SINGAPORE - Singapore is urging local businessmen to explore investment opportunities in Sri Lanka following the defeat of the Tamil separatist insurgency there, a report said here Monday.

"Our business community should take an interest in what's happening, assess the risk and be aware there is a new situation," Foreign Minister George Yeo was quoted by the Singapore Straits Times as saying during a visit to war-scarred Jaffna.

"We have historical ties with Sri Lanka and it is an asset that may achieve some value," he told Singapore media Sunday at the end of a four-day trip to the island.

Yeo said he had a sense of "cautious optimism about Sri Lanka's future" as it emerges from four decades of war between the central government and the Liberation Tigers of Tamil Eelam (LTTE).

Government forces overran the Tigers' last jungle holdout in northeast Sri Lanka in mid-May, ending their struggle for an independent Tamil homeland, one of Asia's longest-running ethnic conflicts.

But Yeo said there were still latent problems to be resolved in the wake of the conflict.

"The key question is whether national reconciliation is achieved... The LTTE is destroyed but the underlying problem is not resolved, which is the contradictions between Sinhalese, Tamils and, to a lesser extent, Muslims."

About nine percent of Singapore's multi-ethnic population are Indian, and many of them are Tamils, while Tamil is one of Singapore's official languages.

Singapore's trade with Sri Lanka totalled 1.49 billion Singapore dollars in 2008, just 0.42 percent of the city-state's total trade last year.

Singapore's total foreign direct investment abroad stood at 260 billion US dollars as of 2007.