Singapore Trade and Industry Minister Lim Hng Kiang said today that cooperation between the city-state and Malaysia will be a boost to the economies of the two neighbours.

Neighbourly competition is unavoidable but the two have many areas where they can work together for the common good, especially in manufacturing and services, which are key to both their economies, Lim said.

"As we advance our respective national interests, competition is inevitable," Lim said in Kuala Lumpur at a forum on business prospects in Malaysia.

"But if we choose to focus only on the competitive aspects of our relationship, we will surely overlook the many opportunities where we can join hands to enhance our value proposition to the world's investors."

Malaysian plans to develop its southern Johor state is also a potential area of cooperation between the two neighbours, Lim said.

Competition

"The plans are to transform Johor into an engine of growth that will attract foreign investment and drive Malaysia's investment, much in the same way Shenzhen and Hong Kong boosted China's economy," said Lim.

"There will of course be competition between Johor and Singapore but we should also not forget the potential SJER (South Johor Economic Region) has in augmenting the existing synergies between Singapore and Johor.

"The SJER will only serve to strengthen and enhance this winning partnership."

Malaysia unveiled the SJER plans in June to transform the state into an economic hub fashioned after Shenzhen and Hong Kong and the project will be driven by the federal government's investment arm, Khazanah Nasional.

Relations between the two neighbours have been periodically rocked by disputes since Singapore was ejected from the Malaysian federation in 1965 but have improved since Malaysia's Prime Minister Abdullah Ahmad Badawi took office in 2003.