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HIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT)
CMV(67)6 FINAL
COPY NO 22
8 June, 1967
VISITS OF COMMONWEALTH MINISTERS TO DISCUSS FAR EAST DEFENCE JUNE, 1967
Economic Aid for Malaysia and Singapore
Brief by Ministry of Overseas Development
Talking Points
1. The proposed reduction in British forces in Malaysia and Singapore will create economic problems for both countries though their magnitude both in absolute terms and in relation to the economy will be much greater in Singapore than in Malaysia. In Singapore it is estimated that British military expenditure in 1966 accounted directly for some 13 per cent of the G.D.P. and allowing for indirect effects for some 22 per cent. In Malaysia the corresponding proportions are 1.6 per cent and 4 per cent respectively.
2. We recognise that significant economic assistance will be needed in both countries to mitigate the short term effects on income and expenditure of the rundown and to assist in promoting the longer term adjustments which will be needed. This will be of particular importance in Singapore where it is estimated that the military authorities and forces personnel are currently employing directly about 9 per cent of the total labour force and a long term solution to the problem must involve the redeployment of this labour force into activities which either increase export earnings or reduce imports. The problem is further complicated by the very limited resource base of the Singapore economy and her limited domestic market.
3. The amount of economic assistance which will have to be provided has yet to be assessed in full and will, in any case, be the subject of negotiation between ourselves and the two governments. In the case of Singapore it is likely to take the form of supporting assistance designed to mitigate the balance of payments effects of the rundown, and to enable the Singapore Government to increase its expenditure so as to absorb into useful activities those made redundant by the rundown who cannot secure jobs in trade or industry. This assistance will be complemented by capital aid designed to assist the country to develop new activities which will replace both the foreign exchange earnings and the employment opportunities lost by the rundown.
4. The problem will not be solved merely by financial aid, however; technical assistance will be needed, particularly for vocational training and retraining. Moreover, we would hope through our supporting and capital assistance to provide an environment which will attract private investment. For in the particular conditions of the Singapore economy private invest- ment must necessarily play a large part in developing the economy. We would welcome participation of other countries in this field, particularly Australia and New Zealand.
/Finally,
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