The latest dispute making headlines is over a small, rocky outcrop which Malaysia calls Pulau Batu Puteh and Singapore Pedra Branca. The island has no economic significance, although it is useful for maritime navigation. To an outsider, it is hard to understand why so much fuss is being made over such a small matter.

Actually, the dispute is a microcosm of all the problems that exist between the two countries. Unresolved bilateral issues include the price of water that Malaysia sells to Singapore, the withdrawal of pension funds before retirement by Malaysian workers who have worked in Singapore, redevelopment of Malaysian Railway land in the island republic, relocation of Malaysia's immigration facilities to Woodlands near the connecting causeway at great inconvenience to passengers, the use of Malaysian airspace by Singapore's military jets, and Singapore's land reclamation.

Many observers attribute the difficulties to historical baggage. The two countries were united in 1963, but by 1965 there was an acrimonious split.

``It's probably fair to say that, with hindsight, both sides could have handled the problems in their relations better,'' said Manu Baskaran, a prominent Singaporean economist. ``Too often, the residue of animosities from the 1963-65 period come back to haunt us.''

Of the various issues, the most important concerns water. Malaysia supplies about half of Singapore's water needs. Under agreements signed in 1961 and 1962, Malaysia sells fresh water to the island republic at only 3 sen (less than one US cent) per 1000 gallons (3785 litres). This agreement was signed just prior to Singapore joining Malaysia, and according to Malaysian Prime Minister Mahathir Mohamad, it is based on 1927 pricing.

The water contracts actually allow for a price review after 25 years. Singapore claims that since Malaysia did not invoke the price reviews in 1986 and 1987, the country has lost its right to do so at any time in the future.

Dr Mahathir has slammed this as typical Singapore legalese. ``They objected to a review of the payment even though it has been agreed that after 25 years we could negotiate the price of water. After 25 years, not on reaching 25 years,'' he said.

Singapore always bases its position on strict legal arguments. This makes perfect sense to many Singaporeans.

``While bonds of trust, etc, are important, agreements between countries, especially on sensitive issues like water, have to be finally articulated in legal agreements,'' Mr Manu said. ``This is because there are bound to be differences of views, and if there is no legal agreement then there is no way to resolve these inevitable differences that will spring up from time to time.''

But Singapore's strict, legal approach doesn't sit well with many Malaysians, who feel that the island republic is being unreasonable and overly calculative.

``Singapore is far too hard in its approach, far too legalistic,'' said James Wong Wing On, a former member of parliament and now the chief analyst at Strategic Analysis Malaysia, a political consultancy. ``I can accept it because I'm Western educated. But to a lot of Malaysians, Singapore is being pushy and arrogant.''

Malaysia, of course, is not without blame for the impasse. Ever since the two countries split in 1965, Malaysia has tended to regard Singapore as the little brother which needs to show big brother more respect and deference.

It is easy to understand why. Singapore relies on Malaysia to sell its goods and services, as a source for skilled workers, and for much of its water. But this attitude has led to strained relations many times in the past.

As Singapore's Senior Minister Lee Kuan Yew himself noted in his memoirs, whenever Malaysia wants things its way -- even on matters that are strictly within Singapore's domestic rights -- overall relations with Malaysia become strained.

A case in point is the 1986 state visit to Singapore by Israeli President Chaim Herzog. Malaysia -- a Muslim nation with no diplomatic ties with Israel -- considered the visit an insult, and protested heavily. Singapore, which does have diplomatic relations with Israel, allowed the visit, but its relationship with Malaysia was soured for some time after that.

``Malaysia has got to stop treating Singapore like a little brother and start accepting it as an independent, sovereign state if it wants ties to improve,'' Malaysian political scientist Chandra Muzaffar said.

The problem is that neither side seems to be softening its stance, hence the difficulties in resolving the various bilateral issues.

``Both sides are sticking to their guns,'' said P. Ramakrishnan, president of Aliran, a Malaysian social reform and human rights organisation. ``This has gotten them nowhere. In fact, it will only prolong the differences and bring agony to both sides.''

It is hard to imagine any significant changes happening under the current leadership. Dr Mahathir is renowned to be a headstrong and stubborn leader, and is likely to continue playing hardball with Singapore throughout the rest of his tenure.

This has led some to believe that a change will come only when he steps down in October, when his deputy, Abdullah Ahmad Badawi, takes over.

Although it is still too early yet to tell what kind of prime minister Mr Badawi will be, he is widely considered a kinder, gentler leader who disdains confrontation. Still, many political observers say there will be great pressure on him to stand tough against Singapore.

``Badawi is definitely more accommodating than Mahathir, and personally I think he will try to tone things down a bit,'' former MP Mr Wong said. ``But don't forget, he's a politician first and foremost.''

This is a point echoed by academic-turned-opposition politician Rustam Sani, who has known Mr Badawi since the 1960s. ``As a person he's a nice guy, but if he has to take a hard stance [against Singapore] to win political points, I think he will do it.''

Whether Mr Badawi is the man to create a better environment for solving bilateral issues is yet to be seen, but it is obvious the key lies with the approach.

``What it takes is statesmanship from both sides,'' Mr Chandra said, ``not just good political leadership but true statesmanship.''

Oon Yeoh is a freelance writer based in Kuala Lumpur.

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