"Obviously we encourage the reforms that they are hoping to put in place," Panetta told delegates at an Asia security summit in Singapore, the Shangri-La Dialogue.

"As you know the State Department has taken steps to relieve some of the sanctions that have been placed on Myanmar and try to encourage them again to move in the right direction," he told representatives from 27 countries at the event, organised by the International Institute of Strategic Studies.

"I think part and parcel of that, assuming that they are able to implement reforms and to continue the kind of political efforts at opening up their system, that a part and parcel of that would be discussions with regards to how we can improve our defence relationship with their country as well."

After Myanmar carried out political reforms and freed democracy campaigner Aung San Suu Kyi, international sanctions have been eased on the government.

Suu Kyi, during a visit to Bangkok on Friday, urged "healthy scepticism" over Myanmar's dramatic reforms, saying only the rule of law could cement recent political progress.

A senior US defence official offered a more cautious forecast on expanding military ties to Myanmar, referring to it by its former name of Burma.

"The secretary expects the government of Burma to continue on the path of reform and promotion of human rights, and once it shows progress in that regard, stronger military ties with Burma could be possible," said the official, who spoke on condition of anonymity.