SHAH ALAM: The CEO of LTAT (the Armed Forces Provident Fund) Datuk Ahmad Nazim Abdul Rahman in an interview with the Edge business daily has brushed aside the criticism over the LCS project even saying that the ships cost were comparable with the ones bought by Egypt and UAE.
The Edge itself did’nt endear itself as it stick to the line that the LCS will only costs some RM10 billion, around RM1.2 billion more than the ceiling contract price. From the Edge. Click on the link to read the whole article.
Some people have called the continuation of the LCS project as a government bailout for LTAT and Boustead Group, as it has already paid RM6 billion and now needs to pay another RM4 billion for the project to be completed, or a total of RM10 billion. What is your comment?
I do not have the authority to respond on the additional money. But regardless of the funding, this is not a bailout of either LTAT or Boustead. The government was focused on saving the project, rather than the two entities. That is why in its deliberation, the government considered multiple options, including terminating the contract with BNS and handing it over to a new party to build the ships. But the latter would cost multiple times more and require a longer time to deliver.
Yes, the cabinet decision in favour of continuing with BNS has averted a massive financial fallout across the economic value chain, but the government’s paramount consideration was the security and sovereignty of the nation. LCS is not just another government project, like highways, schools or hospitals. LCS is a key combatant asset that we urgently need to protect our maritime security and economic interests.
The cost-benefit analysis from an economic perspective is very clear. The economic impact in terms of technical capacities, job creation and the development of the supply chain has been enormous and far outweighs the cost. Having said that, even if we were to look at LCS purely from a cost perspective, public records show that the US’ LCS cost the Americans about US$600 million per ship, while it cost Egypt and the UAE about €375 million per ship. This is not an apple-to-apple comparison, but from a cost perspective alone, they are comparable.
Malaysian Defence has posted previously that the cost of the project is now expected to be around RM14 billion, some RM5 billion more. And that is the estimation IF the project started in January, 2022. The project is now expected to start this October and November!
Clearly the CEO has been listening to the wrong people, as he had mentioned the US Navy LCS programme. As for the price of the Egyptian and UAE Gowind corvettes supposedly costing Euros 375 million (RM1.7 billion), each, I have no idea really. But will it be comparable to the RMN LCS then? If the whole programme costs below RM11 billion it will. But it is unlikely. I know – the RM10 billion to RM11 billion – figures was bandied around in 2018 , before the change of the governments and the project suspension in 2019. The figure, as I had posted previously, is no longer correct.
Anyhow, even if the CEO is right and we end up paying the same as Egypt and UAE (he has a higher pay grade than me so he should be better informed), RMN still need extra funds to cover late entry of the ships. This means the government has to spend much more money to cover the shortfall in capabilities due to the late deliveries of the LCS (apart from paying the cost of the project).
Of course, as the CEO said it himself he was just talking about cost perspectives (to LTAT) alone! And it is likely, he will be gone once the ships are supposed to be delivered. Nothing wrong really, as that is the reason he was appointed to LTAT in the first place, to make the fund make a profit.
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