This week, the Malaysian government's main investment arm, Khazanah Nasional, sold a 5% stake in state-controlled Telekom Malaysia to Temasek Holdings, an investment arm of the Singapore government. This is the first time in years that a Singapore government-owned company has been able to buy assets controlled by the Malaysian government, and involves a company that is the largest by market capitalization on the Kuala Lumpur Stock Exchange. It was only in 2000 that a bid by Singapore Telecommunications--also controlled by Temasek--for a stake in a telecommunications firm, Time DotCom, was rejected by then Prime Minister Mahathir Mohamad, who thought the sale might pose "security" concerns.

Today, taboos are falling by the wayside. Earlier, Temasek was reported to have begun negotiations for a stake in Alliance Bank. The bank may be one of the smallest in Malaysia, but banking is a sensitive sector. If the deal goes through--and reports say the central bank is likely to look favourably on it--this would be the first investment by a Singapore-government company in a Malaysian financial institution. This and the Telekom deal are significant events, and may signal much else to come--particularly as Kuala Lumpur begins to loosen its grip generally on publicly traded state-controlled companies.

More to the point, they indicate a change in how Malaysia and Singapore increasingly see each other, and may mean less frosty relations. Both share much common history and culture, and many families have kin on both sides of the border. Who knows what has been the opportunity cost of failing to leverage all this?

To be sure, these are early days yet. But we'd hope that both countries realize that their best economic policy is simply more cooperation across the causeway.

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