The signing follows a deal worked out in January over tiny Singapore's land reclamation activities in their border waters and is seen as underscoring a rapid thaw in once frosty ties between the two countries.

The compromise allows Singapore to carry on with the reclamation while cooperating with Malaysia to ensure navigational safety and environmental protection in Johor Strait, a busy international waterway.

"It is a positive sign," Malaysian Deputy Prime Minister Najib Razak told a news conference Monday.

"It has not been easy. We have worked very hard," he said.

Foreign Minister Syed Hamid Albar said that under the agreement Malaysia would withdraw its case before the International Tribunal for the Law of the Sea and Singapore would make adjustments to the reclamation work.

"Malaysia will withdraw its case and Singapore has agreed to certain things, including the ecological and environmental aspects (of the reclamation)," he was quoted as saying by the Star.

The two nations have endured an uneasy relationship since Singapore's ejection from the Malaysian federation in 1965, but signs of a rapprochement have grown since former prime minister Mahathir Mohamad's retirement in 2003.

Other disputes that have held back closer economic cooperation include Singapore's military access to Malaysian airspace, the future of Malaysian-owned railway land inside Singapore and rival claims to a rocky islet.

Negotiations were deadlocked under Mahathir in 2002, but his notoriously confrontational negotiating style has been replaced by a more diplomatic approach by his successor, Prime Minister Abdullah Ahmad Badawi.



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