Friday, November 4, 2011

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Subject: Fwd: Atrocious defence procurements

News about irresponsible govt expenditure just gets worse and worse..
Yet they are the police, the judges, MACC, the guys in control - there
seems nothing msians can do except wait for the next GE and kick them out
BIG TIME.. THEN NAIL THEM and freeze every asset they got! No wonder the
govt gets more desperate each day ..

Atrocious defence procurements a microcosm of failing state — Kim Quek
October 26, 2011
OCT 26 — How would you feel as a taxpayer if someone tells you that our
defence ministry pays RM7.55 billion for some armoured vehicles that are
actually worth one quarter of the price?
If you really know what RM7.55 billion (or RM 7,550 million) means, you
would most probably be stunned and exclaim: “Is our government that bad?
Are they really so daring?”
The answer is yes. And the drama is unfolding right in our
and not just as anonymous allegations in some websites.
Member of parliament Tony Pua asked Defence Minister Zahid Hamidi in
Parliament why the ministry was paying the exorbitant price of RM7.8
billion for 257 wheeled armoured vehicles, and Zahid’s answer was that the
ministry had no knowledge of the figure as claimed by Tony, saying the
finalised contract price was for RM7.55 billion.
Zahid added that he also knew nothing about the deal that enabled the
supplier to procure the same armoured vehicles from Turnkey at less than
one quarter of the price to MinDef.
But Zahid’s denial fell flat, as Tony pointed out that Zahid himself
witnessed the signing of the agreement that sealed the deal in Ankara,
Turkey in February this year between the Malaysian supplier Deftech and the
Turkish defence manufacturer FNSS, a joint venture between BAE Systems Inc
of the UK and Nurol Holding of Turkey.
The deal was reported in a
dated June 3, 2011 in the BAE System Inc website as a US$559 million (RM1.8
billion) contract awarded to FNSS for the “design, development and
manufacture of 257 Deftech AV-8 8x8 wheeled armoured vehicles and
Integrated Logistics Support for the Malaysian Armed Forces”.
The vehicle, though tagged “Deftech”, is actually a “FNSS-designed PARS 8x8
multi-purpose, multi-mission, wheeled armoured vehicle”.
*Atrocious price hike*
This means that the Malaysian government is paying Deftech RM7.55 billion
(RM29.4 million each), which it in turn pays FNSS RM1.7 billion for these
257 vehicles (RM6.6 million each).
If you, as a taxpayer, are incensed by this daylight robbery of RM6 billion
from public coffers, wait till you hear of market
are even much cheaper than that offered by FNSS.
Tony Pua in a statement dated March 9, 2011 in his blog reported the
following prices for the equivalent armoured vehicles transacted or offered
in the market:
• The Portuguese Army paid RM4.4 million each for the Pandur II 8x8
armoured vehicles (€364 million for 353 units).
• The latest version of Pirahan III 8x8 armoured wheeled vehicle developed
by the Swiss MOWAG GmBH costs RM3.9 million each (US$1.2 million).
With these prices as reference, it is reasonable to expect that, had MinDef
conducted an open tender and sealed the deal at arm’s length, we could have
slashed the purchasing price down to no more than RM4.5 million from the
present RM30 million each, bringing the
sum to RM1.15 billion instead of RM7.55 billion.
This means that the Barisan Nasional government has hiked the price by six
to seven times through its defence procurement policy that totally lacks
transparency and accountability. Such an astronomical scale of artificial
cost inflation is so mind-boggling that it is probably unheard of even in
the most corrupt of countries.
*Outrageous spending spree*
And this armoured vehicle deal is only one case amidst defence ministry’s
multi-billion spending spree that saw it splurging on patrol boats and
helicopters at equally outrageous prices.
For instance, it is purchasing six offshore patrol vessels (OPV) from
Boustead Naval Shipyard Sdn Bhd at RM1 billion each (total price RM6
billion), which is five times what the Royal New Zealand Navy paid for its
OPV, procured at only RM210 each (NZ$90 million) from the world renowned
BAE Systems, the second largest global defence company.
Similarly, Malaysia is buying the Eurocopter EC725 helicopters at RM190
million each (RM2.3 billion for 12 units) while Brazil purchased the same
helicopters at only RM82 million each.
A quick glance at the figures for these three contracts alone — armoured
vehicles, patrol vessels and helicopters — would indicate that there could
have been a total leakage of RM12 billion arising from these dubious MinDef
For this amount, we could have provided low cost housing for a quarter
million families, housing more than a million have-nots.
That Malaysia’s opaque defence procurement is a hive of corruption is well
known among international defence executives and documented in a recent
exposure from WikiLeaks, which revealed US Embassy cables during 2004–2009
recording conversations with relatives and agents of Malaysia’s top
politicians including the then-prime minister Abdullah Ahmad Badawi and his
deputy (now prime minister) Najib Razak.
Besides giving specific instances of corruption, the US cable also alluded
to such corruption as a major source of political funds that sustains the
local power structure.
*Unacceptable draining of resources*
Looking at the larger picture, the leakages of the three contracts
mentioned above is only a small corner of massive leakages that pervade the
entire procurement system of the BN government, as starkly reminded by the
freshly released annual report by the Auditor General.
Such annual reports, which unfailingly chronicle widespread corruption and
management failure (some to unimaginable extremes) serve as regular
reminders that we have been stuck with an entrenched system of governance
that extensively and continuously drains our reducing resources.
But if we were to realise that what the Auditor-General reports is only the
tip of the iceberg, as he can only cover a small fraction of the sprawling
government bodies every year, don’t we have reason to be concerned, very
And do we see any remedy through institutional reforms under the present
political leadership?
From the deteriorating credibility of our institutions and federal
leadership, isn’t it apparent that the needed remedy cannot be instituted
through political solutions?
Only through a change of political leadership can we bring sweeping reforms
to the country.
** This is the personal opinion of the writer or publication, and does not
necessarily represent the views of The Malaysian Insider.*

( ) Oooo.
\ ( ( )
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Tan Wah Sing

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