Lee told Thai Prime Minister Surayud Chulanont that he did not see the Shin Corp deal affecting relations between the two countries, said the Straits Times.

Lee met Surayud on the sideline of the Asean-China Summit in Nanning in China on Monday. It is their first meeting since Surayud's appointment on October 1.

Speaking to the Singapore media after the meeting, Lee said he told Gen Surayud that Temasek's purchase of the telecom giant was "a clean deal".

"There was nothing offshore, there were no separate side payments," the Singapore-based newspaper quoted Lee as saying.

"It was completed on the stock exchange. It may become a political issue but I wanted him to understand that this was how the deal came about.

"So he said, yes, he understood. He had spoken to his commerce minister and, as far as he was concerned, there was no reason the deal should affect our bilateral relations because it shouldn't be politicised and it should be managed in accordance with the laws of Thailand, which I think is the correct position to take."

Temasek, the Singapore Government's investment company, was involved in a major controversy over the purchase in January of a 49.6 per cent stake in Shin Corp from former prime minister Thaksin Shinawatra's family.

The US$1.9 billion (S$2.9 billion) Shin Corp sale was by a Temasek-led group and the deal is now being investigated by Thai authorities after allegations that control of strategic national assets had fallen into foreign hands.

Lee said he explained that Temasek operated on commercial principles. It had gone into the deal on the basis that Shin Corp was a good company and Thailand a good country, with a promising economy, the paper reported.

Temasek went in according to Thailand's rules and laws, took legal and professional investment advice, and had reputable partners who could add to the consortium which was investing in Shin Corp.

He described Gen Surayud as "a good friend of Singapore's".

Lee has known Gen Surayud since the early 1980s when both were in the army and worked together on the Cambodian issue. Singapore and Thailand supported the non-communist elements of the Cambodian government, which was ousted by the invading Vietnamese forces at the time.

"General Surayud was then in the special forces unit which was supporting this operation and I had contact with him then. So we go back a long way," Lee said.

 "The relations date back a long time, back to when General Prem [Tinsulanonda] was prime minister ... In fact, to before that. In fact, we've been friends through successive Thai governments - with Mr Anand [Panyarachun] and Mr Thaksin and now with General Surayud. And we would like the good relations to continue and to prosper and he shared that view."