Malaysia concerned at navy contract delay

Calls are being made for an enquiry into the delay of the RM24.3 billion contract to build 27 high-tech naval vessels for the Malaysian navy amidst warnings that it was affecting the navy’s ability to operate effectively.

The problem centres on PSC Naval Dockyard Sdn. Bhd. which was scheduled to deliver the first six of 27 heavily-armed offshore patrol vessels (OPV) last year as part of the deal. However, the handover was postponed in February after numerous technical problems during sea trials of the first offshore vessel last year. The Government has so far invested RM2.5 billion million in the project, and there are fears that it could turn into the “biggest financial scandal in Malaysia’s history” if no serious action was taken. The failure of the first OPV to carry out its duty is seen as a waste of public money while exposing the country to the risks of enemy threats from neighbouring nations or from pirates.

The country’s navy chief, Mohamad Anwar Mohamad Nor, said there were technical flaws in the OPV’s command system and that the training package for officers and personnel was outdated. He said the vessel delivery originally scheduled for last September has been delayed till July. The Asian Wall Street Journal last month reported the Government was looking for ways to unwind the contract as it was increasingly sceptical that PSC could deliver. The 10-year contract, signed in 1998, also gave PSC control of the government’s main naval shipyard and the exclusive rights to service the entire navy fleet, a move aimed as a springboard for Malaysia to create its own marine-engineering industry, it said.

PSC was building the first two vessels with its foreign partners, led by Germany’s ThyssenKrupp AG. The Edge business newspaper recently quoted sources as saying that Malaysia’s military investment fund has taken over the privately held dockyard company, and demoted PSC chief Amin Shah Omar Shah to Deputy Chairman.