"We (should) keep our separate entities, but we (should) cherish the long-established links without having this excess baggage to carry into this generation, who don't understand what it is all about," said Rafidah Aziz, Malaysia's minister for international trade and industry on a visit to the city-state.

The warmth of the rhetoric - which was echoed by George Yeo, her Singaporean counterpart - underscored the dramatically improved relations between the two Southeast Asian countries since last year's departure from office of Malaysian Prime Minister Mahathir Mohamad.

Malaysia and Singapore were briefly united in the 1960s, but policy and personality clashes broke the union apart in 1965, when Singapore - an island at the southern tip of the Malaysian peninsula - became independent.

In the years that followed, the two states bickered constantly about a host of petty issues from the price of water that Malaysia sells to Singapore to ownership of a disputed islet no larger than a football field.

Last year's resignation of the abrasive Mahathir - who often clashed with Singapore - set the scene for a warming of ties under his more conciliatory successor, Abdullah Ahmad Badawi.

Appealing to "our dear friends across the Causeway" - the narrow link between the two countries, Yeo said: "There is strong political will to improve bilateral relations, especially bilateral economic relations."

The ministers' rosy comments came as Singapore and Kuala Lumpur set up a joint 10 million ringgit ($1=MYR3.80) fund to allow companies from both sides to make joint international trade missions. The first destination will be a two-day trip to Indonesia in August.

The pair also said Friday they had set up a bilateral business council.

Despite their fractious official relationship, Singapore and Malaysia have long been important trade and investment partners. Hundreds of thousands of people cross the causeway each day to work in the tiny city-state, which is more wealthy than Malaysia.

Family ties between the two countries are also common. "Each year, 10% of Singaporeans marry Malaysians," Yeo said.

Better private sector co-operation was essential to offset growing competition from lower-cost and fast-growing China and India, especially in the battle to capture foreign direct investment, Rafidah said.

"Now it is contingent on us, not to rediscover each other and get married again...," Rafidah said to loud laughs and applause from the 500-strong audience of business people and civil servants.

"We need to rediscover each other in the context of the environment in which we live: that dictates that unless we collaborate and cooperate, both of you will sink," she said.

-Edited by Sharon Vong

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