RM6 billion warships

1. I was asked by the press to comment on the latest announcement by Defence Minister Datuk Seri Dr Ahmad Zahid Hamidi that the government has agreed to allocate RM6bil to build six second generation patrol vessels for the Royal Malaysian Navy.

2. The decision raises questions at four levels, namely a) strategic need, b) choice of arms and military assets, c) choice of vendor, and d) cost.

a) Broadly, it is agreeable that the main challenge of Malaysian defense lies more in the seas as compared to on the land. Thus boosting capacity of the Navy, and to a lesser extent, Air Force, is the right move strategically.

i. It is, however, crucial that the Government releases a comprehensive defense white paper, after consulting various stakeholders, to establish a national consensus on board strategic directions.

b) The Government must also provide details on the choice of arms and assets. While it does make sense to boost navy, there must be some justification as to why 6 OPVs.

c) It also remains to be answered whether the vendor, Boustead Naval Shipyard Sdn Bhd, should be given the job, at the exorbitant price tag of RM 6 billion.

i. It is worth noting that Boustead is the bailed-out and re-named PSCI, which had failed to deliver the previous order of OPVs. Hence more scrutiny and transparency are needed.

d) The Minister said that the construction of the ships would boost the economy while benefiting 632 vendor companies, he told reporters here after a briefing on the project and at least RM2bil of the allocation will benefit these vendor companies which are strategic partners of Boustead Naval Shipyard Sdn Bhd.

i. We remain to be convinced on the merits of building a domestic defense industry, and even if it is advisable in general, whether shipbuilding should be Malaysia’s core competency.

3) The purpose of defense procurement is to fulfil strategic needs of the nation. It is of course great if it also makes financial sense to benefit and build the local defense industry in the mean time. If we take away the domestic defense industry argument and allow open bidding for our defense procurement, would price be significantly lowered?  In the instance in which international open bidding offers half the price and much better quality, are we still insistent on building this particular segment of local industry?

4) Finally, I would like to reiterate DAP’s stance that a parliamentary committee on defense is needed so to build bi-partisan consensus on national defense decisions and to scrutinise defense deals that are above RM100 million.

Liew Chin Tong

Media Note by DAP MP for Bukit Bendera and Member of Pakatan Rakyat Parliamentary Shadow Defense Committee Liew Chin Tong on 7th February 2011

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