The difficulties faced by certain Asean countries could affect the 'climate of Asean', said Singapore Prime Minister Lee Hsien Loong.

In Malaysia, he said, the problem was the "deep political differences" between former premier Dr Mahathir Mohamad and Prime Minister Abdullah Ahmad Badawi.

"I think everyone hopes it will be resolved soon," Lee added during his National Day Rally speech at the National University of Singapore's Cultural Centre last night.

According to Bernama , Lee made reference to Malaysia and several other Asean countries as he elaborated on the outlook and challenges faced by the 10-member grouping which, he said, will indirectly affect Singapore.

Mahathir has repeatedly slammed Abdullah's administration over certain decisions it made, namely the scrapping of the half-bridge project.

The former premier has expressed disappointment with his handpicked successor who took over the reins in 2003 and wondered aloud if he had made the wrong choice.

Mahathir also sarcastically attributed the improved relations between Malaysia and Singapore to Abdullah's penchant for golf, a game which the former premier was never fond of.

Positive aspects

Meanwhile, Lee, speaking on bilateral relations said both countries "will work on the positive aspects of our relations".

"Negotiations over bridge, airspace and sand have ended. Still some other issues outstanding (but) these are on the backburner for the time being. Meanwhile, we will work on the positive aspects of our relations," he said.

Lee also mentioned the problem in Thailand, saying that the country is going into another election but "serious political uncertainties are not yet over".

In Indonesia, Lee said that the government has tackled difficult issues such as cutting fuel subsidies but many other critical reforms are waiting such as tax, investment and labour laws, which are "politically very hard" to implement.

"These regional problems affect the climate of Asean as a whole, and so affect Singapore indirectly," he said.

"If Asean cannot get its act together, then instead of taking off with China and India, we will be left behind," he warned.

Singapore will therefore continue to work with its Asean partners to promote growth and stability in Southeast Asia.

"But taking the situation as a whole, the outlook is favourable. (We) just have to be ready in case the dangers materialise," he said.

Other challenges facing the region are the high prices of energy due to the tension in the Middle East.

Although there was a ceasefire in Lebanon, the problems in Iran, Iraq and Israel-Palestine are far from over, he said. "If there is a blow-up, energy prices will spike, causing a global recession."