KUALA LUMPUR, Aug 10 — Senior Defence Minister Datuk Seri Hishammuddin Hussein should clarify three issues from the RM9.128 billion contract for six littoral combat ships (LCS) for full transparency, said political rivals who previously held his portfolio
In a joint statement, former defence minister Mohamad Sabu and his former deputy Liew Chin Tong, firstly asked Hishammuddin to state the current debt of Boustead Naval Shipyard Sdn Bhd, the main contractor of the project.
They pointed out that former prime minister Datuk Seri Najib Razak had accused the Defence Ministry during the Pakatan Harapan administration of purportedly “freezing” the LCS project for 15 months since September 2019 for investigations.
The duo said Najib’s claim was “a lie” as the project did not proceed due to Boustead Naval Shipyard’s debts.
“The LCS project had faced financial problems before Pakatan Harapan took over power,” the duo said.
They pointed out that Boustead Naval Shipyard’s debts as of August 2019 amounted to RM1.738 billion, comprising RM869 million to financial institutions, RM767 million to original equipment manufacturers (OEM) and RM102.2 million in other debts.
“Many subcontractors and OEMs no longer continued work due to debts. The Pakatan Harapan government did not ‘freeze’ the LCS project,” they said.
Their second question to Hishammuddin revolved around Boustead Naval Shipyard’s use of hundreds of millions of ringgit received as part of the LCS contract to pay for old debts in a separate older project.
Out of the RM6.08 billion which the Malaysian government had already paid to Boustead Naval Shipyard under the RM9.128 billion LCS project, Mohamad and Liew claimed that a total of RM745 million was used to “bail out” the older project involving the supply of New Generation Patrol Vessels (NGPV).
The RM745 million from the RM6.08 billion was listed down by the duo as being RM255 million to settle old NGPV debts and RM141 million for interest on those debts, and RM349 million for “cost increase on design”.
The two pressed Hishammuddin to say if he agreed that the LCS project funds could be used to pay off the debts in the NGPV project, while also asking if the LCS project was started with the intentions of “rolling” the old debts in the NGPV project.
As for the third question, they asked if Boustead Naval Shipyard would be given an “order book” to guarantee the issuance of sukuk or Islamic bonds, in order to raise RM4 billion in funds to revive the RM9.128 billion LCS project.
According to Mohamad and Liew, Boustead Naval Shipyard had in June 2021 proposed for the Malaysian government to give the company an “order book” or contract valued at RM53 billion, for the purpose of obtaining borrowings worth RM4 billion via sukuk for the LCS project.
The two said the proposal for the RM53 billion order book for a 30-year contract for maintenance, repair and overhaul was not appropriate.
While noting that Parliament’s bipartisan watchdog Public Accounts Committee (PAC) was previously told that the Malaysian government in2021 had only agreed to give an order book for three years, both Mohamad and Liew said this move by the government was also incorrect and unsafe.
Noting that Hishammuddin had on April 20 announced that the LCS project would be continued, the two pointed out that no one, including the PAC, had been given details about how funds would be obtained for and the timeline for the LCS project.
“Hishammuddin and the government must give a transparent and clear explanation, and guarantee that there would be no misuse of funds that would bring harm,” they said.
Earlier in the statement, Mohamad and Liew also welcomed a motion by Dewan Negara lawmakers Lim Hui Ying, Fadhlina Sidek and Datuk A Kesavadas Nair to ask for the PAC’s report on the LCS project to be debated in the Dewan Negara.
The trio had yesterday presented the motion to Dewan Negara Speaker Tan Sri Rais Yatim.
Mohamad and Liew urged Hishammuddin to explain the financial status of Boustead Naval Shipyard and the LCS project to the Dewan Negara.
Earlier today, Prime Minister Datuk Seri Ismail Sabri Yaakob said the Cabinet had decided to urge the Malaysian Anti-Corruption Commission (MACC) to speed up its probe on the LCS project and that the attorney general should prosecute those responsible if there was evidence of wrongdoing.
Hishammuddin had then issued a statement today to welcome Ismail Sabri’s remarks, and said both he and the Defence Ministry would give their full cooperation to authorities carrying out investigations on the LCS project, including the MACC, the PAC, the Special Investigation Committee on Public Governance, Procurement and Finance (JKSTUPKK) and forensic auditors.
Hishammuddin said both he and the Defence Ministry leadership had nothing to hide, while also saying that the Cabinet’s decision today would not affect the three things that he had previously stressed.
The three things he had previously stressed are that the LCS project must be continued as decided by the Cabinet in April as the Malaysian navy needs the vessels, and those who are wrong will be brought to face justice, and that the Defence Ministry is actively negotiating with the OEM, vendors and banks in these six months on a mobilisation plan to ensure the LCS can be completed.
On August 8, Hishammuddin told the Dewan Negara that Malaysia hopes to be able to complete the first of the LCS within a year or two.
The PAC’s report released on August 4 said the RM9.128 billion, 10-year contract from October 2013 to October 2023 was awarded through direct negotiation to contractor Boustead Naval Shipyard for the supply of the six LCS.
The PAC report also said the Malaysian government had to date already paid RM6.083 billion to the contractor, but none of the six LCS vessels have been completed. Based on the original schedule, five of the six LCS vessels should have been completed and handed over by August 2022.
The project has also run into cost overruns of over RM1.4 billion.