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Their armed forces expansion programme has been designed, in conjunction with us, on the basis that they could depend on us, under the general terms of the Agreement, for certain expensive categories of sophisticated
defence, for example, fighter aircraft, ground-to-air missiles, and
armour Their demands for such equipment will no doubt be pitched high.
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19. It is impossible to say what would be the Malaysian attitude to the future of the Defence Agreement. The Tunku has recently expressed the hope that Britain would never withdraw her troops "amounting to an abrogation of the Defence Agreement with Malaysia". In the short term, when we still have forces in the area, they would see advantage in its maintenance. But should we not prove generous in cushioning the economic
consequences of our force reductions, they might consider their interests
lay in denouncing it. The terms of the Agreement allow us to sell our facilities; and although we might have to agree to hand large parts of
then over to the Malaysians when we left, we should at least be able to take credit publicly for so doing, Other installations and equipment might be sold to private buyers. If they denounced the Agreement, the Malaysians could expropriate our facilities without payment, and this would affect our occupation of the Singapore base. While each party to the Defence Agreement has the right to suggest its review should this
seem necessary for any reason, there is no guarantee that the Malaysians would necessarily accept whatever amendments we proposed and they could effectively nullify it. They would be likely first to try to hold us to our full obligations under it, and our means of counter-pressure by withholding aid might well not in practice be of much effect.
Singapore
20. The Singapore Government for their part value our military presence partly on economic grounds and partly for the preservation of their own independence. Unless we treated them generously, they could bring considerable pressure to bear on us. We have no defence agreement with them, and in the last resort our forces are in the island because the
Singapore Government have stated that they consider that the 1963 Malaysian Defence Agreement continues to apply to Singapore. They could clain that we should vacate the properties we hold, and there is ample scope for administrative irritants which they could employ to make our occupation of the Base impossible. Whatever the size of forces we decided to retain in Singapore during the later stages of the rundown we would still employ a substantial civilian labour force and occupy a
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