Singapore's Senior Minister Lee Kuan Yew himself suggested after negotiations with Prime Minister Mahathir Mohamad that he was driven to compromise by concern over a possible change of government in Malaysia.

He said it would be "problematic" for Singapore if the opposition Parti Islam SeMalaysia (PAS) came to power, adding that there appeared to be "a kind of Islamic globalisation" of growing militancy.

The president of the International Movement for a Just World rights group, Chandra Muzaffar, told AFP that Lee's decision to resolve the issues may have been prompted by his "apprehension" over dealing with PAS.

But, he said, he believed it was not so much Islamic militancy as simply a change of government and the passing of time which Singapore feared, as Lee and Mahathir had known each other for years and were both in their 70s.

"There is certain chemistry between the two men. They may have felt that it is better to resolve it now," he said.

PAS, which wants to establish a more rigid Islamic state in Malaysia, responded to Lee in a statement September 6 by saying it was keen to have a close relationship with any country including Singapore.

"... any insinuation of a future enmity is mutually counter-productive," PAS president Fadzil Noor warned.

PAS tripled its parliamentary seats to 27 in 1999 elections, at the expense of Mahathir's United Malays National Organisation (UMNO), which lost 22 seats to 72. The next elections are due in 2004.

Lee said Singapore had to compromise more than expected in tough negotiations but was worried it might later have to deal with a "government that will not deliver."

Singapore's request for 750 million gallons of water from Johor state after 2061 when a water contract expires was reduced to 350 million gallons and water prices drastically increased.

Singapore, which obtains half of its daily water needs from Malaysia's Johor state, also has to give Malaysia 12 parcels of land as a "bonus" for the water.

"We have not given in so easily but we have to decided to make a deal, even though it's not one I would say is balanced... it could have been better but a deal's a deal, so let's move on," Lee said.

Apart from water supplies the issues agreed in principle, without details being released, include the construction of a bridge linking the countries, the use of Malaysian airspace by Singaporean aircraft and the withdrawal of pensions by Malaysian workers in Singapore.

The executive director of the Malaysian Strategic Research Centre Abdul Razak Baginda told AFP he believed economic issues were the major concerns driving Lee and Mahathir to work out their differences.

"We cannot have bilateral relations bogged down in the wake of the economic downturn," he said, referring to Singapore being in recession and Malaysia's lower than projected growth rate this year.

The breakthrough would enable the two countries to "stabilise their relations" whose bilateral ties are "embedded with emotions due to history and the race factor," he said.

Malays make up more than half of Malaysia's 23 million people, with Chinese accounting for 25 percent, while Singapore's population is predominantly Chinese.

Relations between the two have often been prickly since Singapore was ejected from the federation of Malaysia in 1965, two years after it was founded.

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