouldn't want to put myself in that particular form of words.

Asean belongs to 10 members, but Asean really was driven by the five original members. One of the five, Indonesia, is in some difficulty.

I think the other four should combine their resources and get it out of this morass, and one way to do it is to show that there are large areas of Asean where things are stable, opportunities are there, and foreign investments will give returns.

And it is in that context that I highlighted that the two best performing economies are Malaysia and Singapore.

I think we will both draw in more investments if foreign investments and governments see that we are working closely together to help ourselves and to help our neighbours.

If I can put it simply in this way: The PM briefed me before I came up to meet Dr Mahathir. He said simply, tell Dr Mahathir that, in his recent trip to Europe, no leader asked him about Indonesia.

But they did ask him how are his relations with Dr Mahathir.

He said, they are okay. In other words, they wanted to know, beyond being okay, are you going to work together.

If you are, then there is synergy, then there is more investments for us both. I told Dr Mahathir this.

The Straits Times: What was Dr Mahathir's response to this message?

A: You have to ask him, but it was positive.

Nanyang Siang Pau: You have a personal and practical relationship with our Prime Minister. But the second and third layers, they are lagging behind in their relations. What are your comments?

A: It is a difficult problem which will become more difficult if we leave it alone. Even in the roughest of times, I was able to ring up and play golf with Tunku Abdul Rahman, or Tun Razak or Dr Ismail and many other ministers, because we shared a certain common background.

We were friends before we were politicians. Even Dr Mahathir. He was trained as a doctor in Singapore, and he comes down regularly for reunions with his old friends, so there is an emotional bonding. The younger leaders did not go to the same schools.

So some formula, some method, some system of regular exchanges, to-ing and fro-ing without an agenda, just to know each other as human beings, and perhaps to strike up a friendship, so that we can call on each other and not be formal.

So that, when there is a problem, we already know each other's temperament, and you know just how far you can push it.

I mentioned this to Foreign Minister Syed Hamid Albar when he came to Singapore. He agreed with me, and he said, he'll try and encourage his ministers and MPs to come down, and I said we should do likewise.

And it shouldn't be the subject of press spotlight. They should come, go, without anybody taking notice.

When you are in the spotlight, you've got to say, yes, I have produced these things, which makes life difficult.

This is why I've ignored the press speculation about my visit, right up to the last, and I did not want to raise expectations. If I raised expectations, then I am under pressure to deliver. I do not want to be under pressure to deliver.

Because I don't feel under pressure, I can say quite comfortably, it's promising, more optimistic than when I came, but I am not sure it is a done deal, and if it is not a done deal, it is not the end of the world.

Channel News Asia: Do you think that the meritocratic society has worked well for the Singaporean Malays?

A: I don't like to be blowing my own trumpet, especially in Malaysia.

If the Singapore Malay were not doing well, I think he would leave for Malaysia. But he has a better job, better education, better health services, and a very substantial home costing $200,000 to $400,000.

Ninety-four per cent of all Malays own their homes.

The Malays who have returned to Malaysia are those who have retired because their dollar would buy more here, and they would make quite sure that they've got their IC. If they fall ill, they can get into Singapore General Hospital in x number of minutes.

How they behave speaks for itself.

But let me add: It does not mean that we have transformed them into a super race... All it means is that they are more competitive, they are driven, they are all living together with other races in mixed blocks...

They go at the same pace.

One quarter of Malays today reach tertiary standards. Of course, they are not satisfied, they want to do more. Because the Chinese and Indians have reached a higher percentage. So the race goes on. It is a never-ending race.

Bernama: Assuming that PAS comes to power, what impact will this have on Singapore?

A: That depends on what kind of PAS it will be then.

If you assume that PAS comes to power, then you must assume that PAS is flexible and spry, and knowledgeable enough to present a completely new image of itself in order to win over the non-Muslim in Malaysia.

Otherwise you can't form the government.

To be a Barisan Alternatif, they've got to carry the non-Muslims... If you get such a PAS, then maybe it's not the end of the world.

But I think I would sleep more comfortably if I knew it was an Umno government which I've been accustomed to, since the 1940s.

The Straits Times: The last time you drove up to KL was 35 years ago. What went through your mind as you drove up on Monday?

A: (Laughs) I could write an article, a 2000-word piece, for Sunday Times -- for a fee. (Laughs) There were many memories that came back. It was a different time. I had different preoccupations.

It was a winding road. I went down by the coastal road across the ferry at Muar, Batu Pahat, then went on to Malacca, then on to a meeting in Seremban, then on to another meeting in KL...

It was an exciting time. It could have gone either way.

The Australian: While on that note, did you have any thoughts on what might have been?

A: Yes, I have. But it would take too long, and distract everybody from what they have to report tomorrow. That's another what-might-have-been.

Reuters: A number of countries have criticised the verdict and the sentencing of Anwar and those countries have been called enemies. Is Singapore considered a friend or enemy in this matter?

A: Singapore is not an enemy. If anything, it is a friend. You must not forget that we have extremely close ties with the leaders in Malaysia, including Datuk Seri Anwar when he was minister.

So we knew each and every one of them very well.

And as I have said before, it was an unmitigated disaster and I felt more sorry for Dr Mahathir than I did for Anwar.

I said this before the event, before all the trials and the tribulations and the revelations, and I say it even now. I think Dr Mahathir paid a very heavy price and I feel sorry for him.

He had an error of judgement, several errors of judgement which I felt was most unfortunate.

When I met him in Davos last year, shortly after the Anwar arrest, I asked him: Why did you arrest him under ISA? How can he be a national security threat when only four weeks ago, he was your deputy for five years, and he told me -- and I was flabbergasted -- that he did not know that Anwar was going to be arrested under the ISA, that it was under the prerogative of the police chief.

I thought it was the beginning of a series of blunders that cost him dearly. It should never have been that way. It should have been a straightforward criminal charge under the Penal Code, for corruption, sodomy whatever, produced in court the day after his arrest.

But the police chief arrested him under the ISA, and the next disaster, the blue eye.

I said, why not a commission of inquiry immediately? I felt it would not have absolved him from blame, but it would have cleared the doubt that he was party to it.

As he said to me, what benefit do I get out of it. I agree.

But these are things that have been done, and I am afraid he has paid very dearly for it. My sympathies are with him.

AFP: Do you think the two sentences which run consecutively are too harsh, or what is your opinion of that?

A: Is it of any relevance what my opinion is, so why should I want to express it?

AFP: The United States, Australia, New Zealand, European Union had expressed an opinion on this subject.

A: God bless them.

The Straits Times: You said that the Anwar issue had cost Dr Mahathir dearly. But this morning, Defence Minister Najib Tun Razak said you expressed confidence in the government's ability to ensure support. Do you have comments on this?

A: If they take the right steps and are able to re-inject the original ideals that drove Umno, and bring in a fresh generation, untainted by all this money politics, to draw the agenda for that younger generation, I believe there are enough educated Malays who will be able to present the programme that will attract their generation.

They have far more educated people, not just in universities in Malaysia but worldwide, who are quite capable of drawing up this agenda.

Let me put it in a different way. You know, Singapore 21 -- I couldn't draw up that Singapore 21 programme.

I am 76 years old, how can I plumb the minds of people who are 18, 19, in the high school or in the university, so we have Teo Chee Hean, and other leaders in their 40s, who induct a group of people in their 20s and 30s to come up with the programme.

Therefore, it resonated because these are ideas that move the young generation -- the kind of Singapore they want.

For me, what you see is what I dreamt of, or maybe more than what I dreamt of, because I could not dream up all the inventions that took place.

I now understand why Dr Mahathir says the young are ungrateful. They take for granted what had been achieved. They were not easy to achieve. They had done it.

He has brought them forward -- such a massive education programme. They have prepared for the Internet age, e-commerce. But they are taking it for granted: Where are we going from here? That is the generation that's got to crystallise their thoughts as to what their future ought to be.