Singapore Defence and Security Report Q3 2010

Singapore itself is a wealthy and extremely successful country located between emerging powers India and China and neighbour to much less stable nations such as Thailand, Myanmar and Cambodia. Half of the world’s oil and 25% of all other cargoes pass through the Singapore Strait. As put very succinctly in the 2010 Budget papers the defence priority for Singapore is ensure that it retains ‘unimpeded access to its air and sea lines of communication’. To that end, the country maintains a small but extremely well-equipped military and a defence budget of SGD11.5bn per annum. There is a significant defence infrastructure business built around the various companies in the Singapore Technologies Engineering Group, which now operates in a number of different countries.

The Malacca Strait between the Malayan peninsula and the Indonesian Island of Sumatra remains at risk from pirate attacks. Singapore is working with other states in the region to contain that threat. In March 2010, Singapore warned of a potential terror attack on oil tankers passing through the Malacca Strait, citing ‘intelligence from liaison partners’. At the same time, security was increased at Changi Airport and new casino resorts. It is believed that Islamist militants favour targeting the Malacca Strait in order to disrupt global shipping.

Within a regional context, Singapore and the waters around it are sensitive for China, India and the US. Each has strategic interests that it looks to safeguard. The US has been the overwhelming naval power globally for some years but may not be able to afford to maintain that position into the future. China clearly sees the need to ensure its trade routes are not compromised. It is building its naval capabilities and also facilities (useful for both commercial and military purposes) along what has been called the ‘String of Pearls’ around the coastline as far as Bangladesh. India also wants to extend its influence and is wary of China’s expanding presence.

Economically, we are forecasting a strong rebound to 7.0% GDP growth this year. However we expect this will fall to 4.3% next year. The higher growth in 2010 will be due to recovery from a low in 2009 plus a natural slowdown as the inventory restocking effect wears off.

Politically, Singapore is exceptionally stable, having had the same party in government since independence in 1965. While there are alternative scenarios the most likely outcome is that for the foreseeable future the government will remain in power just so long as they can keep delivering good economic growth.