The government's decision to acquire submarines will lift the country into an exclusive Southeast Asian club, but analysts warned today it could spark a regional arms race.

A defence official told AFP that apart from Singapore no other member of the 10-state Association of Southeast Asian Nations (Asean) possessed submarines.

Singapore has four subs, designed and built in Sweden, and Malaysia Wednesday set out to establish its first fleet of underwater warships by sealing a RM3.7 billion (1.035 billion euro)deal to buy three from France.

But delivery of the final vessel is due only in 2009, by which time neighbours Thailand and Indonesia may also procure submarines, the defence official said on condition of anonymity.

An Asian diplomat agreed. "It could spark an arms race in Southeast Asia," he told AFP .

"But I think Malaysia's decision is based on its need to protect its vital marine resources, including its joint claim for the Spratly islands in the South China Sea."

The Spratlys are claimed by China, the Philippines, Taiwan, Brunei, Malaysia and Vietnam.

New era of progress

The deal with European shipbuilders DCN International and Izar involves two new Scorpene-class submarines and an overhauled ex-French navy submarine, the Agosta 70, for initial training.

"The submarines will significantly expand Malaysia's naval capabilities and usher the navy into a new era of development and progress," Defence Minister Najib Razak said.

Speaking at a news conference after the signing ceremony, he dismissed concerns over an arms race, noting that "nobody makes a big fuss" about Singapore's fleet of submarines.

"We are not competing, Singapore has Apache helicopters, that doesn't mean tomorrow we have to go out and buy attack helicopters.

"We have such a large body of water to police. We need submarines because it is a force multiplier. They can appear anywhere and because they are stealth, they are hard to detect. That makes our deterrent value much higher."

The purchase of the submarines is part of an armed forces modernisation programme that was derailed by the 1997/98 Asian financial crisis and is apparently now back on track.

The government in April ordered British and Russian missile systems and has also announced plans to buy more than 60 tanks from Poland and is considering a deal to buy Russian Sukhoi SU-30 fighter jets.

Beefing capability

Abdul Razak Baginda, executive director of the Malaysian Strategic Research Centre, defended the submarine purchase saying: "Malaysia has a long coastline. It has interests in the South China Sea. So it has to beef up its maritime capability."

Abdul Razak pointed out that Malaysia's territory was divided by water, referring to peninsula Malaysia and its two eastern states - Sabah and Sarawak on Borneo island.

An Asian diplomat pointed out that Malaysia's waters serve as vital sea lanes, particularly the narrow Malacca Straits, through which some 600 ships carrying oil and other cargo pass daily.

"This kind of area can suddenly become volatile," he said.

Najib said Thursday that a new submarine base at Sepangar Bay in Sabah state, which fronts the South China Sea, would be ready before the vessels are delivered.

Commander of the Royal Malaysian Navy, Admiral Abu Bakar Abdul Jamal said Malaysia needed more than 10 submarines to ensure security over its territorial waters.

"At least to feel comfortable, 10 should suffice," he said.