Malaysia To Resume Ship-Building Project Despite Stalled Corruption Probe

By S. Adie Zul and Muzliza Mustafa

Malaysia will allow Boustead Naval Shipyard (BNS) to resume construction of littoral combat ships for the country’s navy, the defense minister said Friday, despite its failure to deliver on schedule and an unfinished probe into missing funds in the billion-ringgit project.

The move will preserve 1,600 local jobs and more than 400 small and medium-sized businesses owned by Malay Muslims, Defense Minister Ismail Sabri Yaakob said in a statement, which did not say anything about the past delivery delays or corruption allegations.

“The Defense Ministry wishes to announce that the cabinet meeting on May 5 decided that the Boustead Group could resume the construction of LCS which was stalled since 2019,” he said. Littoral combat ships (LCS) are small, fast warships designed for shallow coastal waters.

BNS was awarded a 9 billion ringgit (U.S. $2.18 billion) contract in 2014 to design, build and deliver six of the ships for the Royal Malaysian Navy, with the first one due in April 2019.

At an August 2020 parliamentary debate, Ismail Sabri acknowledged that none of the LCSs had been completed, despite the government having paid 6 billion ringgit ($1.46 billion) so far.

The following month, former deputy defense minister Liew Chin Tong told lawmakers that Putrajaya’s special investigation committee on procurement, governance and finance had discovered that 1 billion of the 6 billion ringgit paid for the warships could not be traced.

A month later, Liew called for the government to investigate the missing funds, adding that the money should be returned so the LCS project could be completed.

“Once the parties involved are brought to justice, the government should consider injecting funds to ensure the project can be completed for the navy’s use, to continue protecting the sovereignty of our waters,” he said.

Delayed by COVID

In November 2020, BNS’s parent company, Boustead Heavy Industries Corp Bhd, even filed a report with the Malaysian Anti-Corruption Commission on possible irregularities in the project.

“This stands testimony to the BHIC’s group commitment in fighting corruption and bribery at all levels of the organization and in all its business dealings,” Ramlan Mohamed Ali, the group’s chairman and a retired navy chief, said in a statement at the time.

But a parliamentary probe into the matter was soon suspended because of the coronavirus pandemic and the state of emergency declared by Malaysia’s king to rein in surging infections.

“We were only able to have one or two proceedings in December last year related to the probe,” Parliament’s Public Account Committee (PAC) chairman, Wong Kah Woh, told BenarNews on Friday.

The panel was scheduled to call a Royal Malaysian Navy admiral on Jan. 12, followed by former Deputy Prime Minister Ahmad Zahid Hamidi on Jan. 13, Wong said. Malaysia’s king declared a national emergency that very week – the country’s first in more than 50 years.

“I disagreed that the emergency could put everything on hold, but I have been informed there is a legal opinion from the Attorney General’s Chamber, so everything is put on hold until the parliament is convened,” Wong said.

In August 2020, as he answered questions in parliament about the non-delivery of ships, Ismail had said the ministry was considering terminating the contract with BNS, among other options.

On Friday, he noted that doing so would have adverse effects on the Armed Forces Fund Board, the military pension fund. The fund owns 59.4 percent of Boustead Holdings, according to Bloomberg News.

“Indirectly it would affect soldiers who are contributors, should the project be halted, while the banking institution which has financed the project would suffer losses. For the record, Boustead Naval Shipyard Group is a government-linked company, managed by mostly Malay Bumiputera,” he said, referring again to the country’s majority ethnic group.

Separately, the Royal Malaysian Navy received the second of four Chinese-built Littoral Mission Ships in March, under a contract signed by Putrajaya and the China Shipbuilding & Offshore International Co Ltd in 2017.

The ship, KD Sundang, arrived at the RMN Naval Base in Sepanggar, Kota Kinabalu in the state of Sabah in early March, two months after the first ship, KD Keris.

The remaining two ships from the Chinese company are to be delivered by October and December, respectively, according to Navy officials.