This article first appeared in The Edge Malaysia Weekly on January 9, 2023 - January 15, 2023
The dismal track record of government-linked companies (GLCs) handling shipbuilding projects related to the defence industry is appalling.
In the last 12 years, three major contracts to build ships to beef up the country’s maritime defence system have been awarded to GLCs. Two of the contracts were to cater for the needs of the Royal Malaysian Navy (RMN) and another was to build three offshore patrol vessels (OPVs) for the Malaysian Maritime Enforcement Agency (MMEA).
The RMN jobs are the infamous littoral combat ship (LCS) project and littoral mission ship (LMS) contract.
Of the three, only the RM1.17 billion LMS project awarded to a joint venture (JV) of Boustead Naval Shipyard Sdn Bhd (BNS) and China’s China Shipbuilding & Offshore International Co (CSOC) has come through. The RMN has taken delivery of all four LMS ships that were built in China.
If the ships had been built by BNS at its local facilities, the LMS project would probably have suffered the same fate as the RM9.1 billion LCS project.
The LCS project, awarded to BNS in 2011, has hogged the limelight for all the wrong reasons. It has been littered with delays and cost overruns. The government has forked out RM6 billion but BNS has not delivered a single ship yet.
The latest company needing to be rescued is THHE Destini Sdn Bhd, a JV that was given a RM738.9 million mandate in 2017 to deliver the three OPVs to MMEA. Destini Bhd exited the JV at end-2021, leaving TH Heavy Engineering Bhd to handle the project.
The Ministry of Finance (MoF) has stated that the project requires an additional RM152.6 million to see the completion of the three OPVs.
There really seems to be no end to the MoF’s rescuing of GLCs that are completing obscure shipbuilding contracts involving the defence industry. The cost would certainly be much lower if the ships were just bought off the shelf.
Perhaps the government should stop handing out such contracts to GLCs until they get their act together.
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