Over RM6b spent on LCS project without delivery

by FAYYADH JAAFAR / Pic by BERNAMA

THE Parliament’s Public Accounts Committee (PAC) has found that the government has paid a total of RM6.08 billion for the Littoral Combatant Ships (LCS) project, but not a single ship has been delivered.

According to the original schedule, as of August 2022, five ships should be completed and handed over to the Royal Malaysian Navy (TLDM).

PAC chairperson Wong Kah Woh said that TLDM’s view as an end user was ignored by the Defence Ministry (Mindef) and Boustead Naval Shipyard Sdn Bhd (BNS) company in the implementation of the LCS project. Originally, the design of the SIGMA-type ship chosen by the TLDM was approved by Mindef. The decision was changed to the GOWIND type ship design on July 11, 2011, at the suggestion of BNS, which was brought to Mindef on July 8, 2011.

He cited the statement of Navy Commander Tan Sri Abdul Aziz, at that time, saying “something is gravely wrong”.

Wong further said that due diligence carried out by the government on BNS failed to detect the company’s financial problems. This was proven when the government had to make an advance payment of up to RM1.36 billion to BNS, contrary to Treasury Circular No 5 of 2007, which was in force at that time.

The PAC chairman also pointed out that the financial situation of BNS is weak and critical due to abuse of power and deficiencies in financial management. As of 2018, BNS’ debt to original equipment manufacturers is as much as RM801 million, while its loans with financial institutions are as much as RM956 million.

“The terms of the contract are weak and do not favour the government. Payment of LCS projects is based on the progress of activities or supply of items and not on actual progress. This is unusual and it causes the LCS1 progress payment to exceed the actual work progress by 21.1% (payment of 63.8% compared to the actual work progress of 42.7%).

“Until now, the detailed design has not yet been finalised by the government and BNS. This causes VO to be released continuously and opens up space for manipulation to occur,” he added.

Umno president Datuk Seri Dr Ahmad Zahid Hamidi, who was among the top officials summoned by the PAC, was the defence minister in 2011.

The others summoned included current Defence Minister Datuk Seri Hishammuddin Hussein, Defence Ministry secretary general Datuk Seri Muez Abd Aziz, former Auditor-General Tan Sri Ambrin Buang, current navy chief Tan Sri Admiral Mohd Reza Sany, BNS’ COO Low Kok Chiang and its CEO Sharifuddin Md Zaini Al-Manaf.

PAC suggests that the ministry needs to present substantive military procurement planning to the Parliamentary Special Select Committee on Defence and Security from time to time by involving all stakeholders for the sake of national defence preparedness, as well as present a progress report on the LCS project every three months until the LCS project is completed.

Wong also calls for the Malaysian Anti-Corruption Commission to investigate all the findings of the PAC Report, the Committee on Governance, Procurement and Finance Investigation report, and the Forensic Audit Report immediately.

“The incident of the LCS ship design selection change from SIGMA to GOWIND should serve as a lesson for future procurement. The acquisition of national defence equipment and equipment should prioritise the needs of the end user, which is TLDM in this case, and in general for all future projects and acquisitions in line with the Defence White Paper 2020-2030,” said Wong.

In addition, the PAC also recommended that the government review all options and determine the best direction for the LCS project and ensure that public money is spent responsibly.

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