Boustead unit says it supports stern action against those who committed wrongdoings in combat ship project

Boustead unit says it supports stern action against those who committed wrongdoings in combat ship project
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KUALA LUMPUR (Aug 5): Boustead Naval Shipyard Sdn Bhd (BNS) said on Friday (Aug 5) that it will give its full cooperation to the authorities to ensure that the RM9 billion littoral combat ship (LCS) project will continue for the sake of national defence.

BNS, a subsidiary of Boustead Holdings Bhd, also supports the authorities in taking stern action against any parties that were involved in any wrongdoing in the project.

It said this in a statement issued in response to the findings of the Public Accounts Committee on the LCS procurement released on Thursday, which highlighted how the Ministry of Defence (Mindef) and Boustead Naval Shipyard Sdn Bhd had ignored the Royal Malaysian Navy's (RMN's) views on the procurement.

BNS said it appreciates the finding as well as the recommendations given by PAC in the report and said that it is "very committed to move forward with the project" and that it is "currently managed by a new leadership". Negotiations for the LCS started in 2011.

"During the current six-month mobilisation period, we are working very hard in engaging and negotiating with the original equipment manufacturers (OEMs) and the vendors to finalise the forward planning of the project as desired and required by the RMN.

"We are also working very closely with the Special Governance Committee (Jawatankuasa Tadbir Urus Khas) co-chaired by the Secretary General of Treasury and Secretary General of the Ministry of Defence, to ensure that the RMN will receive the LCSs, which are much-needed assets," it said.

It further said it has implemented various initiatives under its ongoing transformation programme to strengthen its business and operations.

“Besides organisational restructuring, as well as recruiting new talents and calibrating existing resources, we have also enhanced the use of digitalisation, especially in the project management to eliminate leakages, and to ensure integrity and transparency in carrying the mandate given by the Government.

“In the heart of all these efforts is our utmost priority to beef up the strength of the RMN to safeguard Malaysian waters, while ensuring that the wellbeing and interests of all stakeholders of this project are protected,” BNS said.

According to the PAC's findings, the RMN's views as end user of the vessels were not taken into account by both Mindef and BNS, which led to the original Sigma design chosen by the Navy being changed to the Gowind design on July 11, 2011, following a suggestion by BNS to Mindef on July 8, 2011.

The committee also found that not a single ship had been completed despite the government having spent RM6 billion on the project, which it awarded to BNS through direct negotiations. The navy should have received five of the ships by August this year.

The PAC also said the terms of the contract were unfavourable to the Government, as the LCS project payments were based on activity progress or item supply instead of being based on actual progress.

The committee also found that the Government had not done its due diligence on BNS' financial problems. This was evidenced by the fact that the Government was required to make an advance payment of up to RM1.36 billion to BNS, contrary to a Treasury circular in effect at the time.

PAC said BNS's financial situation was in a weak and critical state due to abuse of power and deficiencies in financial management. As of 2018, BNS' debt to the original equipment manufacturer (OEM) stood at RM801 million, while it owed RM956 million to financial institutions.

BNS had appointed its subsidiaries — Contraves Advanced Devices Sdn Bhd and Contraves Electrodynamics Sdn Bhd — to buy equipment from the OEM, which caused acquisition costs to swell several times.

Witnesses summoned to the proceedings conducted by PAC from Nov 18, 2020 to March 8, 2022, included Senior Defence Minister Datuk Seri Hishamuddin Hussein, former Defence Minister Datuk Seri Ahmad Zahid Hamidi, Royal Malaysian Navy (RMN) Chief Tan Sri Mohd Reza Mohd Sany, former RMN chief Tan Sri Abdul Aziz Jaafar and BNS Chief Operating Officer Low Kok Chiang.

Tan Choe Choe