SET aside differences and work together to tackle the current economic downturn.

Speaking to reporters at the end of a sports meet between the two countries' foreign affairs ministries in Kulai, Johor, yesterday, Mr Yeo stressed the importance of cooperation within Asean amid the global economic downturn.

'Cooperation between Malaysia and Singapore - which is the single most important economic relationship in Asean - becomes especially important.

'In fact, at a time like this when we expect retrenchments on both sides, it is especially important that we find ways to work together,' he said.

He cited Iskandar Malaysia - an economic zone in Johor about three times the size of Singapore - as an example of a project supported by Singapore.

Dr Rais' view is that 'although we may have several outstanding issues in our bilateral relations, this should not deter us from adopting a positive and harmonious approach'.

He said Singapore is one of the two most important Asean member countries to Malaysia. The other is Thailand.

On the imminent change in Malaysia's leadership, Mr Yeo said he believes relations will remain very good and forward-looking under the next prime minister Najib Razak.

Singapore and Malaysia have yet to settle territorial claims surrounding the disputed rocky outcrop of South Ledge as well as Singapore's maritime territory around Pedra Branca.

In July, Malaysia protested against Singapore wanting to claim an exclusive economic zone around Pedra Branca - an island east of Singapore - which means Malaysia would have limited access to the waters around the Middle Rocks, which falls within the zone.

While the International Court of Justice in May confirmed Singapore's ownership of Pedra Branca and handed the nearby Middle Rocks to Malaysia, it ruled that South Ledge belongs to whoever owns the territorial waters it sits in.

Mr Yeo said the matter will be resolved by 'friendly negotiations'.

ndianah@sph.com.sg