LTAT Thinking To Divest From Defence Business

The LCS major equipment detailed by RMN in 2016. RMN graphic

SHAH ALAM: It appears as part of its privatisation exercise of Boustead Holdings, Lembaga Tabung Angkatan Tentera (LTAT) is looking at whether it is feasible to divest from the defence business, The Edge quoted LTAT CEO Nazim Abdul Rahman. He said as part of the LTAT transformation they will need to see how much exposure they want from the defence business.

The defence business he is talking about is of course, those under Boustead subsidiaries – Boustead Heavy Industries Corporation Bhd (BHIC), Boustead Naval Shipyard (BNS) and Boustead DCNS Naval Corporation Sdn Bhd. BHIC is involved in a JV with Airbus.

The company is BHIC AeroServices Sdn Bhd (BHICAS), a joint venture company by BHIC Defence Technologies Sdn Bhd (BDTS), a wholly-owned subsidiary of BHIC, which holds 51 per cent stake in BHICAS, together with Prestige Pillar Sdn Bhd and Airbus Helicopters Malaysia Sdn Bhd that hold 30 per cent and 19 per cent equity, respectively.

BNS is the builder of the LCS, and a member company of BHIC. Boustead DCNS is a JV between BHIC and Naval Group (formerly known as DCNS) for the integrated support services for the RMN two Scorpene class submarines.

From The Edge:

What about strategic assets like defence and others?

We have to go back to the drawing board and see how much exposure we want in the defence industry.

You might pull out of it?

It’s an option, but we have to see. If it is a divestment, we have to see how we can execute the divestment. It will be challenging, especially considering that many of the companies within the BHIC group are joint ventures — whether it is with Airbus, Naval Group [or] Bofors. So, yes, we really have to go to the drawing board and look into this in more detail. It’s nothing concrete yet at this stage.

It must be noted that Boustead (LTAT) involvement in defence came about the order of the government to save the NGPV programme back in 2005. Eight-years earlier the-then PM Tun Mahathir Mohamad administration awarded the project to Penang Shipbuilding Corporation Bhd, then under the control of TS Amin Shah Omar Shah.

BHIC was also chosen as the vehicle to rescue the training deal for the Scorpene submarine which was originally awarded to Perimekar Sdn Bhd. The company became infamous following the murder of one Mongolian model.

Boustead was also selected as JV partner for the ISS of the submarines as well as the maintenance of the EC725 helicopters. BHIC-Bofors was another JV set-up to offer maintenance services for the Malaysian Armed Forces. The sale of new Bofors guns is undertaken by BAE Systems.

Clearly, the LTAT CEO realised that while the defence business is lucrative at the first glance, there are many pitfalls surrounding it. Honestly, it is refreshing that someone from LTAT has finally acknowledged the pitfalls, one that have been obvious to defence watchers since the takeover of BNS, at least.

That said while LTAT may be thinking about divesting from the defence business, it is likely that it needs the permission from the government to do so. This is even before the need to find the suitable companies to replace it. Can it find the companies? From past attempts to revive defence companies, it is very unlikely.

Of course, they can be turn into government owned companies instead of the current government linked companies.

— Malaysian Defence

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