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Australia and New Zealand
15. Australia and New Zealand attach great importance to the British presence in the Far East, and in particular to our holding the Singapore/ Malaysia base complex. They have not subscribed to the "peripheral strategy" and will argue that the presence of our forces in Singapore and Malaysia is the best guarantee of orderly development and stability in an area which they at least regard as of vital strategic importance to them. They will find our change of policy hard to understand in view of the frequent Ministerial statements of the importance we attached to a British military presence in the Far East. They will be sceptical of the value of any future assurances about our continuing military role in the area. This might be modified to the extent that we showed ourselves ready to commit ourselves politically by basing some forces in Australia if this was their wish.
16. Even so the psychological shock to public opinion in Australia and New Zealand would be very great, and we would be assumed to have chosen Europe to the exclusion of all else, These countries would be drawn
even more closely into the orbit of the United States. We could probably not escape some reaction on our commercial interests. The longer term reactions of Australia and New Zealand would to a certain extent be governed by those of the United States.
17. What we can do to soften this response is primarily a question of the way in which our discussions with them are handled, to which we refer later when we amplify the following points, Clearly our decision must be justified primarily as a sensible way of making the savings needed for the health of our economy; but we should also point out the political advantages we saw in our new strategy and emphasise that we should still stand by them militarily when necessary and would be doing all we could to mitigate the impact of our withdrawal on the stability of the area.
Malaysia
18. Even the 50 per cent force reduction by 1970-71 will require the Malaysians to rethink their future defence and foreign policies. They will conclude that they can no longer count on us to help them effectively in all the circumstances envisaged in the Defence Agreement, and in parti- oular they will assume that we would do everything possible to avoid supporting them against a renewal of Indonesian aggression. unlikely that they could find another powerful ally to take our place.
It seems
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