Singapore's relations with its closest neighbours, Malaysia and Indonesia, are expected to improve in 2011-15. If the domestic political situation in those two countries remains stable, this will make it easier for Singapore to resolve more of its prickly and long-running bilateral disputes with them. Relations with Malaysia have been warming, owing in part to the substantial opportunities that are emerging in the Iskandar Malaysia (IM) development region, an area three times the size of Singapore that lies just over the island state's border with Malaysia, in southern Johor. This is proving a magnet for investment by Singaporean manufacturers and is acting as a focus for increased collaboration between the two governments. Although the IM is still in its early stages, greater connectivity between the two countries will improve crossborder access and promote economic integration, bringing together Singapore's workforce and Malaysia's land and other natural resources. However, a degree of racially tinged wariness will persist between the two countries, despite the mutual desire for stronger economic ties.

Singapore will also continue to seek ways to encourage greater economic integration in Asia and Australasia and to promote global free trade, thereby helping to reinforce its position as an important transport and financial hub. In this respect, Singapore will continue to play an active role at the forefront of moves to improve co-operation and integration among the ten members of the Association of South-East Asian Nations (ASEAN).