Singapore sees a "new relationship" emerging with Malaysia and is open to investing in a major industrial project in Johor, Senior Minister Goh Chok Tong said in remarks published today.

"I see the start of a new relationship with Malaysia," Goh was quoted by the Straits Times as saying ahead of a key visit by Prime Minister Lee Hsien Loong to Kuala Lumpur in May.

Goh stepped down as prime minister in 2004 and was named a special envoy to Malaysia tasked with seeking solutions to outstanding bilateral issues.

Relations have often been stormy since Singapore was ejected from the Malaysian federation in 1965 over ethnic issues but they have undergone a marked improvement in recent years, especially in areas of economic cooperation.

Among the outstanding issues between Malaysia and Singapore are the price of water supplied to Singapore, the future of Malaysian-owned railway land in Singapore and rival territorial claims to a rocky islet.

Malaysia is seeking billions of dollars in global investments to turn its southernmost state Johor, connected by a causeway and bridge to Singapore, into a major industrial centre.

A project called the Iskandar Development Region (IDR) is forecast to be 2.5 times the size of Singapore with an area of 2,217 square kilometers.

"We would want to cooperate, if we are welcome, not just by Kuala Lumpur but also Johor," Goh said.

"If the signals are clear, we would cooperate and see what we can do because it is mutually beneficial."

Ties with Malaysia appear to be improving at a time when Singapore is engaged in diplomatic spats with Indonesia over trade in resources and a proposed extradition treaty, and with Thailand over the Singaporean takeover of a telecom conglomerate.