"The political environment is more positive now. We are looking at sending the right signals to both sides, especially to our business communities," Najib told reporters after talks with the Singaporean president.

Nathan is in Malaysia for a three-day vist -- the first by a Singaporean president in 14 years.

Najib said negotiations over several issues which have long plagued relations were now heading in the right direction following a change in leadership in both countries.

"The issues are moving in the right direction and in that sense there are some positive developments talking place," he said.

Malaysian Prime Minister Abdullah Ahmad Badawi took over from Mahathir Mohamad in October 2003 while Singapore's Prime Minister Lee Hsien Loong replaced Goh Chok Tong in August last year.

Abdullah and Goh, who is now a senior minister and special envoy to Malaysia, pledged at a meeting last month to strive for an amicable solution to the disputes.

They include the price of raw water that Malaysia supplies to Singapore, rival claims to a rocky islet, the future of Malaysian-owned railway land inside Singapore, Singapore's military access to Malaysian airspace and a proposed one billion ringgit ($263 million) bridge linking the two countries.

Najib said he and Nathan shared the view that both countries should take advantage of the positive developments in relations.

"We expressed the view that we should take advantage of this new environment and work closely together in many, many fields that have been identified by our two sides such as in investment, trade, tourism and defence," he said.

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