The island republic is an ideal place, despite its tiny size (though you cannot see it clearly from the sky these days because of the smog from Indonesia). The country is not totally open, but it is opening up. But with a level of stability that is unmatched by any place in the world, and the undisrupted continuity of social and economic development over the past four decades, foreign investors and expatriates love Singapore.

Its leaders are intelligent, self-centred and unshakeable. There are no coups. The People's Action Party has reigned supreme and will continue to do so for the foreseeable future. Tolerance of opposition parties is low because the ruling party here is so "damned good" - to borrow a descriptive phrase from a Singaporean journalist. There are few irritants in Singapore at the moment. After all, Dr Chee Soon Juan has been declared bankrupt and is bleeding. James Gomez has been repeatedly branded a liar and is living overseas. The Far Eastern Economic Review is no longer on sale on the island.

So, when Prime Minister Lee Hsien Loong minced no words in commenting on the Thai coup last Friday to a group of editors from Europe and Asia gathered at Sentosa Island, it was a real eye-opener. He said the coup was a setback for Thailand, and that Singapore would have to accept it. He went on to say that former prime minister Thaksin Shinawatra had won two general elections with landslide majorities, but there was implacable opposition from the Bangkok establishment, which subsequently led the military to intervene.

"General elections were scheduled for November as a way to break the impasse. But the military decided to remove Thaksin through a coup instead of waiting for the verdict of voters," he said. He also dissected the development of democracy in Indonesia since the fall of Suharto, saying that although political reform there had produced more checks and balances, it also made it harder for the country to push other critical reforms, such as fixing up its labour laws.

It was hard to disagree with his analysis of the Asian political system when he said that every country in Asia must take its own route and strike its own balance. Importing institutions from other countries and grafting them onto the local political system can end up doing more harm than good. In more ways than one, Singapore has found its own political niche, which it has guarded tooth and nail. One could detect the pride that Lee seems to feel over Singapore's model. It is just the right mix.

Unfortunately, Lee's comments were not taken very well in Bangkok, not to mention "shock and deep concern" expressed by Foreign Minister George Yeo in New York. Over the weekend, the Foreign Ministry had made its position known to the Singaporean Embassy. It is not that the Thais are not used to harsh comments on its political system. The issue is where they come from. The United States - particularly certain American Congressmen - was the first to condemn the Thai coup and was the only country to suspend all bilateral assistance. Bangkok could not have cared less. After all, US Ambassador Ralph Boyce was the first foreign diplomat to congratulate the new prime minister, General Surayud Chulanont at Government House last Monday. Singapore was also among the three countries along with Laos and China to send a letter of congratulations to Surayud.

Some Thai officials bluntly rejected Lee's comments, saying they displayed a high level of political arrogance and indifference to the Thai political situation. They expected Singapore, as a strategic partner, to have more a moderate view. As they saw it, Singapore's strong words about the coup and Thailand's democracy seemed closely linked to the island state's blind support of Thaksin over the past five years and the perceived loss of opportunities and benefits involving the mega Shin-Temasek deal.

The deposed Thai leader was seen as a student of Minister Mentor Lee Kuan Yew's political philosophy. The senior Lee saw in Thaksin a leader with great potential and awarded the Thai with a fellowship under his name in 1996, the first foreign politician to receive such an honour. Thaksin was hooked.

He even declared at one time that he would make the Thai provinces into several Singapores. One of Thaksin's long-held plans was to implant the Singapore press model on the Thai press.

That explains why Thaksin was considered a buddy of the island state's leaders. In the past five years, they saw eye-to-eye on how the region could develop and compete with others. He and former prime minister Goh Chong Tong jointly called for an acceleration of Asean economic integration and several other schemes. Singapore's confidence in Thailand's economic performance shot up under Thaksin and served as a key factor in luring investors, including those belonging to the government, to pour money into this country. Now Singapore's level of investment rivals that of Japan and Taiwan.

The "win-win" mentality ignored the political risk associated with Thaksin's leadership and abuse of power, which reached its peak right after he won his second election in 2005. Indeed, Temasek was not the only organisation that had placed all its chips on Thaksin. Many Western corporate leaders in the US and Europe were supporters and were equally impressed with his economic vision. Fortunately they had their views vetted by independent experts before making any decisions.

Last week the Supreme Administrative Court accepted to consider a petition to revoke the licences of Shin Corp because of its deals with Temasek Holdings. However the case is resolved, the ramifications for the future investment climate and the state of Thai-Singapore relations will be serious. It is therefore imperative for the two countries to hold talks and establish a new rapport so they can move past the dramatic changes that have taken place. Both sides have to make sure that it will not directly affect the fledging defence cooperation.

In the end, the coup was a big - or rather a mammoth - setback for Singapore's interest in Thailand. It also exposed Temasek's way of doing business and the nature of its corporate governance. Obviously, the island republic does not worry about democratic development here.

Thailand's democracy will move on, with ups and downs that reflect its distinctive home-grown situation. At the end of the day, Thailand will remain an open society that tolerates dissenting views from the opposition, civil society organisations and media.

Kavi Chongkittavorn