Singapore and Malaysia can pursue win-win cooperation and focus on their respective domestic priorities if bilateral relations are kept stable and close, said Prime Minister Lee Hsien Loong.

The fundamentals of the relationship between them have not changed, he said, even though Malaysia has a new government led by Prime Minister Mahathir Mohamad.

"We are closely bound by ties of kinship and history, geography and economy," said Mr Lee yesterday, as he addressed concerns about the state of bilateral ties with Malaysia under Tun Dr Mahathir.

"We need to work together to tackle common challenges. And when our interests diverge, we must find constructive ways to resolve our differences," he added.

The Pakatan Harapan coalition came into power in May, defeating the ruling Barisan Nasional government in the general election.

Dr Mahathir subsequently announced plans to scrap the project for the high-speed rail (HSR) line between Kuala Lumpur and Singapore, before changing tack by saying that Malaysia is looking to defer the project. He has also revived the issue of water.

Mr Lee noted that Singapore has worked with Dr Mahathir before, when he was Malaysia's prime minister for 22 years until 2003.

Both countries completed several important projects together in that time, including the Second Link at Tuas and the Linggiu Dam in Johor.

Soon after the election in May, Mr Lee called on Dr Mahathir, Deputy Prime Minister Wan Azizah Wan Ismail and her husband, Datuk Seri Anwar Ibrahim.

"I had good meetings with all three of them. I told Dr Mahathir that I wanted to work with him to take our bilateral relationship forward," Mr Lee said.

"He agreed that we should, because we are each other's closest neighbours."

Mr Lee said he appreciates the reasons why the Malaysian government is determined to review and change many of the policies set by the previous administration.

But some reviews affect Singapore's ongoing projects with Malaysia, including the HSR and Rapid Transit System (RTS) Link to Johor, he noted.

"We entered into these two projects in good faith, after careful negotiations, because they benefited both countries," he said.

Transport Minister Khaw Boon Wan recently met Malaysia's Economic Affairs Minister Mohamed Azmin Ali "to understand Malaysia's intentions, and to find a constructive way forward".

Mr Lee reiterated that both the HSR and RTS Link have legally binding bilateral agreements that clearly set out the duties of each party, and what happens if either party wants to change or terminate the agreements.

"Both sides have to carry out what has been agreed to, unless we mutually agree to vary the terms," he said.

On water, Mr Lee pointed out that the issue of reviewing the 1962 Water Agreement has come up before, during Dr Mahathir's previous term as prime minister.

Singapore's view is that the Water Agreement is sacrosanct, he said. "We must proceed strictly in accordance with its terms."

That is why Foreign Minister Vivian Balakrishnan recently reiterated Singapore's position in Parliament, to avoid any misunderstanding, he added.

Singapore has worked well with Malaysia over the years, Mr Lee said, and has done substantial projects with successive governments that have brought tangible benefits to both Singaporeans and Malaysians.

"I hope that with Dr Mahathir and his new team, we can build on our deep partnership, look ahead and make further progress together."