Quora Answer: What are the Structural Obstacles Preventing Danantara from Delivering Sustainable Returns?

The following is my answer to a Quora question: “What are the biggest obstacles to Indonesia’s sovereign wealth fund, Danantara, delivering high and sustainable returns?”

How about everything about it?  Indonesia launched Danantara — Daya Anagata Nusantara — on 24^th February 2026.  President Prabowo Subianto described it as the vehicle that would transform Indonesia into a developed nation.  Its initial capitalisation was US$20 billion.  Its projected AUM target is US$900 billion.  It is simultaneously the most ambitious sovereign wealth fund ever launched in Southeast Asia and the one with the least credible foundation for achieving anything it has promised.  The ambition is not in question.  The architecture is.  And the architecture is a disaster.

The Governance Problem: A Family Business Masquerading as a Sovereign Fund

I will dispense with diplomatic language.  Danantara’s governance structure is not merely imperfect.  It is a textbook example of how to design a sovereign wealth fund for political extraction rather than investment performance.  Prabowo appointed his son, Didit Hediprasetyo Prabowo, to the supervisory board.  His close political ally, Muliaman Hadad, chairs the board.  The Chief Investment Officer, Pandu Sjahrir, is the nephew of Luhut Binsar Pandjaitan — the former Coordinating Minister for Maritime and Investment Affairs, a man whose fingerprints appear on virtually every major economic decision in Indonesia for the better part of a decade.  This is not a coincidence of talent.  This is a political architecture dressed in investment vocabulary.

The sovereign wealth funds that actually deliver sustainable returns — Norway’s Government Pension Fund Global at US$1.7 trillion, Singapore’s GIC, Abu Dhabi Investment Authority — share one defining feature: the insulation of investment decisions from political influence.  This insulation is not peripheral to their success.  It is the mechanism of their success.  Remove it, and you do not have a sovereign wealth fund.  You have a state slush fund with a better brochure.  Danantara has not merely failed to achieve this insulation.  It has structurally guaranteed its absence.  The presidential family is on the supervisory board.  The political inner circle controls the chair.  The CIO reports to a governance structure whose primary qualification for appointment was proximity to power rather than proximity to returns.

The regional cautionary tale is Malaysia’s 1MDB — which began with a legitimate developmental mandate, a governance framework that looked defensible on paper, and ended as a US$4.5 billion fraud that implicated Goldman Sachs, consumed a Prime Minister, and produced one of the most embarrassing money-laundering investigations in the history of global finance.  1MDB’s governance looked fine on paper too.  The paper was the problem.  Danantara’s governance does not even look fine on paper.  The political capture is visible, documented, and apparently unembarrassing to its architects.  That lack of embarrassment is itself the most alarming signal.

The Legal Framework Problem: Built on Sand

Danantara was established through Government Regulation Number 10 of 2026 — not through dedicated primary legislation passed by the DPR.  This means the next President of Indonesia can materially alter Danantara’s mandate, governance structure, and investment framework without parliamentary process.  The investment commitments Danantara makes to international co-investors — joint ventures, infrastructure mandates, long-term capital commitments — are made on the basis of an institutional framework that is legally less durable than a mid-sized Singaporean company’s articles of association.

International institutional investors — the pension funds, endowments, and sovereign funds whose participation Danantara needs to approach its stated scale — evaluate counterparty frameworks partly on their durability.  A fund whose legal basis can be rewritten by executive decree between one administration and the next is a fund whose commitments are worth precisely as much as the current government’s intention to honour them.  Which is to say, they are worth whatever political convenience determines at any given moment.  This is not a theoretical risk.  Indonesia has changed governments before.  Indonesian administrations have reversed predecessor commitments before.  The infrastructure investment landscape is littered with project agreements that the subsequent administration found inconvenient to honour.  Danantara’s regulatory architecture provides no protection against this pattern.  It institutionalises it.

The Accountability Vacuum: No Audit, No Accountability, No Credibility

Danantara’s assets are explicitly excluded from oversight by the BPK — Indonesia’s supreme audit agency.  The justification offered was that standard government audit processes are too slow and insufficiently commercially sophisticated for a fund operating in competitive global capital markets.  This argument is so transparently self-serving that one is almost impressed by the audacity of its proponents.

The Santiago Principles — the voluntary governance framework endorsed by 26 sovereign wealth funds including GIC and Temasek Holdings — explicitly require independent external auditing as a condition of institutional credibility.  Danantara’s architects apparently reviewed these principles, noted the audit requirement, and decided that Indonesia’s sovereign wealth fund would be the one exception.  Without BPK oversight, Danantara’s financial performance is whatever its management and supervisory board choose to report.  There is no independent verification mechanism.  There is no external audit trail.  There is no accountability architecture that would allow Indonesian citizens — whose SOE dividends are capitalising this fund — to determine whether their capital is being competently managed or quietly redirected.

1MDB had internal audit functions.  It had external auditors.  Deloitte, KPMG, and Ernst & Young all signed off on 1MDB accounts at various stages.  The fraud persisted for years because the audit mechanisms had been captured by the same political relationships perpetrating it.  Danantara has dispensed with even the pretence of independent external oversight.  1MDB at least maintained the fiction of accountability.  Danantara has not bothered with the fiction.  The exclusion of a US$20 billion public fund from independent audit oversight is not a governance innovation.  It is a governance catastrophe — one that signals, with remarkable clarity, that the fund’s architects anticipate needing to do things with the money that independent auditors would find difficult to approve.

The Mandate Confusion: Designed to Fail, Designed to Excuse Failure

Danantara’s stated mandate simultaneously requires maximum risk-adjusted commercial returns and strategic developmental investment in national priority sectors including food security, energy transition, and digital infrastructure.  These objectives are not inherently incompatible.  What makes them catastrophic in Danantara’s specific context is the complete absence of explicit prioritisation mechanisms, transparent trade-off documentation, or accountability frameworks that would allow anyone to evaluate whether the developmental investments are generating adequate returns or subsidising political vanity projects at the expense of financial performance.

This ambiguity is not an oversight.  It is a feature.  When investments generate strong returns, the government claims credit for sound commercial management.  When investments in politically strategic sectors — the President’s free meals programme, infrastructure in politically important constituencies, SOEs that employ people in swing regions — underperform, the developmental mandate provides perfect cover.  The dual mandate without prioritisation is a permanent accountability escape hatch, designed with the specific purpose of ensuring that no investment outcome can ever be definitively characterised as a failure.  A fund that cannot fail by definition cannot learn.  A fund that cannot learn cannot improve.  Danantara’s mandate architecture guarantees mediocrity as the ceiling rather than the floor.

The Talent Problem: You Get What You Pay For

Building a sovereign wealth fund capable of deploying US$900 billion requires investment professionals of exceptional quality.  GIC employs approximately 1,800 investment professionals.  ADIA employs approximately 1,700.  Both have spent decades competing for talent against the world’s leading investment banks, private equity firms, and hedge funds — offering compensation structures and institutional mandates that attract professionals who could work anywhere.  Danantara’s initial staff are drawn primarily from Indonesia’s SOE ecosystem and domestic financial institutions — institutions whose investment track records, commercial sophistication, and compensation structures are not the primary reference points for global institutional investment talent.

The fund has announced partnership discussions with BlackRock, Goldman Sachs, and others.  These partnerships — if they materialise, which is not guaranteed given the governance concerns — will provide deal flow and co-investment access.  They will not provide the internal capability to evaluate those opportunities intelligently, negotiate terms effectively, or manage the resulting portfolio.  You cannot outsource investment judgement.  You can only outsource the appearance of it.

The compensation structures available within a government-affiliated entity are constrained by civil service pay scales and the political optics of paying investment professionals international market rates while the President’s free meals programme consumes fiscal resources at record pace.  The talent required to run a credible sovereign fund at scale will not accept domestic civil service compensation.  The talent that will accept it is precisely the talent you do not want running a US$900 billion fund.

The Scale Problem: US$900 Billion is Not a Target.  It is a Fantasy.

Norway’s Government Pension Fund Global took approximately thirty years to reach US$1.7 trillion.  It was funded by a consistent, legally ring-fenced stream of petroleum revenue deposited according to a fiscal rule that limited annual domestic withdrawals to three per cent of fund value.  That fiscal discipline — maintained through multiple governments, multiple economic crises, and sustained domestic political pressure to spend the money — is what built the fund.  The discipline was the institution.  The money followed.

Danantara’s US$900 billion target rests on no comparable fiscal discipline.  It rests on SOE dividends — dividends from the same SOEs that are simultaneously being asked to fund their own operational development, to serve the government’s developmental mandates, and to generate the commercial returns required to sustain their own dividends.  This is a circular capitalisation strategy that depends on each component performing well enough to support the others — at precisely the moment when the Indonesian macroeconomic environment is providing the least favourable conditions for any of them.

The US$900 billion figure is not a financial projection.  It is a political aspiration dressed in a number sufficiently large to impress an audience that will not ask how it was calculated.  No credible methodology for reaching US$900 billion from a US$20 billion base — through SOE dividends, in a country whose fiscal deficit is surging, whose currency is at 1998 crisis levels, and whose international bank counterparties are repatriating capital — has been publicly presented.  Because no credible methodology exists.

The Macroeconomic Environment: Launching a Lifeboat in a Storm

The conditions into which Danantara has been launched are not merely challenging.  They are the conditions that make a poorly governed sovereign fund most dangerous.  Indonesia’s fiscal deficit surged to Rp240.1 trillion in Q1 2026 — more than double the Rp99.8 trillion of the same period in 2025.  Moody’s changed Indonesia’s credit outlook to negative in February 2026.  Fitch followed.  The Jakarta Composite Index has fallen approximately 32 per cent year-to-date — the world’s worst-performing major equity market.  The rupiah has collapsed to levels not seen since the 1998 Asian financial crisis that nearly destroyed the Indonesian state.

Citigroup, HSBC, and Standard Chartered repatriated Rp11.5 trillion from their Indonesian operations in two years — slightly exceeding their combined profits for the period.  The world’s most sophisticated institutional money is leaving Indonesia faster than it is arriving.  It is leaving because the risk-adjusted return on Indonesian exposure has deteriorated materially under the current administration’s fiscal and governance trajectory.

Danantara is being launched as a vehicle to attract the international capital that the Indonesian macroeconomic environment is simultaneously repelling.  This is not merely contradictory.  It is delusional.  International institutional investors evaluating Danantara as a co-investment partner will conduct the same risk assessment that led Citigroup and HSBC to repatriate capital.  The governance concerns, the political capture, the audit exclusion, and the macro instability will all appear in that assessment.  The conclusion will not be flattering.

The Verdict

Danantara is not a sovereign wealth fund.  It is a political vehicle with sovereign wealth fund branding.  Its governance architecture guarantees political capture.  Its legal basis guarantees institutional fragility.  Its exclusion from independent audit guarantees an accountability vacuum.  Its dual mandate guarantees cover for underperformance.  Its talent pool guarantees investment mediocrity.  Its scale target guarantees disappointment.  And its macroeconomic context guarantees that it will attempt all of these things in the least favourable conditions available.

The most charitable interpretation is that Indonesia’s technocrats are attempting to build something credible within the constraints of a political system that is structurally opposed to the conditions that credibility requires.  The technocrat’s dilemma in Indonesia is ancient and well documented — genuine professionals operating within political constraints, delivering what they can within what the system permits.

The less charitable interpretation — and the one the structural evidence more strongly supports — is that Danantara was designed primarily as a political instrument: a vehicle for directing state capital toward politically connected recipients, insulated from audit oversight, protected by a developmental mandate that provides indefinite cover for underperformance, and branded with sovereign fund vocabulary to attract the international legitimacy its governance architecture does not deserve.

The burden of proof lies entirely with the institution.  It has five years to demonstrate that the structural obstacles can be overcome.  It has chosen a governance framework that makes demonstration nearly impossible and a legal basis that makes the attempt reversible.  The Indonesian people, whose SOE dividends are funding this experiment, deserve considerably better than what has been built in their name.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Why Does Malaysia Not lead ASEAN Like Indonesia & Singapore?

The following is my answer to a Quora question: “Why could Malaysia not lead ASEAN like Indonesia and Singapore?” 

ASEAN is a regional grouping, with ambitions of moving towards a EU-style economic union.  It does not have an overt leadership hierarchy, although founding members carry more weight, and tended to work in concert.  Since it is not a hierarchical organisation, ASEAN does not have an established leadership structure with all members being nominally equal.  The ASEAN chair is rotated annually. 

All that aside, some countries are more influential than others within ASEAN, just as it is with other groupings.  Indonesia is the single largest member, with the most population.  Thailand is a regional security lynchpin.  Singapore is the wealthiest and holds the most strategic location.  In terms of international engagement, Singapore has the most influence to get international partners involved.  Throughout all this, Malaysia has lagged behind, with waning influence.  There are a few reasons for this. 

The first is that Malaysia’s political turmoil and recent changes in government means that they are not a credible dialogue partner.  Bilateral agreements carry little weight, regional and international treaties are ratified late or not ratified at all.  The economy is weak, and regressing.  This makes it difficult for Malaysia to have any influence on other members when its own government is severely lacking in credibility. 

The second is actually the legacy of Mahathir bin Mohammed.  His proposals for the direction of ASEAN, and the EAC were seen as overtly anti-American.  It was opposed by the United States and Japan, and the compromise was ASEAN Plus Three, which later evolved into the ASEAN Plus Six.  In a region made wealthy by international trade, Mahathir was protectionist, and Malaysia is still protectionist.  This limits her influence with dialogue partners, which in turn, diminishes her influence within ASEAN.

Quora Answer: Will Batam Become the Next Singapore?

The following is my answer to a Quora question: “Will Batam become the next Singapore?” 

What do you mean by the next Singapore?  In terms of being a sovereign city state, that is not going to happen.  The population of Batam is just over 1 million, which is small.  The population of the entire Riau islands is just over 2 million. 

In terms of geopolitical potential, however, Batam is strategic.  It can be built up as a refining, ship repair, and industrial park to leverage on its proximity to Singapore, just across the Straits of Singapore.  It sits at the natural junction between the Malacca Straits and the Sunda Straits.  It has the potential to be a rival air hub for the region.  It is surrounded by waters teeming with fishery and mineral resources.  It has fresh water resources.  Batam is not so much the next Singapore, as a complement to it.  Done properly, its population would explode and it would cease to be a backwater.  It may even be feasible, with all that development and increased population to have a viable land transport link between Batam and Singapore. 

Batam, like much of Indonesia, is potential.  Due to the state of Indonesia, it is wasted potential.  It would take a fundamental shift in thinking and values for Batam to actually live up to what it could be.

Indonesian Plans for a Carbon Tax

Indonesian plans to impose a carbon tax.  This was always expected.  Indonesia submitted its post-2020 climate pledges to reduce global emissions, their intended nationally determined contributions (NDC), to the to the United Nations Framework Convention on Climate Change (UNFCCC). 

Indonesia signed the Paris Agreement, and ratified it through Law No. 16 of 2016.  Indonesia submitted its NDC in 2016, and sealed its voluntary pledge to reduce emissions by 29% to 41% by 2030.  These are ambitious targets.  To achieve this emissions reduction target, Indonesia is in the process of drafting a more progressive emissions reduction scheme under the draft Presidential Regulation on Instruments of Carbon Economic Value for NDC (Carbon Economic Value Bill).  This will likely take a while, and there are contentions as to whether the government would reserve the sole right to regulate the trade, allow private transactions, or have a mix of both. 

The proposed scheme would be to regulate the carbon trade, provide payments based on performance in reducing greenhouse gas emissions, and impose a levy on carbon emissions.  The Carbon Economic Value Bill is in the process of being finalised, and is expected to enacted by the end of the year, or more likely, the first quarter of 2022. 

The current Indonesian administration is pursuing an amendment of Law No. 6 of 1983, the General Provisions and Taxation Procedures (Tax Law) to include a new carbon tax scheme.  The proposed amendment would be the fifth amendment to the bill.  This bill is registered with the Majelis Permusyawaratan as one of thirty-three bills included in the priority national legislation programme.  This bill is intended to become the legal basis to impose a levy on greenhouse gas emissions outlined in the Carbon Economic Value Bill. 

Under Indonesia’s Tax Bill (Article 44G), carbon emissions with a negative impact on the environment will be subject to a minimum carbon tax of Rp 75 per kilogramme of CO₂e or other equivalent measurement unit.  This would be around US$5.20 per tonne CO₂e.  The proposed carbon tax would be imposed on individuals or entities purchasing goods containing carbon or engaged in activities that generate carbon emissions.  The Tax Bill contains general carbon tax provisions, which include catch-all provisions to tax any goods or activities that cause environmental externalities, such as depletion of natural resources, environmental pollution, or environmental damage. 

According to the bill, goods containing carbon include, but are not limited to, fossil fuels that cause carbon emissions.  Regulated activities are defined as activities that produce carbon emissions in the energy and transportation, agriculture, forestry and peat lands, industry, and waste treatment sectors.  Indonesia’s NDC identified these sectors as the five main sources greenhouse gas emission contributions.  Aside from this, the full scope of the carbon tax is still undefined, and details are still scarce. 

If all five targeted sectors are taxed without any exemption, many businesses will be affected and will have to recalculate their strategies in response to a carbon tax that directly puts a price on greenhouse gas emissions.  Businesses in carbon-intensive sectors such as coal-fired power plants, oil and mining, pulp and paper, cement, plastic, petrochemicals, and palm oil plantations, among others, will be the most heavily affected.  Industry player have already voiced their concern, and there have been nascent attempts to lobby against it through business associations.  Their primary contentions that the carbon tax places too high a burden on businesses, and not the government.  Businesses have also questioned the calculation of the carbon tax rate. 

Brown energy companies are rightly concerned about the imposition of Indonesia’s carbon tax scheme.  It is expected that there will be incentives provided for taxpayers to lower their greenhouse gas emission.  It is expected that the carbon tax may help generate investment in the renewable energy sector.  This could support the government’s intention for renewable energy to account for at least 23% of the country’s total energy mix by 2025.  That is an ambitious goal.  Currently, the share of renewable energy is 10.9%.  Coal-fired plants dominate the supply of power in Indonesia and are a major source of revenue. 

It is expect that with the expected exponential increase in carbon credits, and the pressure on brown energy businesses, there will be an increasing shift to more sustainable energy generation.  It is about the money.  There is a blue ocean market for generating profit through the issuance of Verified Carbon Units (VCUs), and the sale of carbon credits on the international voluntary carbon market.  As the government moves toward the enactment of the Carbon Economic Value Bill, to regulate carbon trade and provide payments based on performance, more players will explore opportunities to generate additional revenue streams. 

There are a number of projects and initiatives that intend to take advantage of these new developments in carbon trading.  We will closely watch the market in the next few months to see if Indonesia can keep to the ambitious timetable it set.

Indonesian Sovereign Fundraising

Indonesia is a land of opportunities and contradiction.  According to a report by the World Economic Forum, Indonesia is projected to be the 5^th largest economy in the world by 2030.  Indonesia’s population is far larger than official count because of the ay census are conducted, meaning a greater potential customer base than most realise. 

The problem with Indonesia is finance.  Indonesia defaulted on its sovereign bonds during the Asian economic crisis.  This makes it very difficult for the country to access international banking facilities.  For them, raising funds is a huge challenge.  Indonesia’s sovereign rating is junk status.  She had to issue 50-year bonds at higher than average yields to even get this.  Where international finance will not go, Red Sycamore has.  We have the expertise and the connections to actually get projects off the ground.

Quora Answer: Why Does Lee Hsien Loong Not Communicate with His Malaysian & Indonesian Counterparts in Malay?

The following is my answer to a Quora question: “Why does Prime Minister Lee Hsien Loong communicate with the Malaysian Prime Minister and Indonesian President in English despite the national language of all three countries being Malay?  Should Malay not be used given that he is fluent in Malay and that can stabilise relations?” 

Firstly, Malay is not the national language of all three countries.  The national language of Singapore is Malay.  The national language of Malaysia is Bahasa Malaysia, which is almost identical to Malay, with slight differences in idiomatic phrasing.  The national language of Indonesia is Bahasa Indonesia, which is a form of standardised Malay, but distinct from Malay.  The same word may have vastly different meanings in Malay or Bahasa Malaysia, and in Bahasa Indonesia.  The variety of Malay spoken in in Singapore and Malaysia is a distinct dialect from Bahasa Indonesia.  This means there is a great possibility of misunderstanding. 

Secondly, the Federation of Malaysia, and Indonesia have a difficult history, the Konfrontasi.  Using one dialect would be unacceptable to the other due to national pride.  This is asking for trouble. 

Finally, English is the primary language of international diplomacy.  Treaties, agreements, and documentation may need to be filed at various supranational organisations such as the International Court of Arbitration, various United Nations Bodies, or the International Monetary Fund.  It is a matter of practicality.

Quora Answer: If War Broke Out between Malaysia & Singapore, Would Indonesia Help Malaysia?

The following is my answer to a Quora question: “If a war broke out between Malaysia and Singapore, would Indonesia help Malaysia?”

A shooting war between Malaysia and Singapore is extremely unlikely.  For such a scenario to develop, relations between these two have to plumb whole new depths, and no rational person sees that happening.  The most likely scenario would be Malaysia crossing the red line by reneging on the two long-term agreements, forcing Singapore to take military action.  Singapore’s military is currently better equipped to wage war due to chronic underinvestment and corruption in Malaysia, as well as inadequacies in the procurement process.

This is compounded by the fact that while Malaysia has a larger population base, it actually has a smaller military and a smaller trained manpower base.  This is because Singapore has conscription, whereas Malaysia is largely a volunteer force.  We must also consider that many of Malaysia’s better units are across the sea, in East Malaysia, and cannot be deployed in time to make a difference.  This means Singapore has a distinct advantage in force concentration, in addition to the huge technology advantage.

Indonesia has a large military force, but they are scattered throughout the archipelago, and they do not have the life capability to move a substantial force to support Malaysia in a land war.  Indonesia also lacks 4^th generation aircraft, or an adequate navy, meaning they have no means to protect their troops during their movement to the theatre.

All this is assuming that Indonesia would actually side with Malaysia.  Indonesia has a much closer relationship with Singapore.  The SAF trains more often with TNI than the MAF, and they have forged relationships across all levels, all the way to the executive office.  Malaysia and Indonesia have a difficult political relationship, and several major bilateral issues that are unresolved, from the treatment of Indonesian foreign workers in Malaysia, to border disputes.

From a political perspective, Indonesia would have already known that Singapore would be able to force Malaysia to the negotiation table for war reparations and settlement faster than they can mobilise.  In fact, they would welcome a quick resolution in order to keep the Malacca Straits open.  Why would they want to prolong the conflict, incur losses, and delay an inevitable Singapore victory over an unprepared MAF?  It makes no sense.  Indonesia is also a recipient of direct and indirect aid from Singapore.  Singapore has major investments in Indonesia.  The wealthy political elite keep their wealth in Singapore banks, and send their children to Singapore schools.  Many of these same people, including military leaders, also have property in Singapore, and even permanent residency.  In summary, no, Indonesia is not going to rush to Malaysia’s defence.  They have nothing to gain.

Quora Answer: Since I Have an Inheritance of $2.8 Million, What Investment is Suitable in Malaysia, Indonesia or Singapore?

The following is my answer to a Quora question: “I got an inheritance of $2.8 million.  I do not have any business skills.  What investment is suitable in Malaysia, Indonesia or Singapore?”

If you really did inherit that sort of money, I would assume that it would be in a bank account, or a series of bank accounts somewhere.  I would be very surprised if you are getting it in cash in a doughnut bag.  In such a case, the bank itself would contact you, and assign an investment banker to speak with you.  If the funds came via an insurance payout, the insurer would have one of their financial advisors or consultants contact you.

Even then, I would recommend you speak to different types of financial services consultants, and weigh your options, from banks, insurers and fund houses.  Spread your funds between these various types.  This is not something that can be done on a Quora answer since serious recommendations require a Financial Health Review, and that is done face to face.  This is a comprehensive fact find to ascertain your liquidity, your exposure and your investment horizon, among other things.

Quora Answer: Why Do Malaysians Consider Singapore Their Rival More Than Indonesia?

The following is my answer to a Quora question: “Why do Malaysians think of Singapore as their rival, and not Indonesia?” 

Malaysia and Singapore have a shared history, both under British rule, and were once one nation.  Indonesia was the Dutch East Indies, and have their own historical experience, distinct from British Malaya.  The rivalry between Singapore and Malaysia is due to the Separation, and is strictly political in nature.  This means it does not trickle down to the local populace, except in minor areas of contention, such as the ownership of cuisine and the origin of culinary favourites.  This, latter, series of contentions, has no real impact in the wider world.  If I like a dish, I do not really care where it came from.  I care about the price, convenience and taste. 

At a governmental level, Singapore and Malaysia chose very different paths.  Malaysia is a federal state with a rotating constitutional monarchy, predicated on the rights of certain groups superseding the rights of others, the so-called bumiputera policy.  Singapore is a socialist democratic parliamentary democracy that chose to be a meritocracy.  The rights of the Malays is a footnote in the Constitution, and specific to the areas of religion, Malay as the national language, and minor areas of preference in the community.  Due to the racialised nature of political parties in Malaysia, and the rise of Malay-supremacy as supported by UMNO, PAS and other groups, Singapore is a convenient bogeyman when addressing a domestic audience.  This does not make it a true rivalry since Singapore ignores or responds in a measured manner to this.  Singapore, being a trade and business hub, is focused on the macropolitical landscape.  The continued rule of the PAP since independence grants them the security of not needing to pander to a domestic audience to make difficult economic decisions. 

Malaysia has a much more diverse and contentious political landscape, which legislators having a history of hopping between parties.  This encourages a more incendiary form of hustings.  Malay supremacists within UMNO, and Islamofascists such as PAS regularly demonise the Chinese electorate and non-Muslims within their own country.  Singapore is a Chinese-majority state in a Malay sea.  It is a convenient bogeyman.  As a former Malaysian state that has achieved developed state by eschewing the apartheid policies of Malaysia, Singapore is a proof that the bumiputera policy does not work.

Quora Answer: Why is the Singapore Military Weaker than Her Neighbours Despite Having a Larger Budget?

The following is my answer to a Quora question: “Why is the Singapore military weaker than Indonesia, Vietnam, Thailand and Malaysia, despite having a bigger budget and cooler toys?”

In what way is the Singapore military weaker?  If your assumption is based on the various lists such as Global Power Index, these lists are essentially worthless in judging the capabilities of any military.  What they do, is give a list of the estimated manpower, the number of tanks, aircraft, and whatever else they choose to factor.  What they do not quantify is the quality, the performance, and the tactical integration of military units, and the quality of training.

For example, when we consider manpower, Singapore, due to its smaller population, is expected to have the smallest manpower base, but that it not how it works.  Due to conscription, and the reservist system, the Singapore Armed Forces has an effective manpower of just over 300,000, with a reserve pool of between 1.1 to 1.4 million men if it were in a state of total war.  This refers to the number of men who have basic military training, and can be deployed immediately to the front, with minimal training.

In contrast, Malaysia’s standing military is much smaller, which is also due to its smaller military budget.  There were abortive attempts to implement national service, but it was badly managed, and the system is not functional.  Furthermore, due to mismanagement and corruption, aside from select units, the vast majority of the Malaysian military are not trained in manoeuvre warfare, or even engage in active exercises at any unit level.

Indonesia has a massive military pool of more than a million active personnel, if we include the police and paramilitary personnel.  However, they are scattered across the archipelago engaged in what is essentially police action, and pacification.  The vast majority of them are not trained for s modern military conflict of a nation state level, and this can be seen in how they underperformed in Timor Leste, against what was essentially Australian and Singaporean units in an undeclared war for Timor Leste’s oil resources.  Indonesian generals utilise their men as a form of cheap labour, and not professional soldiers.

Thailand has a competent military, with a wealth of combat experience, stemming from fighting the Vietnam War, and in the various conflicts in Indochina thereafter, as well in undeclared military action on the Myanmar border.  Their Achilles’ heel is political interference, the rivalry with the police, and corruption.  They have struggled recently in pacifying the restive south.

Vietnam has a massive military, numbering well over a million active personnel, but they are in a demobilisation, and modernisation phase.  Just like Indonesia and Thailand, due to the size of the budget, the per capita spend per soldier is inadequate to ensure that they are fully equipped to fight a modern war.  This lack of funds also means that they do not have the means for military exercises of the scale and frequency required to bring many units to combat effectiveness.

In terms of aircraft, Singapore has, far and away, the largest modern air force in the region.  They also have the pool of pilots, and the logistics, to keep an air campaign going on for several weeks.  Thailand is the only other nation in the region with over the horizon interdiction.  Singapore is also the only air force in Southeast Asia with an established air-to-air refueling capability, extending the operational range of their combat aircraft.  The only regional nations that can do that is Australia.  Singapore’s real strength, however, is in its airborne early warning, and satellite targeting system.  Aside from this, Singapore is actively amassing a massive drone fleet.

In terms of naval power, whilst Singapore has a smaller number of surface vessels, and submarines, it has the most modern.  The RSN fields the only stealth frigates in the region, with the capability of providing a significant anti-aircraft envelope around the fleet, allowing for force projection beyond the horizon.  With the impending acquisition of the F-35 IIs, and the JMMS, Singapore has a carrier fleet in all but name.

In terms of overall military, Singapore has the most modern force, with a special emphasis on force multipliers, and team warfare, meaning that all branches of the military, and the civilian defence structure, function as an integrated unit.  The country has the money to invest in fighting the next war, and the R&D capability to develop the indigenous capability to support the military.  This is while its neighbours are still in an extended modernisation phase.

For example, Indonesia spent billions acquiring the old East German Navy, with little consideration for the fact that a surface fleet built for the Baltic and North Atlantic waters, is unsuitable for tropical waters.  The result is that while the numbers look impressive, these ships were floating scrap metal by the time they arrived.

For example, Vietnam had, at one time, over a thousand combat aircraft, on paper.  However, due to a lack of spare parts, maintenance personnel, pilots, and even a proper integrated command structure, most of them were not airworthy, let alone combat effective.

Another consideration is not just the numbers, but whether these countries have the ability to deploy their manpower and weapons in theatre.  Indonesia, Malaysia and Vietnam lack the lift capability, both air and sea, to bring their military to bear effectively.  Vietnam is a land-based military, with a lot of old tanks and APCs, but no adequate anti-air envelope.  Indonesia is based on an archipelago, but they do not have enough ships to move that massive number of men and supplies in a reasonable window to take decisive military action anywhere but at the Kalimantan border.  They do not even have the naval superiority to protect their convoys.

Strictly from a military perspective, none of these countries are a serious military threat to Singapore.  Such is the integrated nature of their economies, and the framework of ASEAN, no one has any reason to resort to war.  For countries such as Vietnam, Indonesia and Malaysia, they need a stronger military to project some sort of military presence to deter Chinese claims in the South China Sea.  At the moment, they are woefully outgunned, even collectively.