The Government Must Be Transparent On The LCS Saga

The Littoral Combat Ship (LCS) saga was one of the several issues that had been brought to the Parliamentary Select Committee on Defence and Home Affairs when I chaired it from December 2019 until the December 2020.

We must remember that LCS is one the largest defence procurement for new equipment undertaken in Malaysia’s history.

The Special Investigation Committee on Public Governance, Procurement and Finance (JKSTUPKK) had stated that the LCS is one of the vendor-driven procurement undertaken by the Ministry of Defence, where the requests and needs of the contractor prevailed over that of the end-user, the Royal Malaysian Navy (TLDM).

TLDM had initially agreed to use the Sigma design proposed by Damen Schelde Naval Shipbuilding from the Netherlands, but was overruled by then Minister of Defence, Dato’ Seri Dr Ahmad Zahid Hamidi at the requests of BNS without referring to TLDM in 2011. BNS was pushing for the Gowind-class design by the Naval Group France (NGF). TLDM had also initially expressed its disappointment at the decision.

The first delivery of the 6 LCS was supposed to have taken place in April 2019. In fact, it was revealed in December 2020 that the first ship is only 59.79% complete despite some RM6 billion having been paid out.

Compare this with Egypt-which ordered four Gowind-class ships two years later than Malaysia in 2013 and the first ship commissioned in 2017. Keel laying to delivery took only 36 months.

Indonesia on the other hand ordered four Sigma-class ships in 2010. This was the original request by TLDM. The first ship was commissioned in 2017 while the second was commissioned in 2018.

The current government, has however decided that the project should be continued by its contractor, the Boustead Group via its BNS subsidiary. The majority shareholder for Boustead is Lembaga Tabung Angkatan Tentera (LTAT). Earlier, the government ruled out an option to appoint NGF as a “rescue contractor” to complete at least 2 of the LCS.

The Cabinet has said that it will impose a number of conditions that the Boustead Group must obey. However, what these conditions are, how they will be enforced or will help the completion of the project (which was supposed to be finished by end-2023) has not been detailed.

For one thing, it was still allocated the project despite its alleged poor track record with previous projects such as the New Generational Patrol Vessel (NGPV), which was reportedly impacted by delivery delays and large unforeseen additional costs—the matter had been investigated by the 11th Parliament’s Public Accounts Committee in 2007.

The Parliamentary Select Committee on Defence and Home Affairs was also informed by JKSTUPKK that BNS had created written commitments with third party suppliers regarding specifications and equipment for the LCS before the “surat setuju terima” (SST) had been issued by the government.

This in turn had an outsized influence on the design of the LCS that BNS recommended to the Ministry of Defence, rather than the considerations and needs of TLDM as the final user as mentioned-earlier.

Before we go any further, it should be established that the main priority in defence procurement must be getting the best equipment for our armed forces. By this logic, the needs of the armed forces should be paramount, rather than those of companies or other interests.

While it is true that the Navy eventually agreed to the specifications, it cannot be denied that the issue of the LCS’ design sets a negative precedent.

The Committee was also told that BNS had applied and received an advance of more than RM1 billion on the contract, which is more than the norms established by the Ministry of Finance.

An exception however was made by the request of the Ministry of Defence due to the supposed weak financial state of BNS even at that early stage. So the current problems faced by the LCS was not something inevitable if normal government financial procedures were followed.

The Committee in fact heard from BNS’ management itself that almost RM396 million from the LCS project was used to pay off debts and interest occurred from the NGPV project. Effectively, this was robbing Peter to pay Paul.

The Committee was further informed that BNS had taken loans from financial institutions to manage the cash flow for the LCS project, but this resulted in the need to pay interest of up to RM571 million by February 2020, which had not been planned for while the contract was being negotiated.

BNS’ cash flow problems also resulted in the late or failure to pay a number of OEMs for the LCS project, leading to work stoppages or the cancellation of deliveries by the OEMs, hence contributing to the delays.

These are just a few of the many anomalies that were said to have plagued the project.

All of this suggests a failure on the part of the government at the time to undertake due diligence on the contractor, whether in terms of its technical or financial capacity to carry out the project.

The current Perikatan Nasional government is compounding these failures by continuing the project solely on the basis of the unknown “conditions” it has set the contractor.

I do not rule out the possibility that the company has been able to address its various real and perceived weaknesses in the interim.

However, public confidence and the national interest would be better served if, as noted, the government could be transparent and reveal what the conditions are, how they will be enforced and how it will ensure the guarantee of completion.

It cannot simply cite the interests of jobs, vendors and the LTAT to continue the project without outlining what safeguards it has put into place to ensure that the contractor will finally be able to deliver.

It must not be forgotten that the cashflow problems also caused hardship to the OEMs (who are vendors, after all) and their workers. And the last thing the LTAT needs is to keep having to deal with the reputational issues the LCS issue has caused.

But more importantly, Malaysia, via its serving men and women, urgently needs better hardware like the LCS to defend its borders, especially the increasingly challenging maritime sector.

Without proper safeguards, transparency and a commitment to the best practices, Malaysia will be stuck in an endless cycle.

We must cry over spilt milk. This government owes us much more information and far better performance than it has dished out so far.

NIK NAZMI NIK AHMAD
SETIAWANGSA MEMBER OF PARLIAMENT

The Government Must Protect Our Credibility In The South China Sea

Our Foreign Minister, Dato’ Seri Hishammudin Hussein must be more careful and precise in his pronouncements moving forward.

The South China Sea dispute is an international issue. As such, statements by our leaders on this matter will likely be scrutinised not only domestically but on the world stage as well.

Hence, not only is Malaysia’s territory and sovereignty at stake, but also its reputation and credibility.

Also, the current government must continue to address the fundamental question of how Malaysia can defend its rights in the waters.

While diplomatic approaches are ideal, Malaysia’s leaders must show that it is serious in defending its national sovereignty.

NIK NAZMI NIK AHMAD
CHAIR, PARLIAMENTARY SELECT COMMITTEE FOR DEFENCE AND HOME AFFAIRS
SETIAWANGSA MEMBER OF PARLIAMENT

The Appointment Of The 21st Chief Of Defence Forces

I would like to congratulate General Tan Sri Dato’ Seri Haji Affendi Buang on his appointment as the 21st Chief of the Defence Forces of the Malaysian Armed Forces.

The new appointment is undoubtedly historic given that he is the first son of Sarawak to hold this post and only the second Chief of Air Force to do so.

I would also like to thank the outgoing CDF, General Tan Sri Dato’ Seri Panglima Haji Zulkifli Zainal Abidin for his 41 years of service to the nation.

I am confident that the MAF will continue to go from strength to strength under its new leadership.

NIK NAZMI NIK AHMAD
Chair, Special Select Committee on Defence and Home Affairs
Setiawangsa Member of Parliament

The Appointment Of The 21st Chief Of Defence Forces

I would like to congratulate General Tan Sri Dato’ Seri Haji Affendi Buang on his appointment as the 21st Chief of the Defence Forces of the Malaysian Armed Forces.

The new appointment is undoubtedly historic given that he is the first son of Sarawak to hold this post and only the second Chief of Air Force to do so.

I would also like to thank the outgoing CDF, General Tan Sri Dato’ Seri Panglima Haji Zulkifli Zainal Abidin for his 41 years of service to the nation.

I am confident that the MAF will continue to go from strength to strength under its new leadership.

NIK NAZMI NIK AHMAD
Chair, Special Select Committee on Defence and Home Affairs
Setiawangsa Member of Parliament

What Did Hishamuddin Do To Address The Problems Of LTAT During His Time?

WHAT DID HISHAMUDDIN DO TO ADDRESS THE PROBLEMS OF LTAT DURING HIS TIME?

The lowest-ever dividend of 2% announced by the Lembaga Tabung Angkatan Tentera (LTAT) is disappointing but an unfortunate consequence of years of alleged mismanagement and irregularities.

The problems it faces are not a recent phenomenon, but rather the result of the omissions and malfeasance of the past.

What is needed are concrete measures to strengthen the LTAT and hence the welfare of our heroic armed forces personnel.

It is hence extremely disappointing that the Sembrong MP and former Defence Minister Hishammuddin Hussein is playing politics by blaming the Pakatan Harapan Federal Government for the lower dividends.

He has inexplicably chosen to ignore the results of an audit by Ernst & Young which found, among other things, that LTAT’s earnings were affected by the overpayment of dividends in previous years. Indeed, its five-year asset returns from the financial years 2014 to 2018 (after excluding one-off gains) were lower than the declared dividend rates.

In effect, the LTAT had been paying dividends at higher rates than it could afford.
There’s no point for the previous administration’s defenders and enablers to crow about the supposed higher dividends of the past when they actually hurt the future of the LTAT as well as other funds.

The audit also found that LTAT had 88 condominium units worth RM45 million that had been unsold despite having been completed in 2015. Also, since 2014, LTAT was said to have become over-reliant on Boustead Holdings Bhd and its quoted subsidiaries (BHB Group). Indeed, it was alleged that LTAT’s exposure to BHB Group increased almost 50% from RM2.1 billion to RM3.1 billion.

The fact is that Hishammuddin was Minister of Defence from 2013 to 2018. These alleged irregularities and weaknesses—which significantly contributed to the LTAT’s current poor performance—happened under his watch as the Cabinet Minister tasked with administering of our Armed Forces.

What was he doing all those years?

Why had he done nothing to address the problems facing the LTAT?

And yet, he seeks to blame others for his own failures and shortcomings. What is worse is that he seeks to use the fate of Malaysia’s soldiers, sailors and airmen to give him political cover.

He should consider his own responsibility for the parlous state of the LTAT and the country as a whole before seeking to blame his successor, Mohamad Sabu.
In that period, Rafizi Ramli, the Pandan MP then had constantly warned the public about the problems facing the LTAT. He did so under great personal risk and cost.

This included exposing, in March 2016, a document classified under the Official Secrets Act (OSA), on the LTAT’s controversial dealings with the now-discredited 1Malaysia Development Berhad (1MDB).

The fact that the LTAT had in May 2018 withdrawn a lawsuit it had filed against Rafizi is proof that the concerns he had raised about the Board at the time were justified and indeed, vindicated.

The current management of the LTAT must continue the reforms it has proposed as well as work closely with the Federal Government to better ensure the wellbeing of our Armed Forces personnel.

NIK NAZMI NIK AHMAD
KEADILAN CHIEF ORGANISING SECRETARY
KEADILAN CENTRAL LEADERSHIP COUNCIL MEMBER
SETIAWANGSA MEMBER OF PARLIAMENT

Do Not Belittle The Role Of The Armed Forces

I am in complete agreement with the 13 August 2019 statement by the Deputy Minister of Defence, YB Senator Liew Chin Tong on the role of Malaysia’s Armed Forces.
As I have stressed on many occasions, the one and only job of Malaysia’s serving men and women should be to defend our country and its people.
It is also certainly not true, as some have allegedly claimed,
The statement by Koon Yew Yin that that our military personnel are “…doing nothing except eating and sleeping,” does not only belittle the role of our soldiers but is entirely untrue.
I take note of his statement of apology.
Proposals to use our military for political or extraneous purposes should be firmly rejected.
The country does not need unsolicited, hare-brained ideas on how to utilise its armed forces.
Rather, what is needed is wise policies and public support to maintain and upgrade their professionalism; as well as to ensure the welfare of the men and women who keep our nation safe.

NIK NAZMI NIK AHMAD
KEADILAN CHIEF ORGANISING SECRETARY
KEADILAN CENTRAL LEADERSHIP COUNCIL MEMBER
SETIAWANGSA MEMBER OF PARLIAMENT