Waiting For You

The LCS major equipment detailed. RMN graphic

SHAH ALAM: Waiting for you. In an earlier post, a reader asked about the progress of the LCS. To be honest I have no idea but thanks to Boustead Heavy Industries Corporation (BHIC) we now know that actually nothing much is going on until the government decides what to do next. This has been the stance of the government for the last three years though. The last report on the LCSOptions Two and Three for LCS.

Boustead executive chairman TS Ramlan Ali (centre) greeting Defence Minister DS Ismail Sabri when the latter visited the BNS yard in November 2020 to check on the LCS project. The LCS hull in the background looked appeared to be fitted with the propellers but without the rudder. I am guessing that this is the second hull as it does not have water marks on it. Kementerian Pertahanan picture.

Anyhow in its report to Bursa, BHIC has this to say about the project.

Second Generation Patrol Vessel with Littoral Combat Ships (“LCS”) Capability As at 31 December 2020, the Group has net amount due from its associate, BNS of RM269.8 million. On 16 December 2011, BNS received a letter of award from the Government of Malaysia (“GOM”) for the supply of 6 LCS for RMN at a ceiling price of RM9.0 billion.
The formal contract with GOM was signed on 17 July 2014. In 2019, the Minister of Defence at that time made a statement in the Parliament on the delay in delivering the LCS. It was announced that BNS has requested a variation order to complete the project.
Subsequently, series of discussions and negotiations were held between GOM and BNS. Based on the progress of these deliberations, as at 31 December 2020, the Group is of the view that a satisfactory resolution will be reached with the GOM.
Accordingly, the Group had only provided an additional expected credit loss of RM18.5 million during the financial year in respect of the receivables of RM253.5 million based on BNS’s expectation of a satisfactory resolution between BNS and GOM.Subsequently in March 2021, BNS had submitted a formal proposal on the way forward for the LCS project which is pending approval by the GOM.

Defence Minister Mat Sabu is briefed on the LCS project during his visit to BNS in late June, 2019. Mat Sabu FB.

So as you can read from above we are still waiting for the government to make a decision which they have been trying to do since 2019.
Another angle of the keel of the first LCS, most likely from the bow end when Defence Minister Hishammudin Hussein launched the first keel in 2016. H20 picture

Anyhow in the same Bursa announcement, BHIC stated that the Kuala Lumpur High Court has fixed 29 April to hear BNS application to strike out MTU Sdn Bhd winding up order against the shipyard.

BNS was served with winding up petition on 3 July 2020 by Plaintiff. By the Petition, MTU alleges that BNS is indebted to them for the total sum of RM56.0 million for the equipment supplied and services provided to BNS. On 11 August 2020, BNS has then filed an interlocutory application to Stay/Strike Out the Winding Up Petition filed by MSM on a few grounds. On 29 March 2021, the Judge has allowed for BNS’s Application to Strike Out the Petition.


— Malaysian Defence

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Shah Alam

6 Comments

  1. This is really concerning; it’s as if the government is dragging its feet on purpose instead of resolving the problem as soon as possible, or they are putting off making any firm decision only until the GE15. I’ve a feeling that the country’s finances aren’t in a good situation either.

  2. ASM,

    I have no idea if ”its really dragging its feet” or if it’s because the issue if highly complex one with political implications.

    I would be nice to hope that we’ve learnt certain lessons but unfortunately we seem to have a tendency not to – this is what’s really ”concerning”. futher delays in the LCS programme will have profound and adverse consequences for the RMN that will last years; it will affect various things.

    On top of this is the fact that defence overall is not a priority [not for the government, the opposition and majority of the public] and that we have a very flawed policy it place. A policy which is a drain on resources and doesn’t see us getting the best ”bang for our buck” [to use a cliche] for our money.

  3. Meanwhile the way forward would be to keep on doing mid life extension n modernisation or end of life extension.
    There seems no choice. Or go n purchase second ships. Not the best but what other choice

  4. We’re dragging our feet of this issue. Either we bury the LCS and send it to Bangladesh for scrap and bill Boustead for the ‘burial’ or reward Boustead again with sufficient RM to complete just 2 ships. That too, is problematic as many will be loathe to let BNS take the RM and try to fix the ‘Lego’ set. Or maybe as some have said before, allow the Frenchies to help expedite the completion. I have been told before not to call for ‘hanging any General or Admiral’ in my comments, so henceforth I too will say I hope for the best solution out of this mess. I’m being extremely polite here. Am fasting too mates.

  5. @ASM
    From discussions here, I am of the opinion that the reason for this delay was the real and true total outlaid cost for this project far exceed the Rm9Bil budgeted, and in actuality likely its truer cost is RM12Bil (extra 3Bil as what BNS requested).

    It could be that the then BN Government had intentionally set a lower initial budget and later on intent to issue an extraordinary budget surplus (a ‘hidden’ Rm3Bil) to cover the remainder. This, of course, was not followed thru when they got replaced and subsequent governments are still holding onto the balance 3Bil from that initial budget, stalling any progress. This balance would not make much difference on the completion unless BNS can unlock the ‘hidden’ Rm3Bil above. As Marhalim said, its all about the money.

  6. Taib – “I have been told before not to call for ‘hanging any General or Admiral’ in my comments”

    No idea what others may have mentioned but I did say (1) first we have to find out if any Generals and Admirals are actually responsible (2) if indeed they are it’s the system that enabled to do what they did (3) It’s common for companies worldwide to hire former top ranking people for their knowledge/networking – it doesn’t have to be a negative thing (4) Most of the problems we’re facing are not due to former top ranking people but our actual policy…

    Taib – “ henceforth I too will say I hope for the best solution out of this mess”

    Needless to say all of us want the “best” outcome but what’s “best” for the government (from its perspective) may not necessarily be what’s “best” for the service.

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