Lest we forget

By Masterwordsmith |August 14, 2011
The Malaysian Insider

AUG 14 — While Malaysians express outrage about the RM8-RM9 billion MAS scandal and the ‘reverse takeover’ of the national airline company through Air Asia — which is another multi-billion ‘backdoor asset stripping’ exercise — lets us not forget the RM6-RM7 billion patrol boat fiasco. As Dr Mahathir said: Melayu mudah lupa. Well, let us not lupa this.

In February ‘11, Defence Minister Datuk Seri Dr Ahmad Zahid Hamidi announced via a Bernama statement that the government has agreed to allocate RM6bil to build six second generation patrol vessels for the Royal Malaysian Navy. The rationale given for the expenditure was to “boost the economy while benefiting 632 vendor companies”. The Defence Minister clarified that they would ensure that “at least RM2bil of the allocation will benefit these vendor companies which are strategic partners of Boustead Naval Shipyard Sdn Bhd”. Then, many Malaysians were up in arms after that disclosure.

In October last year, The Star reported that the construction of six patrol vessels by Boustead Heavy Industries Corp Bhd (BHIC), a maritime engineering and defence-related services provider, may only begin as early as the fourth quarter of this year. Analysts estimated it would take another year before BHIC’s letter of intent (LOI) is firmed up and construction of the patrol vessels begin.

“This is as seen with the company’s Scorpene service job, which took a year for the LOI to be firmed up via the letter of award,” ECM Libra said in a research report. (CLICK HERE for more.)

Today, The Australian announced that AUSTAL has won a $330 million contract to produce eight new patrol boats for the Australian customs service. The eight boats will be built in Henderson, south of Perth. The contract is for the design, construction and through-life support of eight Cape Class patrol boats for the Australian Customs and Border Protection Service.

What is most interesting about the report is that the total value of the project is $330 million, including a $280 million design and construction contract and an In-Service Support contract worth $50 million.

So the Australians can build EIGHT NEW PATROL BOATS at AUS$330 million (RM1.016 billion) @ 127 million per boat while in Malaysia, six new patrol boats cost us SIX BILLION RINGGIT at RM1 BILLION per boat.

Can you see the RIDICULOUS DIFFERENCE in figures?

Apart from that, The Austal site reports:

The In-Service Support contract extends for a minimum period of eight years and encompasses a full range of intermediate and depot level maintenance activities. Further options can be exercised by the Australian Customs and Border Protection Service for In-Service Support for the life of the Cape Class Patrol Boat Fleet.

The eight 57.8m Cape Class Patrol Boats will play a significant role in protecting Australia’s borders from multiple maritime threats, and have been designed to have greater range, endurance and flexibility, as well as enhanced capability to operate in more severe sea conditions than the current Customs’ fleet.

According to The Star, AmResearch Sdn Bhd says the value of the six new patrol vessels can reach RM8bil, based on a 20% mark-up from the first batch’s price tag of RM6.7bil.

In that report, ECM Libra adds that the new order for six patrol vessels with combatant capabilities, littoral combatant ships, has more technical specifications than the first-generation batch which amounted to some RM1bil per vessel.

“We believe per unit cost should be higher. Assuming a value of RM1.2bil per vessel, the contract will provide BN Shipyard with an RM7.2bil orderbook that will likely last it five to seven years,” it adds.

The recent contract, which has been long awaited, is part of a privatisation agreement with the Government for the construction of 27 units of patrol vessels, where six have been completed. In 1998, BN Shipyard was awarded a contract to construct and deliver six patrol vessels to the Royal Malaysian Navy. They took EIGHT YEARS to deliver the first two patrol boats in 2006 which are being used to patrol the waters off Sabah and Sarawak. Two more delivered in 2009 are guarding the east coast of the peninsula.

According to the BHIC’s 2009 annual report, the remaining two patrol vessels were launched in November 2008 and July last year respectively.

HwangDBS Vickers Research says the second-generation patrol vessels will be built at BHIC’s Lumut shipyard, which is currently 50 per cent utilised. However, AmResearch estimates that 30 per cent of BN Shipyard’s contract will be undertaken by BHIC’s Penang shipyard (Jerejak).

Interestingly, BHIC was awarded a contract worth some RM1.3bil by the government to service the two Royal Malaysian Navy Prime Minister-class Scorpene submarines in August.

The contract was given to its subsidiary, Boustead DCNS Naval Corp Sdn Bhd, a joint venture with DCNS SA, a French defence company, and was effective for a period ending Nov 30, 2015.

The contract differed in value from the original letter of intent of RM600mil dated June 4, 2009 due to the inclusion of a full submarine integrated logistics support package.

AmResearch points out that the group’s earnings track record has disappointed in the past year and it maintains FY10 to FY12 forecast earnings pending a significant quarterly earnings improvement and the actual award of the new patrol vessels contract.

The Star reported that for the six months ended June 30, BHIC’s net profit was down 4 per cent to RM31.5mil as a result of cost escalations due to delays in completing certain shipbuilding projects, coupled with reduced contribution from associates. Revenue fell 18% to RM192.9mil from a year ago.


The bottom line is that the six patrol boats Malaysia is purportedly building should not even cost RM1 billion for all six, and certainly far from RM1 billion per unit as announced.

Can the authorities clarify the state of affairs? Six billion ringgit is certainly a lot of money!

I remember back when Tun Ghafar Baba was the Deputy Prime Minister when in a ceramah in Terengganu, he started by saying that the government has spent millions. Then he stopped and said, “let us not talk about millions.” Today we no longer talk about millions. We talk about billions.

I don’t.

I don’t know how much one billion is, said Ghafar. If I sit and count one billion, I will die before I can finish. That is how much 1 billion is. It is a lot of money.

Well, if Ghafar was still alive today, he will be shocked that we no longer talk about 1 billion. We talk about tens of billions. And if Ghafar was born ten times over, he would still not be able to count to that figure.

Remember – for all the billions spent, or purportedly spent, CHANGE IS IMPERATIVE and we need YOUR VOTE for that MASSIVE SWING TO MAKE IT HAPPEN!

Let’s do it! — masterwordsmith-unplugged.blogspot.com

  1. #1 by dcasey on Monday, 15 August 2011 - 12:52 pm

    Yes, one thing is true, the BN Govt today is not interested to talk about the 6 million dollar man, they have propped it up and want only to see the 6 billion dollar man in action. That’s why Malaysia is also fondly known by its other name as “Bolehsia”.

  2. #2 by sheriff singh on Monday, 15 August 2011 - 12:57 pm

    Good case for outsourcing to the Ozzie company.

    1Malaysia is not competitive internationally. No wonder we keep falling in the Competitive Index.

  3. #3 by boh-liao on Monday, 15 August 2011 - 2:36 pm

    Of cos we MUST always pay more mah, how else 2 line d pockets of corrupt politicians n their spouses/cronies 怎么还要明知故问呢

  4. #4 by monsterball on Monday, 15 August 2011 - 5:55 pm

    In every project…be it purchases…building or services rendered…all projects are grossly overpriced…..since the day Mahathir encouraged corruptions by showing the way..bailing out his son …to the tune of RM1.2 billion with EPF money and made Tajuddin a multi billionaire…to be his stooge and supposedly timid reliable crony.
    From just these cases…all UMNO B crooks help themselves with no fear.
    Mahathir made sure..his created UMNO B party depends on corruptions … race and religion dirty politics.. plus phantom votes…to rule forever.
    Now that cannot work…Najib applying his soft talks…cannot work…cane and bullets…cannot work…what else???
    Lets wait…for all those bright ideas of his…have made him so frightened to declare the date for 13th GE.

  5. #5 by waterfrontcoolie on Monday, 15 August 2011 - 11:23 pm

    It is a fore gone conclusion that projects are given GRAND names so that more cash can be cashed out. We love to buld large projects with no quality. just look at the Gomen buildings at Putrjaya; they might look grandeur “inthe distance”! just visit them and look at the pseudo quality! We are all good for building Half past 6 projects with tremendous cost input. Whatever happen to the double-track railway lines. if one compare it with the average cost per Km in China, ours are some 5 times higher for similar specs! Even the local ‘high class condominiums are indeed 2nd class; even though the same contractor could have bult them say in Singapore and at KL. Why? they know that in this bolehland, one can take shortcut and not be held accountable; everyone has a purchasable price ! This is a nation with over a generation of such experience of everything has got a price, if you can or dare to pay for it, it can be done!

  6. #6 by ENDANGERED HORNBILL on Tuesday, 16 August 2011 - 12:00 am

    All the billions are needed to plug UMNO and BN holes so that their boats will not sink.

    Now let them know that no lifeboat will be able to keep them afloat the next GE.

    Bye, bye BN.

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