The government is willing to supply water to Singapore for another 100 years after the current pact expires 2061, but the city-state must be open to paying a higher price, Foreign Minister Syed Hamid Albar said today.

Syed Hamid said he was optimistic of progress in talks with his Singaporean counterpart S Jayakumar in Kuala Lumpur from July 1-2 to iron out outstanding bilateral issues.

"We are willing to supply them water for another 100 years at the end of 2061," he told reporters.

"I think that if we can clinch a deal on water, then all other things will follow. There will be no problem because water is the core and fundamental thing.

"Malaysia does not want to continue to be shackled or haunted by the water problem. If Singapore has an open attitude and wants to reach a consensus, then we can move forward in our relationship without looking back."

Singapore obtains half of its daily water needs from neighbouring Johor at three sen per 1,000 gallons. Its two water agreements with Malaysia expire in 2011 and 2061.

Malaysia has accused Singapore of profiteering from cheap water supplied by Johor under agreements dating back to the early 1960s and is demanding a higher price.

Ridiculous price

Prime Minister Dr Mahathir Mohamad reiterated Thursday it was "ridiculous" to sell water to Singapore at three sen when Hong Kong buys water from mainland China at RM8 per 1,000 gallons.

Syed Hamid said today Malaysia's asking price would reflect market value and would not be arbitrary.

"We are not unreasonable. We guarantee Singapore that we will supply the water but it must be at a price that is competitive and that reflects the market," he said.

"It is not a price that is going to be plucked from the sky... it is going to be a justified price and it's up to Singapore to decide if they are willing to accept it."

Water has been a thorny issue between the two countries since Singapore was kicked out of the Malaysian Federation in 1965 and rose to become one of Asia's wealthiest nations.

Apart from water, other irritants include a proposed bridge linking the countries, the use of Malaysian airspace by Singaporean aircraft and the future of Malaysian-owned railways and real estate in Singapore which are part of broad negotiations that have been going on for years.

In the latest bilateral tiff, Kuala Lumpur has protested a land reclamation project by Singapore along their narrow maritime border which it said would affect shipping lanes to Malaysian ports.