New National Defence Industry Policy

The National Defence Industry Policy infographic. Kementerian Pertahanan.

SHAH ALAM: Defence Minister DS Khaled Nordin in his new year message on January 16 2024 announced that the National Defence Industry Policy 2025 (DIPN25) will be launched at LIMA 2025 this May. The ministry also launched a portal for public feedback. Unfortunately, as of today the portal is still not accessible.

In his speech. Khaled said:

Untuk tahun 2025, sasaran utama kita adalah menyiapkan Dasar
Industri Pertahanan Negara dan melancarkannya semasa LIMA
‘25 pada bulan Mei nanti.
Memandangkan industri pertahanan mesti difahami dan diterima
baik oleh masyarakat dan pemain industri, dasar yang berkaitan
dengannya mesti dibangunkan secara komprehensif dan terbuka.
Untuk itu, Kementerian memutuskan untuk membuka ruang libat
urus awam atau public consultation.
Dan portal dalam talian bagi libat urus ini akan kita lancarkan hari
ini.
Portal ini akan menjadi saluran terbuka bagi membolehkan
masyarakat, ahli akademik, pakar, pemain industri dan semua
pihak bersama-sama terlibat dan berpeluang memberi pandangan,
cadangan serta saranan agar dasar yang dibangunkan bersifat
praktikal dan strategik.
Untuk itu, saya menjemput semua pihak untuk tampil dan
bersama-sama dengan Kementerian Pertahanan untuk kita
bangunkan satu dasar industri pertahanan yang bermanfaat dan
menyumbang secara bermakna kepada tanahair.

I must point out that in April 2023, the-then Defence Minister DS Mohamad Hasan announced that the National Defence and Security Industry Policy will be launched at LIMA 2023. However, at LIMA 2023, the policy was not launched nor even previewed at the show. I was told by ministry and defence industry officials that the policy could not be launched as it was not approved by the Cabinet.

Two Gempitas of 2 Armor during a parade in 2016. 2 Armor FB

The biggest sticking point I was told was that the security industry people were not keen on it and wanted their part to be separated from the defence one. It is unclear whether the security industry policy has been formulated and ready for public feedback prior to approval from the Cabinet.

Hence the one – DIPN25 – announced by the minister is meant only for the defence industry. It must be noted that the DIPN25 is still in the formulation stage – it is likely in the final stage – and waiting feedback from the industry and public before it is tabled to the Cabinet for approval. Whether or not significant changes will be made to it based on the feedback is unknown. And only when it is approved by the Cabinet, it would be unveiled at LIMA 2025. If not, it will be KIV. With some 122 days before LIMA 2025 (May 20) one wonders whether it will be approved. Your guess is as good as mine.

The infographic on the DIPN25 and the SDM. Kementerian Pertahanan.

Meawnhile, the ministry has also approved the creation of a strategic defence management (SDM) entity to oversee the ministry’s procurement and industrial cooperative programme (offset programme).

Seterusnya, saya ingin kongsikan juga bahawa pada tahun lalu,
kerajaan telah bersetuju dengan penubuhan Strategic Defence
Management (SDM), yang ditubuhkan melalui LTAT, yang
bertujuan membantu Kementerian Pertahanan bagi mengurus dan
menyusun segala strategi perolehan dan ICP kementerian ini.
SDM akan turut membantu Kementerian untuk membuat audit
dan pemetaan terperinci terhadap semua pemain industri
pertahanan tempatan, lebih-lebih lagi ke atas syarikat-syarikat
yang telah mendapat manfaat ICP melalui pemindahan teknologi.
Audit ini akan membolehkan kita menilai dan menganalisis
kedudukan, perkembangan serta potensi syarikat-syarikat
tersebut.
Pada masa yang sama, SDM juga akan bertanggungjawab
untuk merangka dan mengurus secara berkesan manfaat ICP
atau offsets yang diterima di bawah kontrak-kontrak
perolehan Kementerian dan ATM.

Honestly, I have no idea why they want to set up another body to manage the ministry’s strategy in procurement and offsets, when there is already the procurement and defence industry divisions. The Armed Forces and the three services also have their own strategic planning and procurement units. As for managing offsets and transfer of technology, there is also the Technology Depository Agency (TDA) under the Ministry of Finance.

3 Rejimen Armor Di Raja with their Gempita AFV at a recent parade. Despite being one of the biggest contracts, TOT, and offsets in recent memory, the Gempita programme has shut down. Unless a new order is made soon it will be the end of the road for the AFV. 3 KAD picture

The TDA according to its website:

plays a crucial role in fuelling Malaysia’s economic and technological growth via the Industrial Collaboration Programme (ICP), that acts as a bridge between local industries and international technology leaders.
By identifying strategic sectors needing advancement, TDA connects them with optimal partners possessing the expertise and experience to fill the gap. This collaborative approach empowers Malaysian companies to acquire essential knowledge and enhance their global competitiveness.

The ICP process goes through rigorous audits ensuring genuine commitment to technology adoption, while a stringent selection process guarantees only the most impactful collaborations receive ICP support. Ongoing project monitoring and comprehensive support foster successful knowledge transfer and sustainable growth, propelling participating companies towards international recognition.

PUTD MD530G LSAH with two RMP pods at the LKT 2024. What are the ICP obligations conducted by the contractor? BTDM

Furthermore, the ICP in defence procurement goes the other way around, it is usually the local agent which finds the technology partner for a tender and if they get the contract, they (the local agent) will be the beneficiary of the offsets. Local tenders worth up to RM50 million and international tenders of more than RM100 million are subject to full offsets. The ministry also has never made public the ICP obligations of the companies awarded such contracts. Only by making the obligations public, their effectiveness or failures can be determined.

— Malaysian Defence

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9 Comments

  1. “security industry people”
    This I assume is PDRM & MMEA? Would be understandable as their priority is different than the military. Since money & authority comes from different ministry (Home & Defence), its natural to expect that each prefers their own independent policy.

    Based on the context, do you think this is effective a Defence Whitepaper? Or something that might change next year or if when a new Menhan comes in?

    As for new procurement body, it was something a few members here had been advocating, altho I too question how effective if building bodies on top of existing bodies/committees. I can see real improvements if this new unit are setup to be impartial to any preference/bias, completely replace all the others or subsume them, and working on a blind procurement prinsip. Having overarching reach, their role also to factor in ICP as well national offsets in the tender. If we do this as we tend to do things, its just merely wayang only.

  2. a joke of wanting the local defence industry to be :

    1 – “kompetitif”

    2 – “berdaya saing”

    When all of the malaysian military contracts have none of the above 2 things.

    There is also zero continuity in any procurements (everything is one off, even small things are given to multiple players) due to the want/need to spread the largesse to as many cronies as possible.

    there are so many things that we bought IPs only to just not use them anymore. There is a need for IPs acquired from defence deals to be owned by the government, not individual companies. From memory, IP we have gotten total ownership but wasted using it for just 1 time use

    – BAe Bulldog trainer
    – SME MD3-160 aerotiga trainer
    – Meko A100 OPV
    – AV8 gempita
    – Gowind frigate

    A good example of fully utilising IP gotten from ToT is Indonesia’s PT PAL Makassar Class LPD. From the original Korean IP, it is slightly modified to become an ingenious design, exported to Philippines, lengthened for TLDM MRSS requirements, and that design now sold to UAE.

  3. ” If we do this as we tend to do things, its just merely wayang only ”

    Worse case it will be super duper crony focused (the heli leasing is just starters) and the services will not get anything that they wanted in the 1st place…

  4. “spread the largesse to as many cronies as possible.”
    Well the current single super mega crony isnt a solution either.

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