Malaysia and Thailand realise that a tussle over the fate of 131 displaced Thai Muslims must not poison relations and their handling of the issue is slowly improving, Malaysia said today.

"I think gradually there is understanding that we should manage the problem," said Deputy Prime Minister Najib Razak, who met his Thai counterpart Chidchai Vanasathidya last week to discuss the status of the group which fled across the border in August saying they feared for their lives.

"I think there is better understanding and appreciation of the situation in the sense that we should not allow the problem of the 131 to be blown out of proportion and... that it should not spill over into the other areas in terms of overall bilateral relations," Najib told reporters.

Relations have worsened over the issue of the 131 men, women and children who crossed from southern Thailand, where a Muslim insurgency is raging.

The talks last week failed to resolve their fate but Najib denied discussions had reached a dead end.

"In fact I've been invited to Thailand in the near future. We are always open to further discussion with our Thai counterparts," he said.

Malaysia has said it will not forcibly repatriate the group and that Thai officials must convince them it is safe to return.

Public assurance

When asked if any of the group had asked to be sent home, Najib said: "So far none of them have indicated so, but the Thais will try to interview every single adult and hopefully they can convince the people to go back.

"While the Thai government has given a very clear public assurance that these peoples' safety will be guaranteed by the Thai government, nonetheless, they need to convince these people that that is the case," he said.

He declined to be drawn on the subject of what will happen to the group if they refuse to return.

"We have a few options but we will decide when the time comes," Najib said.

Malaysia has in the past been reluctant to allow refugees into the country as it fears it could draw people from other regional trouble spots.

However as a mainly Muslim country and the current chair of the Organisation of the Islamic Conference, it has also said it has a duty to protect the Thai Muslims.

Some 1,000 people have been killed since January 2004 in nearly-daily attacks in southern Thailand.