Malaysia and Singapore say they've agreed to try to settle their differences, following a meeting in Kuala Lumpur between the Malaysian prime minister, Mahathir Mohamad, and his Singaporean counterpart, Goh Chok Tong.

They also discussed Malaysia's need to raise funds in Singapore to ease its financial crisis.

The unexpected meeting was proposed by Dr Mahathir and follows months discord over such issues as airspace and border controls.

Dr Mahathir said airspace restrictions would be eased and moves were afoot to resolve the sensitive issue of sharing water.