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Thursday, September 29, 2011

Eurofighters: Has Zahid run dry or is money being used on Scorpenes upkeep

Eurofighters: Has Zahid run dry or is money being used on Scorpenes upkeep

The planned purchase of Eurofighters to replace the 10 Soviet-made MIG-29 has been shelved for the time being according to Defence minister Ahmad Zahid Hamidi. He cited the government's lack of funds and also the need to allocate money to other more important projects under the 10th Malaysian Plan, as one of the reasons for the change of heart by the Defence Ministry.

But activists monitoring the local arms scene were less than impressed. They have long been concerned about the carte blanche given to the Defence ministry for arms purchases while health, education and other social services are still so deplorable.

In 2010, the ministry obtained an allocation of RM9.1 billion or a decrease of RM 1.5 billion from 2009. However, in 2011, the figure was jacked up again to RM11 billion following an additional allocation of nearly RM500 million due to 'under-estimation' of service costs for the controversial Scorpenes submarines. And there is fear this might now be Prime Minister Najib Razak's modus operandi - to allocate a low defense budget but then to slip additional allocations to escape the public's attention.

The total security allocation under the Tenth Malaysia Plan is RM23 billion. Through the years, the allocation for security - internal security plus defence - has been as high as 15.9% and 15.0% under the 3rd and 6th Malaysia Plans, while the allocation for health has been as low as 1.6% and 1.0% under the 4th and 5th Malaysia Plans respectively.

"It is clear that the BN government could get away with such huge defence budgets during the last few decades because of the erosion of these safeguards in our democratic system, viz. dominance of the executive over parliament; loss of public accountability; absence of Freedom of Information legislation; inadequate separation of powers between the executive and the judiciary; poor safeguards for civil rights," a group of Malaysian NGOs, including Suaram and KLSCAH, had said in a statement cautioning the government against excessive arms spending.


Indeed, the purchase of military assets in Malaysia has always been one shrouded in controversy and corruption. Especially, when taking into account the RM7 billion purchase of Scorpene submarines from French company DCN and the alleged kickbacks worth RM570 million paid to Perimekar - which is now a graft case scheduled to be mentioned in open court in Paris soon.

The Scorpene continues to draw attention as additional costs continue to be added to its already overblown budget. A bigger budget was allocated this year to cover the maintenance cost for the subs. Apparently there was some miscalculation as to the actual cost to maintain the 2 submarines. The initial maintenance cost, according to the Defence Minister, stood at RM50 million per year for 6 years - apparently that figure was only an estimate. Now the cost would be RM417 million in total. And increase of RM117 million from its original RM300 million price tag.

Money pit

Then, the latest plan to replace the MIG-29s with Eurofighters was also destined to be another military money-blackhole for Malaysia. The Eurofighter Typhoon is a money pit, not only to those that would benefit from commissions but also in the true sense of the word. Upkeep, upgrading and maintenance of the aircraft is expensive and countries who have placed orders for the aircraft are cutting down on orders in response to its escalating upkeep.

The Typhoon, a multi-purpose twin-engine fighter jet introduced in 2003, is built by a consortium made up of the European Aeronautic Defence and Space Company, Britain's BAE Systems and Alenia/Finmeccanica of Italy. One Eurofighter Typhoon costs GB£68.9 million, €77.7 mil., US$122.5 mil. (2008 Unit Production Cost). On 17 June 2009, Germany ordered 31 aircraft of Tranche 3A for €2,800m, leading to a system cost of €90m per aircraft.

This means that the estimate the Malaysian defense minister gave of RM3 billion a piece is rather off tangent. Maybe the minister was pointing out the fact that the aircraft with all its fittings for a multi-role capability would costt RM3 billion. Still, that is RM3 billion of public money spent on one aircraft to replace an MIG-29 that has only been in service for 10 years.


One should also not forget the overpriced OPVs for it was in 2005, after the Public Accounts Committee brought to light the gross management irregularities at the PSC-Naval Dockyard that a major revamp was put into place to salvage the New Generation Patrol Vessels (NGPV) project.

Under the intervention of the Malaysian Government, a new management team was put in place and the project was revived. Boustead Holding Bhd, also a GLC, took up a 37% stake in PSC, becoming the single largest shareholder. As a division of PSC, PSC-ND therefore merged into Boustead Holding Bhd and was renamed Boustead Naval Shipyard Sdn Bhd.

As the only naval shipyard company in Malaysia, Boustead, was first linked to the allegations of irregularities when an opposition lawmaker claimed the government was paying Boustead 870% more than market price for six offshore patrol vessels (OPVs) for RM6 billion. The exuberant price for the OPVs can be traced back to the findings of the PAC when investigating PSC-ND. The PAC claimed that RM120mil would be needed to salvage the first two OPV vessels, and that the Government also needed to pump in at least RM80mil to pay off local vendors, suppliers and contractors.

Reports of nonpayment to some 40 sub contractors who were owed RM180 million surfaced along with news that PSC-ND had also failed to remit some RM4 million in contributions to the Employees Provident Fund (EPF), the Inland Revenue Board and the National Co-operative Organisation despite having made salary deductions from its 1,500 staff. PSC-ND has also reportedly sought another advance of 1.8 billion ringgit from the government to complete building the vessels. Under the management of Boustead, these issues were seemingly solved and two vessels were delivered and accepted by the Royal Malaysian Navy in 2006.

What happened to the money

Against such a record of corruption and mismanagement, Malaysians would do well to scrutinize all arms purchases by their government or it might fritter away their pension money and hard-earned savings.

Also, in the first place, why the need to spend money to further upgrade military hardware when there is no apparent danger? Is Malaysia on the verge of setting off a South East Asia arms race?

So the statement by the Defence Minister to halt all purchase of military assets is not only timely but overdue. It is also clear that the Malaysian government’s coffers are running dry and that too raises more questions. What has our government been using public money on?

Malaysia Chronicle

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