* Turnbull sees construction boom in North Queensland
* Deal comes amid rising tensions between much of Asia and China
* Region faces rising risks from extremists
* Two countries agree to update free trade deal (Adds bullet points, details, comments from Australia PM and security expert)
By Ian Chua and Aradhana Aravindan
SYDNEY/SINGAPORE, May 6 (Reuters) - Australia and Singapore have agreed to jointly develop military training areas and facilities in Australia in a sign of how China's increasingly assertive military presence in the region is encouraging nations to boost their own defence capabilities.
Singapore will fund a A$2.25 billion (US$1.7 billion) expansion of military training facilities in Australia, a government source told Reuters. will have enhanced and expanded military training access in Australia over a period of 25 years. The two will strengthen intelligence and information sharing, such as in counter-terrorism, the city-state's Ministry of Foreign Affairs said in a statement on Friday.
The move to forge closer military ties between Australia and Singapore comes at a time of rising tensions between much of Asia and China, which has been building military and civilian facilities on its artificial islands in the disputed South China Sea.
"The kind of military relationships that (Singapore) have and types of military ties that they are developing and deepening, they don't have with China," said Richard Bitzinger, a security expert at the S.Rajaratnam School of International Studies in Singapore.
"I am not saying that this is being done overtly to deal with China, but I wouldn't be surprised if that isn't a major driver behind this."
The region is also facing rising risks from Islamic extremists. Earlier this week, Singapore said it had detained eight Bangladeshi men who were planning attacks in their homeland. It deported five others who were arrested by police in Dhaka. Singapore has long sent troops to Australia for military exercises. The new deal would allow the Asian nation to increase the number of troops it has on rotation in Australia to 14,000, from 6,000.
Under the agreement, Singapore would fund the cost of expanding the Shoalwater Bay Training Area and the Townsville Field Training Area, both in the north of Queensland state.
Both bases lie in electorates critical to the government. The timing of the agreement is viewed as a political coup for Prime Minister Malcolm Turnbull ahead of an anticipated July federal election.
"Under our comprehensive strategic partnership, our aim is to elevate our relationship to a level similar to the one we enjoy with New Zealand," Turnbull told reporters in Canberra.
He said the new partnership will also generate a construction boom in North Queensland due to the need for roads, accommodation and facilities for the Singaporean Defence forces.
The agreement makes Singapore the only other foreign country to invest in military infrastructure in Australia besides the United States.
Earlier this week Reuters reported that Singapore will soon pick the winner of a $1 billion tender for military utility helicopters, as it modernises its air force and navy amid rising tensions in the region. city-state and Australia also updated a free trade agreement, which includes improved access for businesses to bid for government procurement contracts and allowed for easier movement of people between the two markets.
Singapore is Australia's fifth largest trading and investment partner, with bilateral trade of S$20.2 billion ($14.86 billion) in 2015. The city-state has investments amounting to A$80.2 billion in Australia.
($1 = A$1.3396) ($1 = 1.3597 Singapore dollars)