"The deal marks a psychological breakthrough in our bilateral negotiations," Singapore's Foreign Affairs Minister, Shanmugam Jayakumar, told parliament.

"It shows that, despite sporadic problems in our relations, both countries recognise the value of co-operation and that each country has a stake in the other's stability and growth," the minister said.

He was responding to legislators who asked whether the deal was fair to Singapore.

In a meeting in Kuala Lumpur this month, Singapore's Senior Minister Lee Kuan Yew and Malaysian Prime Minister Mahathir Mohamad agreed on a "package" deal to settle a number of thorny bilateral disputes over issues including water supply and military airspace.

"Some of the items [in the deal] are not balanced in our favour," said Mr Jayakumar.

For example, he said, Singapore had to reduce the amount of water it was requesting from Malaysia, which currently supplies more than half the island's needs by pipeline.

Mr Jayakumar said Singaporeans should ask themselves: "Are we both better off concluding a deal, or by allowing such outstanding issues to fester?"

Singapore had asked for a guarantee of 2.85 billion litres a day beyond 2061, when existing agreements expire.

But Malaysia agreed to less than half that - 1.33 billion litres a day.

In addition, fees will rise 15-fold in the near future, costing Singapore M$45 million more each year.

Singapore and Malaysia, both former British colonies, united in 1963 but split two years later amid harsh political disputes. A bridge and causeway connect the tiny island of Singapore with much larger Malaysia.

The proposed agreement reached earlier this month promises to end five main disputes - over water, airspace, immigration facilities, pension savings and the development of railway land - that have bedevilled relations between the two countries for years. Leaders of Singapore and Malaysia have said their governments will finalise an agreement for both to sign as soon as possible.