"Mr Abdullah Badawi's appointment as prime minister gives us confidence, as we have known him for many years," deputy prime minister and finance minister Lee Hsien Loong, was quoted as saying.

"We know his character, his approach to problems and his attitude towards Singapore. I do not believe there will be any problem with his appointment."

The two countries have had a testy relationship ever since Singapore left the Malaysian federation in 1965 with ties strained by a number of unresolved issues, some dating back to the British colonial period.

They are locked in a legal battle over land reclamation work being carried out by Singapore in waters between their borders, with the International Tribunal for the Law of the Sea currently considering the matter.

Other sources of tension include the price of water Malaysia supplies to Singapore, a prospective bridge linking the countries, the use of Malaysian airspace by Singaporean military aircraft, and ownership of a rocky islet.

Lee said there would be "no once-and-for-all" solutions to the problems that have strained ties but believed the two countries must still work together despite their differences.

"Our political systems, social values and the way our societies work are very different," Lee said.

"Still, we must find common ground and opportunities for co-operation even under such complex circumstances. I believe it can be done," he said.

"I think we will continue to work towards resolving our problems. There is no once-and-for-all solution," Lee added.

Prime Minister Goh Chok Tong named Lee as his successor when he steps down from the post, probably by 2005.

Lee, 51, is the son of Lee Kuan Yew, the city-state's first prime minister and founding father.

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