The Malaysian leader, who wound up his two-day visit to Singapore last night, agreed that 'legacy' problems which both sides inherited had to be set aside - or steps need to be taken to resolve them.

In particular, both sides pledged to look at how to implement a stalled 18-year-old Points Of Agreement (POA) on the development and status of railway land in Singapore, the interpretation of which Malaysia disputes.

During 1-1/2 hours of talks with PM Lee Hsien Loong at the Istana yesterday morning, Datuk Seri Najib held out another promising initiative - a possible new bridge linking the eastern part of Johor and Singapore.

This would greatly improve Singapore's links with the Iskandar Malaysia economic corridor in Johor and ease overcrowding and jams on the Causeway, both Mr Lee and Mr Najib said at a press conference after their meeting.

Evidently mindful that previous suggestions about replacing the Causeway with a bridge had been a thorny issue in bilateral ties, Mr Najib indicated that he did not intend to resume such a project - which his predecessor Abdullah Badawi had in any case cancelled.

'I told (Mr Lee) that I wouldn't want to go down the same route and end up with another problem or another disappointment,' he told reporters from the Singapore, Malaysian and international media.

'I think we should agree (on) what we need to do. We agree on the objectives first, then let's look at how we achieve that objective. There could be other ways of achieving that objective. We talked about perhaps enlarging the Causeway or having a rail link. Whatever it is, as long as the objectives are met.'

To move ties forward, Singapore and Malaysia are putting faith in a new 'iconic' business project in Johor to be developed by both sides.

These are preliminary ideas and details will be worked out by ministers on both sides.

But Mr Najib is keen on the project being a Wellness Centre, saying that this seemed to be 'the in-thing nowadays'.

Mr Lee said he suggested a mixed-use township 'which would broaden the idea and extend to a range of activities including industrial activities with some residential, commercial space'.

Singapore will also set up a consular office in Johor Baru.

Given the growing business interactions and visits by Singaporeans because of the Iskandar Malaysia project in Johor, Mr Lee said that such an office could service visiting Singaporeans who have consular needs.

Already, Singapore is the third-biggest investor in the vast 2 1/2-year-old economic corridor, which has netted around US$11 billion (S$16 billion) in foreign direct investment.

Speaking about bilateral relations, Mr Najib said that the main thing was that 'legacy issues should not be in the way of us moving ahead'.

There was 'much, much more to gain from productive and cooperative arrangements rather than allowing these things to hamper and even dampen the relationship', he added.

'The basic principle is to make sure that it is in a classic win-win mode in terms of a relationship.

'You don't have to quantify that we will win exactly the same amount as Singapore wins, or Singapore wins exactly the same amount as we win. As long as generally speaking we are being seen as benefiting from resolving these problems and maintaining trade...I don't think the problems are so insurmountable and I'm confident that we can move ahead in resolving these legacy problems.'

Concurring, Mr Lee said the legacy issues need to be tackled.

'They're not easy issues. Otherwise they would have been solved before. But they need to be resolved. Otherwise I think they would continue to potentially trouble our relationship for a long time to come,' he said.

'It is not productive to discuss publicly every move and suggestion and proposal we have on these problems. I think one of the difficulties over the years has been that the issues have taken on not only their practical significance, but a broader political resonance.

'Because it has been explained, argued over, debated; positions have been taken which make it very difficult to have flexibility in discussions...

'So I would not like to have a public discussion of what we are going to do or what changes we're going to propose or what we expect from Malaysia.'

Mr Lee, on the issue of the POA, said that Foreign Ministers on both sides will meet 'to take the matter forward and make sure it doesn't last another 18 years and that's a clear enough set of instructions'.

On security matters, both leaders toasted the cooperation of security agencies, which led to last month's recapture of escaped terrorist leader Mas Selamat Kastari.

Mr Najib's visit to Singapore came just a month after he took office. It was the third country he visited after Indonesia and Brunei.

He arrived on Thursday afternoon with his wife Datin Seri Rosmah Mansor and a 50-strong delegation that included several ministers.

He had a busy day yesterday packed with official pow-wows and visits. Apart from Mr Lee, he also met President S R Nathan and Senior Minister Goh Chok Tong.

Mr Najib also made it for Friday prayers at Sultan Mosque, where he was received by Minister in charge of Muslim Affairs Yaacob Ibrahim.

In the evening, he and his delegation attended an official banquet in their honour, hosted by Mr Lee.

In their speeches, both leaders testified to the longstanding friendship and common history of their countries. Cooperation is especially important now in the economic downturn, they agreed.

Both Singapore and Malaysia 'share an interest in global and regional stability, as well as a free flow of trade and investments' and there is much scope to step up bilateral economic cooperation, said Mr Lee.

Mr Najib, in an off-the-cuff speech, said he hoped his visit would signal 'the beginning of a new era' in bilateral ties.

'We should be bold enough, imaginative enough, courageous enough to represent a new generation of Malaysians and Singaporeans who want this relationship to be a strong, productive and enduring one,' he said.

Mr Najib returned home last night.