Lest We Forget

While Malaysians express outrage about the RM8-RM9 billion MAS scandal and the 'reverse takeover' of the national airline company through Air Asia -- which is another multi-billion 'backdoor asset stripping' exercise -- lets us not forget the RM6-RM7 billion patrol boat fiasco. As Dr Mahathir said: Melayu mudah lupa. Well, let us not lupa this.

In February '11, Defence Minister Datuk Seri Dr Ahmad Zahid Hamidi announced via a Bernama statement that the government has agreed to allocate RM6bil to build six second generation patrol vessels for the Royal Malaysian Navy. The rationale given for the expenditure was to "boost the economy while benefiting 632 vendor companies". The Defence Minister clarified that they would ensure that "at least RM2bil of the allocation will benefit these vendor companies which are strategic partners of Boustead Naval Shipyard Sdn Bhd". Then, many Malaysians were up in arms after that disclosure.

In October last year, The Star reported that the construction of six patrol vessels by Boustead Heavy Industries Corp Bhd (BHIC), a maritime engineering and defence-related services provider, may only begin as early as the fourth quarter of this year. Analysts estimated it would take another year before BHIC’s letter of intent (LOI) is firmed up and construction of the patrol vessels begin.

“This is as seen with the company’s Scorpene service job, which took a year for the LOI to be firmed up via the letter of award,” ECM Libra said in a research report. (CLICK HERE for more.)

Today, The Australian announced that AUSTAL has won a $330 million contract to produce eight new patrol boats for the Australian customs service. The eight boats will be built in Henderson, south of Perth. The contract is for the design, construction and through-life support of eight Cape Class patrol boats for the Australian Customs and Border Protection Service.

What is most interesting about the report is that the total value of the project is $330 million, including a $280 million design and construction contract and an In-Service Support contract worth $50 million.

So the Australians can build EIGHT NEW PATROL BOATS at AUS$330 million (RM1.016 billion) @ 127 million per boat while in Malaysia, six new patrol boats cost us SIX BILLION RINGGIT at RM1 BILLION per boat.

Can you see the RIDICULOUS DIFFERENCE in figures?

Apart from that, The Austal site reports:

The In-Service Support contract extends for a minimum period of eight years and encompasses a full range of intermediate and depot level maintenance activities. Further options can be exercised by the Australian Customs and Border Protection Service for In-Service Support for the life of the Cape Class Patrol Boat Fleet.

The eight 57.8m Cape Class Patrol Boats will play a significant role in protecting Australia’s borders from multiple maritime threats, and have been designed to have greater range, endurance and flexibility, as well as enhanced capability to operate in more severe sea conditions than the current Customs’ fleet.

According to The Star, AmResearch Sdn Bhd says the value of the six new patrol vessels can reach RM8bil, based on a 20% mark-up from the first batch’s price tag of RM6.7bil.

In that report, ECM Libra adds that the new order for six patrol vessels withcombatant capabilities, littoral combatant ships, has more technical specifications than the first-generation batch which amounted to some RM1bil per vessel.


“We believe per unit cost should be higher. Assuming a value of RM1.2bil per vessel, the contract will provide BN Shipyard with an RM7.2bil orderbook that will likely last it five to seven years,” it adds.


The recent contract, which has been long awaited, is part of a privatisation agreement with the Government for the construction of 27 units of patrol vessels, where six have been completed.

In 1998, BN Shipyard was awarded a contract to construct and deliver six patrol vessels to the Royal Malaysian Navy. They took EIGHT YEARS to deliver the first two patrol boats in 2006 which are being used to patrol the waters off Sabah and Sarawak. Two more delivered in 2009 are guarding the east coast of the peninsula.

According to the BHIC’s 2009 annual report, the remaining two patrol vessels were launched in November 2008 and July last year respectively.

HwangDBS Vickers Research says the second-generation patrol vessels will be built at BHIC’s Lumut shipyard, which is currently 50% utilised. However, AmResearch estimates that 30% of BN Shipyard’s contract will be undertaken by BHIC’s Penang shipyard (Jerejak).

Interestingly, BHIC was awarded a contract worth some RM1.3bil by the government to service the two Royal Malaysian Navy Prime Minister-class Scorpene submarines in August.

The contract was given to its subsidiary, Boustead DCNS Naval Corp Sdn Bhd, a joint venture withDCNS SA, a French defence company, and was effective for a period ending Nov 30, 2015.

The contract differed in value from the original letter of intent of RM600mil dated June 4, 2009 due to the inclusion of a full submarine integrated logistics support package.

AmResearch points out that the group’s earnings track record has disappointed in the past year and it maintains FY10 to FY12 forecast earnings pending a significant quarterly earnings improvement and the actual award of the new patrol vessels contract.

The Star reported that for the six months ended June 30, BHIC’s net profit was down 4% to RM31.5mil as a result of cost escalations due to delays in completing certain shipbuilding projects, coupled with reduced contribution from associates. Revenue fell 18% to RM192.9mil from a year ago.

Interesting!

The bottom line is that the six patrol boats Malaysia is purportedly building should not even cost RM1 billion for all six, and certainly far from RM1 billion per unit as announced.

Can the authorities clarify the state of affairs? Six billion ringgit is certain a lot of money!

I remember back when Tun Ghafar Baba was the Deputy Prime Minister. In a ceramah in Terengganu, he started by saying that the government has spent millions. Then he stopped and said, "let us not talk about millions." Today we no longer talk about millions. We talk about billions.

I don't.

I don't know how much one billion is, said Ghafar. If I sit and count one billion, I will die before I can finish. That is how much 1 billion is. It is a lot of money.

Well, if Ghafar was still alive today, he will be shocked that we no longer talk about 1 billion. We talk about tens of billions. And if Ghafar was born ten times over, he would still not be able to count to that figure.

Remember - for all the billions spent, or purportedly spent, CHANGE IS IMPERATIVE and we needYOUR VOTE for that MASSIVE SWING TO MAKE IT HAPPEN!

Let's do it!

- masterwordsmith