Cosy cronyism in Malaysian arms procurements

 

From Kua Kia Soong

No doubt there will be fall guys who will be charged over the latest littoral combat ship (LCS) fiasco. But if we miss the wood for the trees, Malaysian taxpayers will be taken for a ride yet again.

In my 2010 book “Questioning Arms Spending in Malaysia”, I wrote:

“Instead of calling for competitive bidding on defence contracts, the government has insisted that its military procurements be conducted through private negotiations because of security considerations. Very often, contracts are given to companies which have links to political leaders. Approving officers, for obvious reasons, then approve projects forwarded by relatives or friends of political leaders.”

It is not as if such glaring excesses in the latest scandal are new. In late 2007,the auditor-general had tabled a report in Parliament alleging that a contract to build naval vessels given to PSC-Naval Dockyard, a subsidiary of Penang Shipbuilding & Construction Sdn Bhd owned by Amin Shah Omar Shah, was in serious trouble.

The Malaysian company was contracted to deliver six patrol boats for the navy in 2004 and complete delivery by April 2008. Those were supposed to be the first of 27 offshore vessels ultimately to cost RM24 billion.

The contract included the right to maintain and repair all the country’s naval craft. However, only two barely operational patrol boats had been delivered by mid-2006. There were 298 recorded complaints about the two boats, which were also found to have 100 and 383 uncompleted items. The original RM5.35 billion contract ballooned to RM6.75 billion by January 2007.

The auditor-general attributed the failure to serious financial mismanagement and technical incompetence stemming from the fact that PSC had never built anything but trawlers or police boats before being given the contract. The report had found the value of the contract should only have been RM4.9 billion and that the two vessels delivered to date were both found to be defective.

Scorpene submarines and littoral combat ships

Does this not sound familiar? The latest LCS scandal is no different when we see the dramatis personae are interchangeable with those in the Scorpene submarine scandal. Take Lodin Wok Kamaruddin, for example, who was cited by WikiLeaks as one of then prime minister Najib Razak’s close friends. When I was researching the Scorpene scandal, Lodin Wok was also one of the directors of Perimekar Sdn Bhd.

In the Scorpene submarines scandal, Perimekar was suspected of being created for the sole purpose of distributing a RM500 million commission between Malaysian and the French arms dealer. This remains to be uncovered in the French investigations into the scandal.

Now, Lodin Wok Kamaruddin had been the chief executive of the armed forces pension fund Lembaga Tabung Angkatan Tentera (LTAT) since August 1982. He was also group managing director of Boustead Holdings Bhd.

At the height of the Scorpene submarine scandal, LTAT and Boustead controlled 20% of Perimekar, while KS Ombak Laut Sdn Bhd held the remaining 60% stake.

Lodin Wok also sat on the board of Affin Bank Bhd, one of Perimekar’s bankers. He was one of the five directors in Perimekar together with Mazlinda Makhzan, Razak Baginda’s wife.

Furthermore, in 2009, Boustead DCNS Naval Corp – a 60-40 joint venture in 2009 between BHIC Defence Technologies and the French-based DCNS – was awarded a RM532 million contract related to the Scorpene submarines by the defence ministry. This company was supposed to provide “support services” to Scorpene submarines from 2010 to 2015.

BHIC Defence is owned by BHIC (Boustead Heavy Industries Corporation), whose chairman is also Lodin Wok.

These strings of “coincidences” merely point to the cosy cronyism that has been the stock in trade of arms procurement in Malaysia, all executed under the convenient excuse that this is necessary to boost “Bumiputera interests” and national security. - FMT

Kua Kia Soong is a former MP and an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.