Opinions split over another RM6b navy patrol ship deal

(The Malaysian Insider) – The government’s move to allocate RM6 billion to procure a second batch of six offshore patrol vessels (OPV) has led to concerns over Malaysia’s defence strategy and spending.

While most observers agree that the navy needs beefing up, the lack of a defence blueprint has caused some to question the move to acquire another six OPVs at the quoted price.

The deal was struck with government-linked Boustead Naval Shipyard Sdn Bhd, who had taken over the delivery of a first batch of six OPVs by merging with Penang Shipbuilding and Construction Industries (PCSI) which had run into financial trouble and delayed delivery of the ships.

The cost of the original six ships had increased from RM4.9 billion to RM6.75 billion as PCSI failed to meet the initial terms of the contract.

The new order for a more advanced second generation of patrol vessels continues from a letter of intent (LOI) signed in 1998 between the government and PCSI to build 27 OPVs for RM24 billion over 10 years but is not a binding agreement with construction and delivery only being carried out as and when orders are made.

“The government needs to put out a defence white paper outlining the challenges we are facing and then there can be a bipartisan discussion on what to do next,” said Liew Chin Tong, who is part of Pakatan Rakyat’s (PR) shadow defence committee, adding that this was standard practice in other countries, including neighbouring Philippines.

He said it was clear that the navy needed to be strengthened as Malaysia faced greater security issues at sea than on land and noted that the government still spent more on the army than the navy and air force combined.

“We are not told the specifications as the government says that to reveal all details would defeat the purpose of defence spending. But we should have a parliamentary committee that can discuss defence strategy without making the details public,” the Bukit Bendera MP added.

DAP publicity chief Tony Pua also questioned the RM6 billion price tag, saying that the process needed to be more transparent given previous misgivings over defence procurements such as the two Scorpene submarines which had cost the government RM6.7 billion but were unable to dive a few months after being delivered in September 2009.

However, defence analyst Dzirhan Mahadzir said the LOI was “not a blank cheque” as the contractor had to meet requirements before further orders were made.

He added that the RM6 billion quoted for the new batch of vessels was a “ceiling price” and that the deal was pending negotiations on the final specifications of the ships.

“The navy has a requirement for additional warships to be able to defend our maritime resources and claims, particularly in the South China Sea.

“The current OPVs fulfil peacetime enforcement but can double up during wartime, so it is not a bad idea. On the other hand, using warships for patrolling is costly,” he said.

The deal, announced by Defence Minister Datuk Seri Ahmad Zahid Hamidi over the weekend, would also provide a RM2 billion boost to 632 local vendors.

However, Liew, who is also DAP’s international secretary, said that even though Boustead was probably the only local option, there should be an open tender to see what savings could be made by purchasing from overseas contractors.