Singapore-based newspaper quoted Lee as saying Surayud that Temasek's purchase of a stake in Shin Corp from the family of ousted prime minister Thaksin Shinawatra was above board.

"There was nothing offshore, there were no separate side payments. It was completed on the stock exchange," Lee said.

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

Lee said he agreed with Surayud's position that there was no reason the deal should affect bilateral ties.

The Thai government on Monday vowed not to interfere in an investigation by Thai authorities into the deal.

Thaksin's family sold their 49 per cent stake in Shin Corp to state-linked Temasek for 1.9 billion dollars under a tax-free deal in January, triggering months of street protests that eventually led to last month's military coup.

After the 49-per cent buyout, a Temasek-led group of investors increased its total stake to 96 per cent through a mandatory offer for the outstanding shares, sparking allegations of a possible violation of foreign ownership rules.

Under Thai rules, foreign investors can own up to 49 per cent in telecom companies. The question is whether local entities acted on Temasek's behalf, in which case their holdings might not be counted as separate.

Lee also described retired general Surayud as "a good friend of Singapore's", saying he has known him since the early 1980s when both were in the army and working for a resolution of the Cambodian problem.

"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. I told him we would like our good relations with Thailand to continue," said Lee, a former brigadier general.

By the Straits Times/Asia News Network