Different press post different headlines. Some suggested that LKY thinking of merging with Malaysia, some describe until LKY trying to create controversy with Malaysia by saying that they discriminate against their minorities. The topic on Malaysia was only a small part of the interview though.
Singapore will never merge with Malaysia. It is as remote a possibility of South Korea merging with the North.
As LKY mentioned, once the Malaysian administration puts meritocracy as its priority, then will there be a chance. To his credit, the old man has certainly spoken some wise words here.
Malaysia pays too much attention to "cronyism", favouring royalty and relatives of infulential people. Schools, from the elementary level to varsity standard, cheat in exams and it's their bloody culture. And with pro Malays Bumi policy in force, forget it.
Singapore's system will never tolerate a rotten culture as such.
There is a theory in Malaysia that SG govt and their govt best of friends. Everytime there is a domestic problem in Malaysia LKY will shoot his mouth. UMNO members will then KPKB one by one and condemn SG and LKY etc, stirring up nationalistic feelings. Thereafter, the domestic problem simply fades away from discussion.