SHAH ALAM: The nationalisation of Boustead Naval Shipyard (BNS) has been delayed yet again. Last month, Boustead Heavy Industries Bhd (BHIC) announced that the deal with the Ministry of Finance Inc. will be delayed.
BHIC on November 1 said that the parties “require additional time for the fulfilment of the conditions precedent” to finalise the conditional agreement. It said the deal will be delayed up to December 1. It was supposed to be completed today (November 3).
From the previous story:
BHIC had announced previously that the government was taking full control of the BNS and subsequently, the LCS project, for a token figure of RM1. The government however needs to pay BHIC some RM1.2 billion, most of which is liabilities incurred by BNS for the financial period of 2022 while the rest is the sum incurred by BNS to the company.
The exact amount of BNS liabilities is RM848.45 million and RM383.94 million is the sum owed by BNS to BHIC.
In its recent report, the Public Accounts Committee stated that BNS also had loans facility which amounted to some RM629 million. This mean that the full nationalisation of BNS will amount to some RM1.86 billion. According to my calculations, with the BNS outstanding loans, the cost of the LCS programme is actually RM13.2 billion. I did not take account the outstanding BNS loans in the figure, stated here which was RM12.44 billion.
The announcement by BHIC:
PROPOSED DISPOSAL OF 27,000,001 ORDINARY SHARES IN BOUSTEAD NAVAL
SHIPYARD SDN. BHD. (“BNS”) HELD BY PERSTIM INDUSTRIES SDN. BHD. (“PISB”
OR “VENDOR”), AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BHIC, FOR A
CASH CONSIDERATION OF RM1.00 (HEREINAFTER REFERRED TO AS THE
PROPOSED DISPOSAL)
The terms used herein shall have the same meaning as those defined in the announcement dated 21
August 2023.
We refer to the announcements dated 29 May 2023, 21 August 2023, and 4 October 2023 in relation to the Proposed Disposal.
Pursuant to the SSA and the subsequent agreement between the Parties, the Conditional Period for the fulfilment of the Conditions Precedent for the Proposed Disposal was extended up to 1 November 2023
(“Extended Conditional Period”). As the Parties require additional time for the fulfilment of the Conditions Precedent, the Company and the Purchaser have mutually agreed to extend the Extended Conditional
Period of the SSA for a further period up to 1 December 2023 (“Second Extended Conditional Period”).
For avoidance of doubt, all other terms and conditions of the SSA remain unchanged.
This announcement is dated 1 November 2023
— Malaysian Defence
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Due to redtape/paperwork/bureaucracy or haggling the actual sum the Govt need to pay BHIC?
I think its more the legal complications that need to be address
This company can’t escape from the word delay.
Akmal – ”This company can’t escape from the word delay.”
As simplistic/clear cut as that? From what little I know it’s a combination of various factors …
As long as construction has restarted, it is ok since ultimately its the Federal Government of Malaysia. Any legal issues would be a matter of formality unless there is a dispute between parties. If the only progress is desktop design work, then its impossible for the ships to be handed over based on the schedule.
kel – ”it is ok since ultimately its the Federal Government of Malaysia.”
The ”Federal Government of Malaysia” which can’t for political and monetary
reasons scrap the programme and in one form or the other created the conditions which enabled a cock up of this magnitude to occur. Some enlightened souls however still belive it’s all due to BNS.
kel – ”Any legal issues would be a matter of formality unless there is a dispute between parties”
A ”matter of formality”’ or a host of bureaucratic processes which have to play out; due process?
kel – ”then its impossible for the ships to be handed over based on the schedule.”
An RMN friend I spoke has personal opinion that the lead ship might only be ready for commissioning in 2026/7. Let’s see.
Ultimately the LCS saga is another ”venture” which has led to huge wastage of public funds; has impacted the RMN’s overall modernisation plans; play’s a part in public perceptions towards defence and is a huge embarrassment; another reminder of our highly flawed self defeating way of doing things.
Perhaps people live in short memory era or keyword or headline memory era. LCS1 was never meant to be ready by 2024 or 2025. Downslip May 2024. Harbour Acceptance Test Nov 2024. Sea Acceptance Test Oct 2025. Physical handover August 2026. That is the official published schedulde. No one should be expecting a ship in 2024 or 2025. As long as the govt takeover is a done deal – govt will own the company eventually – it is just a formality, that is to say the government will do or pay what is required to get it done. Meaning physcial work restarts. If not, then the government isnt certain it will, can or want to take over BNS – no money.
https://www.malaysiandefence.com/first-lcs-to-be-ready-by-august-2024/
I cannot brain why is it so difficult to solve this problem. Bite the bullet now & BNS must take the fall. For the loss of jobs maybe the ministry of Human Resources can find a suitable way of to reimburse the workers. JUST HAND IT OVER TO NAVAL GROUP & let them do it. For godsake
Kel – “Perhaps people live in short memory era”
Unlike your good self I would assume.
Kel – “ If not, then the government isnt certain it will, can or want to take over BNS – no money”
Not to piss on your parade but the real question is whether the LCS will enter service with the desired capability and whether by the time it does; will actually be what’s needed?
Qamarul – “. JUST HAND IT OVER TO NAVAL GROUP & let them do i”
Must as as well wish for the tooth fairy because that option is as likely as Cuba becoming the world’s leading people lan oil producer or Swiss trains not running on schedule
The minister told Parliament on October 31, the previous government looked at replacing BNS, but found it too expensive. The current government concurred.
Too expensive of course because it is halfway down. Its better to work out with Naval Group for an alternate payment solutions like a concessions etc. It can be worked out. All these dilly dally in the end the cost will reach 15 or 16 billions ringgits with fewer ship. If them gov are not sure like this nore problem will resurface. I doubt the ships will be completed at all because surprise surprise the detailed 3d blueprints is bot even completed. Oh my country
@Qamarul
“work out with Naval Group for an alternate payment solutions”
We arent in the position to be demanding that, since they know if we come back to them we are basically begging for help. They sure will press us for maximum profits and gave a take it or leave it offer. Thats just business. They are in a stronger bargaining position and if we want their help we need to stomach their asking price, and evidently it was a price too high to pay. IMHO going with NAVAL is the right thing to do even if we have to pay up to Rm 17Bil, at least we are assured it will get done.
kel – ”How to increase number of MMEA ships? Complete the 3 OPVs. That’s 3 ships.”
If we’re talking about the same MMEA here the key problem is that the 3 new OPVs are a bare fraction of what the MMEA needs and the government will not be in a hurry to order a follow on 3.
As ”…” might tell you [he’ll also have the links] there are various avenues to ”quickly” remedy the predicament; problem is will the government be willing and to the MMEA’s already large logistical/support footprint.
kel – ”which I belive will increase by at least 5x RMN’s total tonnage”
Who cares about ”tonnage”? It’s not as it’s the 1921/22 Washington Naval Treaty or
WW1/W2 when the quality of ships was measured by how large their guns were and how thick their armour was : ”tonnage”.
It’s quality; in other words to make up for the lack of quantity we need to have a certain level of quality. In order to negate the lack of quantity and various limitations we have; it’s also imperative that we increase the level of jointness”; i.e. the ability of all 3 services to operate seamlessly and to avoid duplication and wastage. A good example [as pointed out in a previous post] would be for the radars of RMN ships in the Spratlys to be networked to the RMAF radar in Labuan. The logic behind this is obvious.
Kel – ”The programs are there. The pipeline exists”
Well that’s reassuring; we can all sleep better tonight now that you’ve pointed it out. The problem is – if you’re unaware – we have/had a whole list of ”programmes” [I use Brit spelling] and ”pipelines” which were delayed; scrapped or were officially still in existence but went no where….
kel – ”just for the rah-rah only for those programs to fail because of poor execution. ”
It’s not only ”poor execution” but also shifting priorities; lack of commitment and lacking the fundamental prerequisites.c
IMHO going with NAVAL is the right thing to do even if we have to pay up to Rm 17Bil, at least we are assured it will get done.
Yes this is right. But we can always use “incremental funding”. Naval Group & the gov can sort it out. Incremental funding is the best way to go. Let’s say the cost will be 17B, divide that by 2 stages of funding. The Us DoD also had been doing it since the vietnam war. Under incremental funding, a weapon’s cost is divided into two or more annual increments that Congress approves separately each year. Supporters could argue that using it could avoid or mitigate budget spikes associated with procuring very expensive ships such as aircraft carriers or “large-deck” amphibious assault ships.
@Qamarul
“But we can always use “incremental funding”. Naval Group & the gov can sort it out.”
Of course they will sort it out, its whether Govt comes out the winner or NAVAL does. They have the upper hand in the nego table so they can dictate what are the payment terms, and if Govt is desperate enough (which they would be if talking to NAVAL) then they have no choice but to follow NAVAL’s lead. Its like going to the market and buying from a sole supplier, you try bargain see if they interested to listen or not. The point is, if were going back to the table with NAVAL it will be on their terms, not ours.
Mind you “incremental funding” is not a means to reduce burden as in the context of Govt funding, it still means they have to allocate the budget for the funds so sufficient money has to be there first place, this unlike an easy payment plan where one buys on credit.