"We have done well individually but if we work together, I am sure Singapore and Malaysia can compete with the rest of the world more effectively," Singapore's trade and industry minister Lim Hng Kiang told a seminar on business opportunities in Malaysia.

"So it is not only about creating new ways of doing businesses in both our countries but also about leveraging on each other's strengths, expertise and capabilities to move into new markets," he said.

The periodically stormy ties between the two neighbours have improved markedly since they signed a landmark agreement in April to settle a long-running dispute over Singapore's land reclamation activities.

The dispute was one of many that have affected relations since Singapore left the Malaysian federation in 1965.

Signs of a thaw first emerged after Malaysian Prime Minister Abdullah Ahmad Badawi succeeded Mahathir Mohamad in 2003.

Malaysian Trade Minister Rafidah Aziz, whose speech was delivered by Kuala Lumpur's envoy to the city-state N. Parameswaran, also urged businessmen from the two neighbours to work together in pursuit of new export markets.