ExclusiveMalaysia fears military ‘miscalculation’ near Sabah amid US-China rivalry

Malaysia faces a growing risk of miscalculation near its state of Sabah as US-China rivalry drives more military activities into the waters around Borneo, its defence minister has warned, bolstering the government’s push for higher spending on its armed forces. The concern is particularly acute for Malaysia, a South China Sea claimant that has long sought to keep close economic ties with China while avoiding alignment with either Beijing or Washington and is feeling further unease over the expanding US-Philippine military presence just north of Sabah. Malaysian Defence Minister Mohamed Khaled Nordin told This Week in Asia that Putrajaya did not regard the Philippines, the United States, China or any other country as a specific threat, but said the increase in military activities across the region had created a more complex and potentially combustible security environment. “When you have more military assets operating within a relatively confined geographical space, the possibility of miscalculation, misunderstanding or even a small incident escalating into something more serious naturally increases,” he said. “Geographic proximity is therefore an important consideration for us,” Khaled added. “Even if an incident does not directly involve Malaysia, any escalation in areas close to us could have wider implications for our security and for stability in the South China Sea.” His remarks provide the clearest explanation yet from Malaysia’s defence establishment of the thinking behind Prime Minister Anwar Ibrahim’s push for higher military spending, after Anwar publicly singled out the expanding US-Philippine military presence on Balabac Island, just north of Sabah. Anwar said on Tuesday during an engagement session at the Finance Ministry for the 2027 budget that Malaysia might need to spend “hundreds of millions, or even a billion ringgit” to strengthen Sabah’s defences, arguing that the country needed adequate capabilities as the strategic environment around the state changed. “This is no longer an ordinary region. It is increasingly becoming a focal point of tensions between two major powers, the United States and China,” state news agency Bernama quoted him as saying. Balabac, at the southern tip of the Philippine province of Palawan, lies 50km (31 miles) from the Malaysian islands of Banggi and Balambangan. The latter hosts a maritime radar installation covering much of northern Sabah. Crowded waters In 2023, Balabac was one of four Philippine military sites added to the Enhanced Defence Cooperation Agreement (EDCA) between Manila and Washington, bringing the total to nine. The US Defence Department said in April that year the expanded network would strengthen interoperability between the two allies and allow them to respond more readily to shared challenges across the Indo-Pacific, including humanitarian disasters. Balabac sits between the South China Sea and the Sulu Sea, close to Malaysian territory, where US forces have shown their prowess with their military hardware in recent months. During the annual Balikatan exercises in May involving troops from the Philippines, the US and other countries, US soldiers fired a rocket from an M142 High Mobility Artillery Rocket System (HIMARS) on the island. The US Army said HIMARS deployed there could be used to protect shipping entering the Sulu and Celebes seas. Although Anwar stressed that relations with Philippine President Ferdinand Marcos Jnr’s government were “very good”, he said Malaysia was “naturally somewhat concerned”, citing both Balabac’s proximity and Manila’s long-standing territorial claim over Sabah, according to the Bernama report. The Philippines reaffirmed its sovereignty claim over Sabah in February, saying existing legislation continued to preserve Manila’s claim to parts of North Borneo. Georgi Engelbrecht, senior analyst for the Philippines at the International Crisis Group, said Balabac was becoming an increasingly important part of Manila’s defence planning because of the Balabac Strait, a critical passage between the Sulu Sea and South China Sea. But he said Malaysia had little reason to regard the Philippine infrastructure itself on the island as a direct threat. “It is the cooperation with the US [and the Philippines] that makes Malaysia reflect,” Engelbrecht told This Week in Asia. “For now, both forces are conducting exercises and strengthening alliances. But it is not impossible [that] US forces near Malaysia make some politicians and thought leaders in Kuala Lumpur uncomfortable.” He said the unease stemmed partly from the proximity of US forces and fears of conflict, particularly as Chinese vessels, including People’s Liberation Army ships, also operated around Palawan. The Sabah dispute itself was unlikely to disappear, Engelbrecht said, noting that Philippine politicians periodically revived the issue and that it remained embedded in domestic politics. “The concern is no longer the legacy of Lahad Datu, but how this dormant dispute might be resurfacing amid growing great power competition,” he said. In 2013, followers of the self-proclaimed Sultanate of Sulu landed in the coastal town of Lahad Datu in eastern Sabah to press their territorial claim, triggering weeks of fighting that killed over 50 militants and 10 Malaysian security personnel. Florence Principe Gamboa, a Philippine-based analyst and fellow at research firm Verve Research, said Balabac had been part of Philippine defence modernisation even before it was designated an EDCA site. Its location close to the West Philippine Sea, Manila’s term for parts of the South China Sea within its maritime jurisdiction, and the Philippine-held Kalayaan Island Group had long made it strategically important, she said. US support was increasingly vital to Manila’s maritime security, Gamboa said, while also providing “a counterweight to maritime coercion” for other regional states confronted by China’s growing assertiveness. “It also complicates navigating great power competition, especially for states like Malaysia that prioritise non-alignment and neutrality, given their strong economic ties with China,” she said. Bigger arsenal Malaysia was already planning to increase defence spending before the latest concern over Balabac. Khaled said the country intended gradually to raise defence expenditure towards 1.5 per cent of gross domestic product by 2030, describing the increase as part of its long-term defence modernisation plans. In comparison, Malaysia allocated about one per cent of its GDP on defence spending in 2025. Malaysia allocated 21.74 billion ringgit (US$5.4 billion) to the Defence Ministry under its 2026 budget, including 6 billion ringgit for the acquisition of strategic assets. Khaled cautioned, however, against interpreting the planned increase purely as a response to the US-Philippine build-up. Cyber and electromagnetic threats, along with mass misinformation campaigns, had also transformed Malaysia’s security requirements, demanding investment in capabilities beyond conventional weapons platforms, he said. When asked about the higher defence spending, Malaysia-based defence analyst Zaki Salleh argued that Sabah urgently needed stronger maritime surveillance, including radar, drones and patrol aircraft, as well as better air defences and rapid-response capabilities. He said Malaysia should acquire another three Anka-S medium-altitude long-endurance drones, continue procuring its next batch of littoral mission ships and establish an army aviation helicopter squadron in Sabah. Military bases, maintenance facilities and resilient communications infrastructure in the state also required improvement, Zaki said. Ian Storey, a principal fellow at Singapore’s ISEAS-Yusof Ishak Institute, said Malaysia faced three pressures: intensifying great-power rivalry, recurring South China Sea tensions and Malaysia falling behind some of its neighbours in military capabilities. He said Kuala Lumpur should invest in longer-range, longer-endurance surveillance drones and eventually heavier fighter aircraft, while noting that Malaysia’s traditional reluctance to confront China meant its surveillance drones would probably remain unarmed. We do not want developments in the region to be framed as Malaysia choosing one side against another Mohamed Khaled Nordin, Malaysian defence minister China asserts sweeping sovereignty across much of the South China Sea, overlapping with the maritime claims of the Philippines, Malaysia, Vietnam and Brunei. Malaysia has generally adopted a less confrontational posture towards China than the Philippines over territorial disputes, even while rejecting Chinese claims that overlap its exclusive economic zone and continuing oil and gas operations in disputed waters, according to analysts. Khaled said Malaysia’s move towards enhancing its defence would not change that approach. “We do not want developments in the region to be framed as Malaysia choosing one side against another,” he said. “Our concern is about maintaining regional stability and ensuring that strategic competition between major powers does not create unintended consequences for Asean countries.”

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Defence Minister Mohamed Khaled Nordin says any escalation in areas close to Malaysia could have wider implications for its security

Defence Minister Mohamed Khaled Nordin says any escalation in areas close to Malaysia could have wider implications for its security