In Malaysia, he said, the problem was the “deep political differences” between former prime minister Tun Dr Mahathir Mohamad and Prime Minister Datuk Seri Abdullah Ahmad Badawi.

“I think everyone hopes these will be resolved soon,” he said in his National Day Rally speech at the National University of Singapore's Cultural Centre last night, Aug 20.

Lee also made reference to several other Asean countries as he elaborated on the outlook and the challenges faced by the 10-member grouping which, he said, would indirectly affect Singapore.

On bilateral relations with Malaysia, he said: “Negotiations over the bridge, airspace and sand have ended. Still some other issues are outstanding (but) these are on the back burner for the time being.

“Meanwhile, we will work on the positive aspects of our relations.”

Lee also mentioned the problem in Thailand, saying that the country was going into another election but “serious political uncertainties are not yet over”.

In Indonesia, he said, the government had tackled difficult issues such as the cutting of fuel subsidies but many other critical reforms – such as tax, investment and labour laws, which were “politically very hard” to implement – were waiting.

“These regional problems affect the climate of Asean as a whole, and so will affect Singapore indirectly,” he said.

“If Asean cannot get its act together, then instead of taking off with China and India, we will be left behind.”

Singapore, he said, would therefore continue to work with its Asean partners to promote growth and stability in South-East Asia.

“But taking the situation as a whole, the outlook is favourable. (We) just have to be ready in case the dangers materialise,” he said.

Lee said other challenges facing the region were the high prices of energy due to the tension in the Middle East.

Although there was a ceasefire in Lebanon, the problems in Iran, Iraq, Israel and Palestine were far from over, he said.

“If there is a blow-up, energy prices will spike, causing a global recession.” – Bernama

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