SHAH ALAM: The statement below is self-explainatory. It is the confirmation of the contract for the AV8. As mentioned in the previous postings, the LOA for the AV8 signified the three mandatory Armed Forces projects for the RMK 10. As a reminder the other two projects are the SGPV/LCS and the Nuri Replacement Programme (Cougar procurement).
The Cougar project has just started while the SGPV/LCS project will be signed, most probably, at Lima 2011 at the end of the year. Again as I had mentioned I am wary of having the government announcing the ceiling budget for any project under negotiations as the final price had always tracked the approved budget. In this case, the LOI was worth RM8 billion and the LOA (contract) is RM7.5 billion, a discount of RM500 million.
Like the SGPV/LCS project I am still of the opinion that this is another Bridge Too Far for MAF. Of course the Army needs to recapitalise its forces but spending RM7.5 billion for just 257 armoured fighting vehicles (AFV) is over the top for our defence budget. Yes, the money spent will be spread out most probably within 10 years or even longer but how the government can guarantee it will be spending a billion ringgit a year for these vehicles especially in an economic downturn?
The rest of the Army remained in need of recapitalisation and more money is needed for operational and maintenance concerns. Yes, there is even the chance of huge capital outlay in case a shooting war does take place , no matter how remote the chance of it happening.
Yes, I know the AV8 is an AFV and it was never designed to fight an Abrams. But for that price it should not only fight an Abrams it should tore it to pieces! I will not bore you with numbers but the rest of the 8×8 AFV cost around RM10 million each or cheaper (Western ones) while Russians and Chinese ones goes much, much cheaper.
I understand the argument on transfer technology and such but then again for RM30 million a piece everything on the AV8 should be designed in country and made locally. Instead it will have a Turkish body, a South African turret with gun and ATGW launcher, a German engine and French radios and electronics and assembled here. It was designed in the USA however, the country that bought an AFV from the Swiss, mind you.
By the way, I have no idea how much is the cost of the Singaporean 8X8 the Terrex. It may even cost as much as our AV8. But with an annual budget of nearly US10 billion, of course it can afford to pay for it.
Revised RMK10 tally (figures in bracket is actual contract price0
Cougar RM1 billion (RM1.6 billion); SGPV/LCS RM3 billion (RM6 billion), AV8 RM2.5 billion (RM7.5 billion) A400M RM1 bilion (RM2.5 billion)
DRB-HICOM BERHAD (“DRB-HICOM” OR “COMPANY”)
ACCEPTANCE OF LETTER OF AWARD (“LOA”) FROM THE GOVERNMENT OF MALAYSIA TO DRB-HICOM DEFENCE TECHNOLOGIES SDN BHD (“DEFTECH”) IN RELATION TO THE MANUFACTURE, SUPPLY AND DELIVERY OF ARMOURED WHEELED VEHICLES
Announcement Details/Table Section :
Further to the announcement dated 20 April 2010, DRB-HICOM is pleased to announce that its wholly-owned subsidiary, DEFTECH had accepted the Letter of Award dated 23 February 2011 from the Government of Malaysia to design, develop, manufacture, commission, supply and delivery of two hundred and fifty seven (257) units of twelve (12) variants of the 8 x 8 Armoured Wheeled Vehicles (AWV) (“Contract”). The Contract valued at RM7.55 billion is for a period of 7 years commencing from 2011.
DEFTECH, via this Contract, will spur and enhance the growth of the Malaysian economy through an economic enhancement program which consists of transfer of advanced defence technologies from its technology partners and original equipment manufacturers (“OEM”), research & development and local vendors development.
DEFTECH will also own its first intellectual property rights on armoured wheeled vehicle systems and sub-systems. Many new local OEMs will be created through direct and indirect foreign investments during the duration of the Contract and this will generate increased employment for the local defence industry.
Close collaboration with its technology partners and principal OEMs will also enhance the capabilities and knowledge of not only DEFTECH’s employees but create a knowledgeable workforce for the local defence industry including acquiring competencies in project management, supply chain management particularly defence business processes as well as systems engineering, amongst others.
The Contract will not have any material effect on the earnings, gearing and net assets of DRB-HICOM Group for the financial year ending 31 March 2011. However, the Contract will contribute positively to the future earnings of the Group.
None of the Directors and/or substantial shareholders of DRB-HICOM and persons connected with them have any interest, direct or indirect, in the said Contract.
This announcement is dated 7 March 2011.