Prime Minister Abdullah Ahmad Badawi and Singapore's former premier Goh Chok Tong indicated after talks Monday that a ban on Singapore's jets using Malaysian airspace could be lifted as part of a deal resolving several disputes between the two neighbours.

The opposition Islamic Party (PAS) said in a statement that Singapore had "threatened several times to go to war with its neighbour", adding: "If we allow them to use our airspace, what next will fall into Singapore's hands?"

"Malaysia should realise that Singapore is the agent in this region for big powers. It has defence ties with the United States and Israel," said PAS youth chief Salahuddin Ayub.

Goh told a joint news conference with Abdullah Monday that Malaysia would consider lifting the airspace ban and in return Singapore would release some two billion ringgit ($526 million) in pension fund payments to Malaysians who have worked in the city-state.

But Salahuddin said Abdullah should not be hasty in "surrendering the country's sovereignty to Singapore just to retrieve a few billion ringgit."

He cited a dispute between the two nations over a tiny island, saying Singapore claimed ownership of the islet after Malaysia allowed it to set up structures there. The row has been referred to the International Court of Justice in the Hague.

The two nations, separated by the narrow Johor Strait, have endured an uneasy relationship since Singapore's ejection from the Malaysian federation in 1965. But signs of a rapprochement have grown since the retirement last year of Malaysia's premier Mahathir Mohamad.

Among the wide range of disputes are the price of water that Malaysia supplies to Singapore, the future of Malaysian-owned railway land inside Singapore and a proposed new bridge linking the two countries.

Negotiations were deadlocked under Mahathir in 2002, but his notoriously confrontational negotiating style has been replaced by Abdullah's more diplomatic approach.

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