Singapore Defence & Security Report Q3 2013 - New Market Research Report

Singapore has the highest security risk rating of any country in the Asia-Pacific region, reflecting its internal stability and its increasingly benign external security environment. In part, this low threat level is a product of Singapore's own defence policy. Though one of South East Asia's smallest countries, it continues to spend more on defence in real terms that any of its fellow ASEAN members, and in terms of capability, its armed forces are vastly superior to their regional peers.

Strategically, Singapore has responded decisively to the changes in its geopolitical environment brought about by the rise of China - a development which has unsettled Singapore as it favours the status quo - by further strengthening its alliance with the United States and encouraging Washington to play a greater role in South East Asia. The most visible element of this strategic decision from Singapore's perspective is the stationing of up to four US Navy littoral combat ships in Singapore, the first of which, USS Freedom, arrived in Singapore on a 10-month deployment in April 2013.

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The Obama administration has embarked on a major diplomatic push in the Asia-Pacific region, with Singapore at the centre of those plans. However, somewhat contrary to this and despite political pressure, Singapore appears tentative about whether to procure the F-35 stealth fighter. This is the biggest procurement decision that Singapore currently faces and it could be the most expensive military programme in Singaporean history. For this reason alone, Singapore may opt out of ordering the aircraft this year, especially following setbacks for the F-35 programme in Australia and Canada.

Within South East Asia itself, we expect Singapore's military pre-eminence to remain unchallenged for the foreseeable future, with spending on defence set to remain high and a range of advanced new capabilities either already procured or in the process of being so. However, Singapore's 2013 defence budget rose by a relatively small amount, reflecting the Singaporean economy's disappointing growth in 2012. If the economy continues to perform poorly - and only 2.5% growth is forecast for 2013 - then Singapore could start to lose ground against some of its South East Asian neighbours, which are increasing their defence budgets quite aggressively.

In BMI's view, an economic downturn continues to pose the most significant threat to Singapore's defence strategy. Singapore devotes an exceptionally high proportion of its national budget to defence and any economic volatility could affect the country's ability to spend its way out of trouble when it comes to matters of security. The national economy's poor performance in 2012 is therefore a matter of concern in security terms.

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