Friday 02 Jun 2023
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This article first appeared in The Edge Malaysia Weekly on July 18, 2022 - July 24, 2022

AS the highly anticipated multi-billion-ringgit Royal Malaysian Air Force (RMAF) tender for 18 light combat aircraft (LCA) moves closer to an actual award, allegations of impropriety have surfaced, sources familiar with the bidding tell The Edge.

While it is understood that there is no concrete evidence, allegations have emerged that some of the parties involved or even those affiliated with them are lobbying for the award despite the tenderers not meeting all the requirements fixed by the end user — the RMAF.

Defence Minister Datuk Seri Hishammuddin Hussein when contacted for comment says, “They (the disgruntled parties) can report to the Malaysian Anti-Corruption Commission to investigate. If not, every procurement will be delayed by disgruntled bidders. The Ministry of Defence (Mindef) will not get involved in such allegations.”

Hishammuddin tells The Edge in text messages that Mindef is leaving the decision on which bidder secures the tender to the RMAF.

“I am leaving it to the end user to recommend to the Ministry of Finance (MoF). Once MoF has decided, then Mindef comes in to expedite the process,” he says.

The RMAF has laid out five main criteria to be fulfilled by the fighter jet manufacturers. The requirements include the delivery of the LCA on a staggered basis over 36 months after the contract is signed, air-to-air refuelling capabilities, the ability to deploy beyond visual-range missiles, 30% local content and supersonic performance.

It is understood that some of the frontrunners do not have the aerial refuelling capability that allows the aircraft to remain in the air during extended manned flights, while some have not integrated secured communication capabilities such as a data link that shares essential battlefield information about targets and threats. Both these criteria are understood to be required by the end user and are integral to modern air war doctrine.

Another issue raised is whether bidding companies would require official permission from the country where their aircraft technology originated from, before any technology transfer that is promised under government offset commitments can be fulfilled.

An offset agreement in defence covers a range of commercial and industrial benefits that the seller (aircraft manufacturing country) offers to a buying nation as an incentive that has long-term effects on the development of the buyer’s industry.

Aircraft run on a variety of components, comprising engines, radars and avionics from various countries, and the manufacturer may not be authorised to re-export the knowledge under a so-called technology transfer, particularly if they involve classified items, a source claims.

The Edge reached out to several industry players who participated in the bid.

One of the frontrunners’ representatives addressed the issue of lagging development on air-to-air refuelling, saying that efforts are underway to modify the aircraft with refuelling probes. The company selected a UK-based manufacturer as its prime contractor to develop, design and qualify a telescopic refuelling probe solution in 2020.

Another representative tells The Edge that the company is working to integrate data links as requested by the end user although it was expected that any fourth-generation combat jet would already have included such critical components to match any potential adversary.

At the time of writing, it is still unclear how much progress these companies have made to mitigate the abovementioned setbacks.

A defence industry analyst who spoke on the condition of anonymity says concerns about the transfer of origin defence articles is hardly an issue.

“Some of these frontrunner LCA programmes have been on the market for some time. So, their technology is known. Plus, Malaysia is a friendly country; as such there is no question about not being able to have transfer of technology.

“Almost all of these planes that are bidding, if you have analysed them, require integration with end users’ equipment and doctrine. This requirement to get approval for exports of high technology isn’t just about military planes. It covers a lot of other things as well. As such, this is a non-issue and it’s hardly going to be a showstopper for this deal,” the analyst says.

He adds that a more critical factor for the end user is what is included in the offset package and how it can interoperate with the rest of its infrastructure.

“For example, [the South] Koreans, Indians and the Turks use different radars and communication technology in their military. So, when the Americans sell their aircraft to any one of these countries, they have to adapt the plane so that it can run on the existing system. When Malaysia buys it, RMAF has to have interoperability and it has to make sure of that before awarding those contracts,” he says.

“That sort of communication infrastructure has to be customised by each country. If such customisation is not developed, even if we acquire the technology, we may not be able to use it.”

The most important question is how Malaysia will allocate funds under the defence procurement budget for the jets, the analyst says.

Some of the bidders such as South Korea, India, China and Russia have made known their intention to form countertrade programmes with Malaysia, such as the import of crude palm oil (CPO).

Representatives of Turkey in a press conference with the Malaysian media in February this year said they would consider the option of importing CPO in the future if an LCA deal materialises.

“The government and the end user have to factor in which country or which bidder is the hungriest for Malaysia’s priced commodity — crude palm oil. But just because one country requires palm oil does not mean they would not expect any charges,” the analyst says.

He adds that the end user also has to look into whether the these bidders’ original equipment manufacturer (OEM) partners in Malaysia have the expertise and capabilities to provide the necessary and critical support to the LCAs.

Six international companies submitted bids to supply the 18 LCAs to the RMAF in a tender that closed last October.

They are China National Aero-Technology Import & Export Corp, which makes L-15 fighter jets; Korea Aerospace Industries (KAI) which manufactures the FA-50 fighter jet; Italy’s Leonardo with its M-346 planes; India’s Hindustan Aeronautics Ltd (HAL) which makes Tejas fighter jets; Turkey Aerospace Industries (TAI) which produces the Hürjet; and Russia’s Rosoboronexport with its MiG-35 multirole fighter.

The local partner for KAI is Kemalak Systems Sdn Bhd while HAL is partnering Forte Drus Sdn Bhd and Leonardo is partnering Aerospace Technology Systems Bhd. TAI has yet to announce its local joint venture partner.

At the time of writing, it is still unclear when the award would be announced.

Although a decision on the tender is imminent, the government is not expected to make an announcement until the next Langkawi International Maritime and Aero­space Exhibition, or LIMA, which is set to be held in May 2023.

The international defence exhibition was cancelled last year due to Covid-19. The bi-annual event was last held in 2019.  


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