MACC Investigating FLIT/LCA Tender

Korean Aerospace Industries FA-50PH. KAI

SHAH ALAM: Business daily, The Edge, is reporting that the MACC has started investigating alleged impropriety in the FLIT/LCA tender. The publication is also saying that the Korean Aerospace Industries (KAI) T/FA-50 was the front-runner for the tender.

From The Edge

KOREA Aerospace Industries (KAI) has emerged as the front runner to secure a RM4 billion contract to supply the Royal Malaysian Air Force (RMAF) with 18 light combat aircraft (LCA), according to sources familiar with the outcome. However, the award is said to have triggered an investigation by the Malaysian Anti-Corruption Commission (MACC), following a complaint by one of the unsuccessful bidders.

The anti-graft body is understood to have opened a case file on the matter based on documents and text messages sighted by The Edge.

MACC declined to comment when contacted.

Meanwhile, caretaker Defence Minister Datuk Seri Hishammuddin Hussein assures that the contract is being handled professionally by those responsible for the multi-billion ringgit deal.

The report quoted a Datuk Lau Kong Cheng, a consultant to one of the bidders as saying that the Finance Ministry should not be negotiating with KAI as the current government was only a caretaker and therefore had no right to enter into any contracts. Lau is quoted in in November 1 Harian Metro report which stated that one of the bidders for the FLIT/LCA had lodged a police report alleging impropriety with the tender process. The report quoted Lau as a retired Brigadier General and the managing director of Paragon Avtech Sdn Bhd. (A Google check showed Lau was a former fighter pilot). The report did not say which aircraft the company had bid for the tender

AVIC/PAC JF-17. Internet

However, an earlier Harian Metro report quoted Lau as saying the Avic JF-17 Thunder was a better plane than the South Korean aircraft which meant the company was representing the aircraft. The report also quoted Lau as saying that the company had also bid for the MALE UAS tender (AFAIK, no police report was lodged).
HAL Tejas MK 1 LCA. Indian Air Force

It is likely the police forwarded Lau’s report to the MACC for further investigations as it found that the alleged impropriety was in the powers of the commission (or he himself lodged a report with the MACC). As I have no current contacts with the MACC, I guess we will have to wait for the commission or the Edge to announce new developments on the case. Malaysian Defence had reported previously that the FLIT/LCA decision rested with the Finance Ministry. With a new government expected only by Wednesday at the latest, I guess the final decision on the tender will not be made any time soon. The new government will need to
come up with a new budget first.

— Malaysian Defence

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21 Comments

  1. Perhaps H2O can publicly threaten to come after MACC Commissioner for daring to investigate this tender matter. After all if it works for someone…

  2. We’ve reached a stage where it is the norm for companies which have lost out to make claims of corruption or irregularities. Also, the esteemed former Brigadier General was talking rot he Saud that the JF-17 was “better”. There is no “better”; only what comes the closest to meeting specific requirements of individual users and ultimately it will be the key enablers which will enable the platform to be utilised to its full potential.

  3. RM4 billion for 18 units or usd$47 milion each. Is training and tools included?
    It is still a fair price although higher than pinoy’s FA-50 blick 10.

    Our neighbour…ID really walk the talk about modernization their fleet.
    They already provided usd$3.9 billion to get batch 2 rafale F4 and ex Qatar AF mirrage 2000-5EDA. Tbe US-ID already agreed on the F15 waiting for their finance minister approval.

  4. Without more details on the equipment and other stuff specific for RMAF and likely TOT costs, its hard to determine whether the price is comparable with other buyers. The Indonesians are relying on loans to finance the procurements. We do not want to go down that route

  5. Make SPRM bigger and stronger

    So many task for them lately, and covering almost every aspect of money matters in everydays life of rakyat Malaysia.

  6. Philippines cost includes the set up of simulator center in the Philippines.
    http://www.pna.gov.ph/articles/1072419

    Things that could be included in RMAF cost
    – Setting up simulator center/virtual learning center.
    – Korean weapons such as glide bombs etc.
    – specific RMAF mods, but I believe we don’t have to pay much for this as Poland has signed the contract before RMAF, and we can just opt to have the same thing Poland has without the need to pay for R&D (let Poland pay for them instead). So I believe the cost on the actual signing could be lower than RM4 bil. Known Polish mods include refueling probe, Targeting pod, AESA Radar.
    – Spare parts, sustainment costs.
    – ToT cost (need a full list of these)
    – Half of payment through palm oil, maybe costs associated to this.

    One thing that JF-17 and Tejas cannot compare to the FA-50. Advanced pilot training systems that is already proven and mature with the T-5/FA-50. If choose JF-17 or Tejas, RMAF will be on its own. Pilot training is a big part of LCA/FLIT requirements.
    – embedded virtual simulation in the aircraft itself. You can have virtual enemy fighters, radars, missiles while you are flying the actual aircaft.
    – Comprehensive ground-based simulator and computer learning systems
    https://m.koreaaero.com/EN/images/business/TrainingSystem/img02.jpg

  7. JF17 did not participate in the tender excercise, so his likely clients is JL10.

    Mr retired Brigadier General complaints was that the ‘winner’ is always chosen beforehand which negated the reason for an actual tender.

    He claimed that
    1) MOF is currently in a direct nego with KAI exclusively.
    2) RMAF didn’t bothered spending time on physical inspection for the other 2 final contenders compared to KAI
    3) MOF had written a letter asking for the other bidder to take back their deposit after the parliament has been dissolved.

    Personally I don’t think he’s counting on MACC to find irregularities. His likely intentions is to bring this forward to the public court of opinion & his clients would put a diplomatic pressure to both SK & us in hope that the decision is overturned by the next administration.

  8. At 900 million dollars for 18 FA-50, we are paying less than the poles who paid more than 3 billion dollars for 48 planes.

  9. I don’t believe we’ll take a long break before a firm decision is made on the LCA/FLIT deal. If this Brig. Gen. is right, I’d assume that ‘his’ JF17s are coming in as single-seat and tandem-seat fighters. IF. Any new government will be a chacha-merba government but seeing the public interest and criticism levelled, there there’s bound to be a backlash if the decision were to drag on. The public apathy on defence issues has somewhat dissipated replaced by mainly uneducated criticism from the public including some politicians on this issue.

  10. dundun,

    The poles are getting the 1st 12 as soon as next year, with 36 more starting 2024.

    The poles are also getting an European MRO and spare parts center for FA-50. So if other european countries are going to buy FA-50 (Ireland, Slovakia, Bulgaria, Hungary to name a few), they will have to service their FA-50 in Poland.

    KAI will also establish an international flight school in Poland as a part of the deal.

  11. dundun – ”we are paying less than the poles who paid more than 3 billion dollars for 48 planes.”

    Because they have probably a more comprehensive training/support package amongst other things. As it stands; despite whatever reports have surfaced; we have no idea how much the RMAF deal is worth; whether it will include a spares and training package, etc.

  12. Training package is likely but spares and support, based on recent projects, may not be included in procurement contract. As I stated before in the AW139 post.

  13. Based on current information if the acquisition of FA-50 block 20 cost us usd$47 each without any spare and support i would say it would be pricey but if block 30 that RMAF will receive than I would say it is still a fair price.
    Pinoy’s FA-50 block 10 including training and simulator only cost then usd$36 million each. The different between block 10 and 20 only in air to air refuelling system.

    I dont mind if military modernization is financed by loan as ID is. ATM need modernization and lack of equipments in all branches. Annual budget will not be able to finance the need. Witbout a crash program there will be no solution for ATM. Loan is good as long as manageable. Even with no loan policy in military modernization, public debt is still higher and higher due to debt is not followed by income increment.

  14. Romeo,

    Philippines FA-50 is Block 0

    Block 10 – sniper targeting pod integration.

    Block 20 – Previously planned as just a software upgrade to the Elta radar to fire AMRAAM BVR missile, refueling probe. Based on latest Poland request, refueling probe, BVR missiles, AESA radar (favourite Raytheon PhantomStrike low cost GaN AESA radar).

  15. AFAIK as I know Block 20 only incorporate the air to air refuelling probe. Block 30 are the other things you mentioned. Of course I could be wrong, some one said these Block configurations are my imagination

  16. I havent heard about any block 30 yet..Maybe i missed the bus..We cant be sure really but initial rumours Block 10 will just involve software upgrade and sniper pod integration.Other good stuffs will come on block 20 above like aar probe,bvr,aesa radar etc..I could be wrong also because im just citing open source wikipedia

  17. Military purchase particularly direct purchase overseas is mostly considered as consumption rather than investment (like rail,road, hospital, school). It doesn’t have much spillover economics impact that would increase the coffer income and thus financing it with debt would reduce the sovereign rating making debt expensive for average customer & corporation. Making too much debt would also devalue the nation currencies.

    Malaysian voters meanwhile demanded lower debt, surplus account and higher currencies values. Which is rather financially responsible things to ask Except they also demand lower taxes & higher welfare.

  18. Romeo – ”I dont mind if military modernization is financed by loan as ID is. ”

    There is a reason why we traditionally have not been keen on loans; even loans the like of ones offered by South Korea; friendly/soft ones to finance procurement.

    Romeo – ”Witbout a crash program there will be no solution for ATM. ”

    Even if Father Christmas or the Grinch decided to gift us 100 billion with no strings attached to fund procurement; chances are we won’t get the best value for what we spend because of the defence policy we have and the way we handle procurement.

    zaft – ”Military purchase particularly direct purchase overseas is mostly considered as consumption rather than investment (like rail,road, hospital, school). It doesn’t have much spillover economics”

    Obviously… Which is why we had issues with the LCS, NGOPV, Korean training ships; Little Birds; Steyrs, why we route things via local companies rather than have MINDEF handle the deal with the supplier, etc. Because the main priority is national interests rather than the end user or taxpayer. The result is the end user and the taxpayer getting buggered and the politicians unwilling to learn from mistakes or revamp our longstanding fundamentally flawed policy.

  19. “There is a reason why we traditionally have not been keen on loans”

    No doubt, there is reason too why we should make things locally. We are good at making reason even if reality says something else.

    “Even if Father Christmas or the Grinch decided to gift us 100 billion with no strings attached to fund procurement; chances are we won’t get the best value for what we spend”

    Agree on that, billions or millions will not make any different as we wont get the best value. Looking at annual buget, it is impossible to finance ATM need even if we have the best procurement plan on earth. What other option we have if annual budget is not enough?

  20. Romeo – “No doubt, there is reason too why we should make things locally”

    Stuff made locally should only be stuff we buy in large numbers but the key issue is that with most stuff; the raw components will still have to be imported and paid for in foreign currency. We’ve reached the point where it’s cheaper and faster to buy ammo from abroad rather than from SME – a reflection of the state of things.

    What we should never do is adopt the policy that it’s sound to pay more because it supports the local industry. It’s this gagalabd policy which has us in the rut we’re in and an MAF whose capabilities don’t reflect what we’ve spent on it.

    Romeo – “What other option we have if annual budget is not enough”

    We need to accept that we’ve been doing things in a flawed manner for a long time and to demonstrate the need for deep rooted fundamental changes in policy. Everything; from the overall mindset to the role vendors play to how we allocate funding; is in need of a revamp. Until or unless that happens things will not change irrespective of who the Defence Minister; who the occupants in Putra Jaya are or how anyone here wants to spin things.

  21. “Stuff made locally should only be stuff we buy in large numbers but the key issue is that with most stuff; the raw components will still have to be imported and paid for in foreign currency. We’ve reached the point where it’s cheaper and faster to buy ammo from abroad rather than from SME – a reflection of the state of things”

    It’s should be the other way around really.

    Ammo are consumer scale products mostly built by machine without much human Input so factory which had operated for decade would have amortized the setup cost allowing them to sell slightly above input cost that’s why factory without much human Input never relocate it manufacturing to Asia.

    Drone, ships, IFV on the other hand are custom built. There’s no factory line to mass produced it to a commercial scale.

    As for the import. Well even the f35 components are imported. A 50 cent import for 1 dollar of output is still 50 cent paid for by making money printing machine go brrrrrrr.

    “why we route things via local companies rather than have MINDEF handle the deal with the supplier, etc. Because the main priority is national interests rather than the end user or taxpayer”

    You are confusing corruption with the national interest.

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