SINGAPORE will increase its expenditure by 12.5 per cent this financial year as it allocates more of its revenue to defence, manpower and transportation ministries to maintain security and boost growth.

The Government will spend an estimated $37.5 billion in the financial year starting April 1, from $33.3 billion in the current period, the Finance Ministry said in a budget report on Friday.

'We have the resources and the capacity to look ahead and position ourselves to deliver more years of good growth and quality jobs for our people,' Finance Minister Tharman Shanmugaratnam told Parliament in his budget speech on Friday.

Singapore's government, like its Asian counterparts, is trying to control rising inflation while battling to keep its economy growing amid concern the US, the nation's single largest export market, will slip into a recession.

More than a quarter of its expenditure, or $10.8 billion, will be directed to defence - an increase of 7.2 per cent over last year's budget.

Singapore, which has one of Asia's most modern armed forces, spent S$10.08 billion for defence in 2007 and $ 9.63 billion in 2006.

Singapore's defence minister Teo Chee Hean has defended the high military spending as an 'insurance policy' in a country with no buffer zone against potential aggressors.

Earlier this month, Singapore commissioned three state-of-the art warships for the navy which already has submarines in its fleet.

The new frigates joined one that entered service last year and two more are expected to become operational next year, the defence ministry said.

The Republic of Singapore Air Force has also selected the US-made F-15 fighter jet by Boeing to replace its ageing fleet of A-4SU Super Skyhawks.

Singapore sees terrorism as one of the gravest threats to its security and economy. Attacks in recent years in the US, UK and neighbouring Indonesia have prompted it to increase its vigilance against similar risks.

Last month, the government said it detained two men under the Internal Security Act for alleged involvement in activities that posed a potential terrorist threat.

Singapore is home to about 4.6 million people, making it the second-most densely populated country in the world. The government last month said it will spend an additional $20 billion to double the island's subway network.

The transport ministry's development expenditure is projected to increase 45 per cent to $2.35 billion in 2008, as it boosts spending on rail projects, the report said.

The government said it will also allocate more money to its manpower ministry to support programmes that supplement the salaries of low-wage earners. More than 17 per cent of households have incomes of $1,000 or less a month.

The government also increased spending for social development-related ministries for the year to March 2009, the budget report showed.

Expenditure for the tourism promotion board will be increased by $93.3 million this year to $316.2 million, the government said.

It is targeting tourist arrivals to rise five per cent to a record 10.8 million as the city-state hosts new attractions such as the world's biggest Ferris wheel and Formula One's first night race. --wire

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