FTI Consulting Global Public Affairs Snapshot: 2026 Shangri-La Dialogue: Asia’s hardening security order

The Shangri-La Dialogue, held annually in Singapore, provides military and political leaders the opportunity to engage their counterparts in Asia, Europe, North America, and the Middle East, and to set out their stall on the major challenges facing the international security order. Vietnam’s President Tô Lâm named three converging crises at the outset: a fracturing international order, competing development models, and evaporating strategic trust. The three days that followed bore him out.

Maritime coercion, seabed vulnerability, and supply chain fragmentation dominated the floor. The US pressed allies to spend more and depend less. China stayed away for the second consecutive year, shaping the conversation by its absence. India announced new missile export deals. Australia committed to purchasing more submarines under AUKUS. Minilateral coalitions multiplied. The region is reorganizing around national interest and hard capability, and the institutions meant to manage that are struggling to keep pace.

This is not a sudden rupture. It is the latest evidence of a structural shift that has been building for some time – away from multilateral frameworks premised on shared rules, toward bilateral and minilateral arrangements driven by strategic alignment and transactional interest. The Indo-Pacific is hardening into something less cooperative, more transactional, and increasingly defined by what each country is willing to build, buy, and defend on its own terms. Overall, these trends indicate the defence sector is primed for accelerated growth in Asia.  

A more transactional Indo-Pacific

The clear US message to delegates was that alliances should be measured by combat capability, burden-sharing and industrial contribution rather than rhetoric, linking stronger defence investment by regional partners to privileged access to US support and arms sales. Hegseth characterized  3.5% of GDP as a “new global standard” for defence spending. There was a clear warning that countries unwilling to invest in their own capabilities could face downgraded US support.

The fact that the Dialogue itself featured a dedicated special session on building defence-industrial resilience further underscored the clear message that US allies must now invest more in their own defence. This suggests a regional procurement environment where local industrial value and speed of delivery are likely to be critical considerations beyond technical performance. 

China was absent, but remained central to the Dialogue

Although the absence of a Chinese defence minister meant the summit lacked one of its traditional set-piece exchanges, there was still pointed public debate over Japan, maritime behaviour and regional military transparency. Beijing’s decision not to send its defence minister for a second consecutive year reflects a more deliberate strategic posture: a preference to avoid a highly public, Western-led order where it would face coordinated scrutiny on issues such as the South China Sea, Taiwan and military modernisation, while signalling that it is not obliged to legitimise US-shaped security architectures.

The Dialogue remains important, but it no longer appears to function as a single shared stage on which all major powers feel compelled to perform at the highest level. Instead, the region appears to be moving toward a more plural, more fragmented ecosystem of security engagement, including public forums like Shangri-La, narrower issue-based coalitions, minilateral arrangements and alternative Chinese-led formats. This dynamic reflects a broader evolution in US–China competition: rather than converging in shared institutions, both powers are increasingly reinforcing parallel networks of influence, with regional actors navigating between them.

Hegseth’s lack of reference to Taiwan was a notable departure from prior Pentagon appearances at Shangri-La, instead emphasising a “drama-free” and “strong, quiet and clear” approach to regional deterrence. While this points to a near-term effort by the Trump Administration to stabilise the US-China relationship following the recent Trump–Xi engagement, lower rhetorical temperature should not be mistaken for reduced strategic tension. China’s growing military capability, continued maritime assertiveness and selective engagement in regional forums suggest a model of competition that is less about confrontation in shared venues and more about shaping the regional order on its own terms—leaving Indo-Pacific security increasingly defined by managed rivalry rather than cooperative governance.

Maritime security is broadening into infrastructure security

One of the clearest thematic expansions at the 2026 Dialogue was renewed emphasis on maritime security. The focus was not only on fleets, chokepoints and naval balance, but also on the security of undersea cables, seabed infrastructure, shadow-fleet activity and maritime attribution. Australia’s Deputy Prime Minister Richard Marles warned that “the seabed is becoming a battlefield,” while Singapore and 16 partner countries launched the “Guiding Principles for Underwater Infrastructure Defence Exchanges” (GUIDE) framework on critical underwater infrastructure – which reflects a growing consensus that cable resilience, attribution and response mechanisms are now strategic priorities.

Demand is broadening across the region

The Dialogue also highlighted how demand for capabilities is becoming more diversified by domain. Australia’s maritime recapitalisation, including submarines, frigates, surveillance and autonomous undersea systems, though AUKUS (a trilateral security partnership between Australia, the UK and the US) and other efforts points to sustained demand in naval and maritime technology. South Korea used the forum to emphasise greater self-reliance through missile defence, pre-emptive strike capability, AI-enabled systems and drone and counter-drone technologies.

India, meanwhile, used the sidelines to underline the rise of its own defence export ambitions. Defence Secretary Rajesh Kumar Singh confirmed that India has signed a BrahMos missile deal with Vietnam and is in the final stages of a similar agreement with Indonesia, illustrating how regional security competition is also creating new suppliers and new industrial poles, not only more demand for established Western primes.

Australia’s announcements at and around the Dialogue reinforced this shift. Canberra confirmed it will acquire three second-hand Virginia-class submarines under AUKUS, a move presented as a more streamlined and cost-effective approach, while AUKUS Pillar II also launched its first “Signature Project” focused on advanced payloads for uncrewed undersea vehicles. Australia also joined the US, Japan and India in announcing a new Quad maritime surveillance initiative, underlining the extent to which maritime awareness, undersea resilience and allied interoperability are now shaping regional capability development.

For industry, this points to a sustained pipeline of procurement and partnership opportunities in naval, autonomous and maritime-surveillance capabilities, even as questions remain over how far Australian firms will participate as genuine co-developers rather than junior partners in longer-term AUKUS programs.

Trends to consider

This year’s Shangri-La Dialogue further underlined the challenges facing US allies worldwide, and the increasing pressure from Washington for them to increase defence investment and reduce their reliance on US capacity and support. Geopolitical competition between the world’s two superpowers is here to stay, and current efforts to maintain stability will remain fragile.

Key themes from the Dialogue include:

• Allies may struggle to meet US demands. The US’ target for Indo-Pacific allies to spend 3.5% of GDP on defence is equivalent in nature to that set by NATO allies during last year’s summit at The Hague. However, fiscal pressures, in particular created by soaring energy costs amid the closure of the Strait of Hormuz, means increasing spending to that level will be a challenge for most. Nevertheless, with countries such as Japan, Singapore, and the Philippines all pledging to increase defence spending, the region is likely to offer fresh growth opportunities for the sector.   
• Maritime security now includes cables, ports, data routes and undersea infrastructure. Increasing awareness of the risks facing critical undersea infrastructure creates a new and urgent imperative for states to address. This will likely widen the addressable market for sensing, surveillance, repair, AI-enabled tracking, cyber-physical resilience and insurance-related services.
• Defence-industrial resilience is now a mainstream policy objective. Companies could expect stronger government attention to sourcing, stockpiles, local manufacturing, trusted suppliers and supply-chain redundancy. This may translate into potentially more stringent procurement requirements, localisation expectations and closer scrutiny of foreign participation in sensitive sectors, particularly those linked to critical infrastructure and dual-use technologies.
• Minilateral and issue-based coalitions are proliferating. In his closing remarks, Singapore’s Minister of Defence, Chan Chun Sing, highlighted the need for flexible, issues-based, partnerships alongside multilateral cooperation. GUIDE, AUKUS cooperation and expanding bilateral defence ties suggest that discrete opportunities may increasingly sit in smaller, purpose-built coalitions rather than in broad regional frameworks.
• AI is emerging as a decisive factor in defence capability. Governments are increasingly integrating AI across autonomous systems, ISR, maritime surveillance and decision-support, positioning it as central to both high-end warfare and grey-zone competition. This may drive demand for AI-enabled platforms and data capabilities, while also increasing regulatory scrutiny around dual-use technologies, security and supply chains.
• Strategic ambiguity around China and Taiwan is likely to persist. Public rhetoric may soften at times, but exposure management, contingency planning and regulatory monitoring remain essential for companies with regional footprints.

Conclusion

The 2026 Shangri-La Dialogue underscored an Indo-Pacific security environment that is hardening without fully cohering. The region is increasingly focused on national defence, maritime, and infrastructure spending and capabilities, but remains fragmented.

For the defence industry, the Dialogue made clear the need to approach the region on a country-by-country, coalition-by-coalition basis. Success will likely depend not only on technology and price, but also on the ability to offer trusted partnerships, local industrial value, resilient sourcing and alignment with national security priorities. While this can be expected to create new opportunities, it suggests a more competitive and politically complex environment which will shape commercial outcomes.