Singaporean Prime Minister Lee Hsien Loong yesterday staunchly defended the Shin Corp-Temasek deal and hinted his government was ready to talk with Thailand's interim administration to discuss post-coup effects on bilateral relations.

Giving impromptu replies to questions posed by editors attending the 7th Asian-European Editors' Forum in Singapore yesterday, he was asked if the two regional governments needed to discuss the Shin-Temasek fallout, Lee said his government wanted to be friends with the new Thai regime, and he hoped vice versa.

Yet the statement was made more equivocal by his criticism of the September 19 coup that toppled the government of the virtual Shin patriarch, ousted prime minister Thaksin Shinawatra. He called the military takeover a "setback" for Thai democracy.

He insisted the deal that led to Thaksin's downfall and soured bilateral ties was made out of goodwill and sincere business motives on Temasek's part.

Asked what lessons Temasek should draw from the Thai controversy, especially now that Temasek was investing in India in a big way, he said, "I think Temasek must make their judgement about the commercial prospects of the companies they invest in. They must make an assessment of the political environment in the countries they invest in. And they must decide where they want to go."

He said Singaporean investment arm Temasek must be careful but at the same time acknowledge and take potential risks. "When they have made the investment, they have to do their best to make sure that investment succeeds and is done in accordance with all the rules and requirements of the host country and the host government," he said.

"As they are owned by the Singapore government, they invest a little part of our reserves. They have a fiduciary responsibility to make sure that it grows. But they also have a long-term perspective, because they are not answering to quarterly shareholders and stock-market reports and shareholders' whims. Therefore, they can take a long-term view and decide where it makes sense, where the strategic directions are and where they would be welcomed, and they will go."

Asked if Singapore felt a moral responsibility for what happened in Thailand following the deal, Lee insisted there were other dimensions to the Thai crisis.

"The demonstrations had been going on for quite a considerable time before the deal with Shin Corp. After Shin, the demonstrations, the temperature warmed up and eventually led to this outcome. Could it have been predicted, could it have been avoided, should Temasek therefore have not done something after having assessed the risks? But they made the decision, and I think it was a professionally made one, and a proper one, and they complied with the rules, and it is our policy that they do," he said.

The Singaporean leader was adamant the deal was a show of his country's confidence in Thailand.

"You've got to look at it as a long-term exercise, because it is really an investment showing confidence in Thailand," he said, adding that Temasek would not have done business in Thailand if it did not think Thailand had a future or was perceived as a dangerous place.

"[If Thailand is perceived to be a dangerous place], I think people will ask us why we are even operating in this way. We must have confidence in our neighbour. And indeed we do. And which is why we made this move," he said.