Defense Maritime Industry In Malaysia : just how bad is the situation ?

Defence Industry

In dialogue and survey session by KPMG involving more than 20 MIDES and VDP companies in February 2021, the most number of complaints submitted was the dire state of the ecosystem. This is as a result of the postponement of the LCS Project and nearly 3 -year -old debts that have not yet paid by BNS. Many of the vendors are in a danger zone due to pressure to clear outstanding payments from suppliers, banks, and government authorities.

MASTRA calls upon the Ministry of Defence Malaysia and the ministry of Entrepreneurs and Cooperatives Development to look into the plight of the entrepreneurs, vendors, and SME's affected by the alleged non-payment. While the government’s efforts in reviving the LCS project are commendable the sustainability of the SME’s must be included in the equation. MASTRA proposes that direct payment to the SMEs be made a precondition of the revival plan.

STRIDE ought to be  under Markas BERSAMA , looking after the interest of all services of MAF , with representative from APMM and Marine Police. Restructure and Reassign STRIDE  for a wider scope of responsibility and accountability. Perhaps jointly with BIP . It must be properly organised with separate  Divisions taking care of Aeronotics, Marine and Automotive. include a 'Proactive' Division for Defence Industry . 

Participations headed by Veteran Senior Officer from Engineering Branch of the  TD, TLDM or TUDM, with council members representing the industry in  Automotive, Marine and Aeronautical Services. 

According to internal sources, STRIDE has no fund to do R&D, past develop project management and events led to loss of confidence in STRIDE's capability in managing innovations , hence sceptics to provide funding.

STRIDE should not continue as the old Defence Research Centre (PSTP) - more for fuel oil and material test labs!

 

Maritime Industry

MiGHT ought to Review and Audit their Maritime Strategy for 2020 that was published in 2011. They should identify  progress and more importantly shortcomings of the strategy up to this date and propose viable solution through Direct Interaction with in-country marine  technology practioners , and ONLY move forward from there  with  more practical and achievable steps . There were too much Way Forward ! yet if still sluggish to 'MOVE FORWARD' ,  it will not take our National Marine Technology Competencies and Sustainability to ANYWHERE ! So much were left out or ignored, at least over the last decade!

MASTRA suggest there a must change the KPI mentality to PDCA mentality in these agencies, besides Improve Governance. Their role is also governance , Tighten requirements for made in Malaysia and Malaysian products. This must Reflect in tender specification, Encourage integration and systems production.

Maintenance contracts should be given to 100% locally owned companies to promote and strengthen self-reliance. Clean up licensing and registrations. Clean up GLCs. Close the non-strategic collaboration. 

At a time when our ecosystem in bad shape we need to do the needful.

 If OEM still required, they must go through local 'technologically related and competent' companies.

We are aware of the problems exist, so how do we counter this or manoeuvre ourselves in this ecosystem ?

For more almost 15 years since our involvement in the industry in AMIM in 2006, we keep seeing plans after plans being launched by VVIP and yet our industry remains almost as 40 years ago. All these seminar, conference and workshop nicely done and presented documents are just for KPI or show only.

Perhaps the Ministry taking care of Technology. Development and Sustenance , such as MOSTI, and Ministry responsible for survival and progress of SMEs , perhaps MITI, are not fully aware, or indifferent,  on the plight of  Malaysian Marine  Industry ?

from defence industry brain storming group

Significant changes with higher risk led to Boustead privatisation lapsing, says LTAT

 5 Feb 2021

theedgemarkets.com

KUALA LUMPUR (Feb 5): Uncertainties stemming from Covid-19, the Littoral Combat Ship (LCS) project, leadership changes at Lembaga Tabung Angkatan Tentera (LTAT) and clarity of Boustead Holdings Bhd’s (BHB) rejuvenation plan led to the armed forces fund aborting its takeover plan of Boustead after eight months of consideration.

In a statement, LTAT said that upon the latest deadline to announced a plan to privatise Boustead on Feb 2, a conscious decision was made to allow the deadline to lapse.

It said this was after considering the changing circumstances surrounding the privatisation plan, which presented heightened risk towards ensuring the successful completion of the privatisation.

“We were conscious to do this in the best interest of our key stakeholders, particularly our contributors, the armed forces personnel,” LTAT said.

These changes included potential uncertainties as a result of the prolonged Covid-19 measures that could further delay the diversified conglomerate’s privatisation. Additionally, there were also further uncertainties over the key businesses of Boustead, namely banking, hotel, property and retail petroleum, LTAT explained.

LTAT also highlighted leadership changes on its side and at Boustead, which require sufficient time to review ongoing projects and initiatives.

Moreover, there was also the question of Boustead’s rejuvenation plan, which included a plan to address its debt levels, it highlighted.

As such, LTAT’s current focus is on the execution of its strategic asset allocation (SAA) framework, which was completed towards end-2020. The framework establishes the objective of better diversification of investments in its portfolio, it noted.

LTAT said that it intends to rebalance its portfolio by increasing fixed income instruments (20%), reducing real estate and private equity exposure (10% respectively), and increase the diversification of its public equity portfolio (50%) and the remaining portion in other asset classes, including money market instruments.

The fund also noted that at a later stage, it plans to diversify its investments in the international arena, like other funds in the country.

“While full implementation of the initiatives as part of the strategic transformation plan would take a few years and continues to be a work in progress, LTAT will continue to assess its options in respect of creating value from its existing key investments, including reviewing the merits of any potential value creation exercise, subject to 4/4 commercial viability to LTAT and BHB, within the boundaries of the takeover rules and relevant regulations.

"At this juncture, LTAT will continue to work closely with BHB in terms of providing support towards its 'Rejuvenating Boustead’ plan and future growth strategies,” LTAT noted.

The fund also explained that it had previously engaged in the privatisation of Boustead to protect the value of its investments, as well as to pave the way to support the potential restructuring of Boustead that was being planned.

This, it argued, would help accelerate its own strategic transformation plan, which involves capitalising on immediate high-impact initiatives as catalysts to address immediate gaps and creating value in achieving longer-term sustainability.

To recap, LTAT announced that it was considering taking Boustead private at 80 sen in May. On Feb 2, the fund announced that it was aborting the exercise.

Earnings-wise, for the nine months ended Sept 30, 2020 (9MFY20), Boustead reported a wider net loss of RM153.1 million, compared with RM14.2 million a year prior. Revenue for the nine months was 6.16% higher at RM7.79 billion, compared with RM7.33 billion previously.

As of Sept 30, 2020, its borrowings stood at RM7.7 billion.

Boustead is the main dividend income contributor to LTAT. The conglomerate was financially stressed in recent years and that affected its affordability to declare generous dividends.

Boustead has several listed entities under its belt. It holds a 20.73% stake in Affin Bank Bhd, a 57.42% stake in Boustead Plantations Bhd, a 65% stake in Boustead Heavy Industries Corp Bhd and 56.09% of Pharmaniaga Bhd.

Shares in Boustead were 2.5% or 1.5 sen lower at 58.5 sen as of 11.56am today, translating into a market capitalisation of RM1.19 billion. It had seen 2.28 million shares done.

by Surin Murugiah

LCS - RESPONSE TO THE PATRIOT STATEMENT

US Navy Asks Shipbuilders: Can You Build Us a Warship for Just $100 Million?

Introducing a $100 million (really small) aircraft carrier

As a matter of fact, this is exactly what the Navy is considering doing as part of its Light Amphibious Warship project, first referenced earlier this year. 

As reported by USNI News last month, the Navy and Marine Corps are working with "about six industry teams" to design and build a 200-foot to 400-foot long amphibious warship, displacing anywhere from 1,000 to 8,000 tons. (For comparison, Ford class aircraft carriers are more than 1,100 feet long and displace 100,000 tons, while smaller America-class "mini aircraft carriers" are more than 800 feet long and displace 45,000 tons.)

The Light Amphibious Warship, or LAW, is therefore being envisioned as a much smaller ship -- but this is commensurate to its task. As part of its new "distributed maritime operations" strategy, the Navy wants LAW to carry small units of Marines to capture small islands, launch attacks on enemy naval forces from those islands, and then quickly scoot off to different islands to launch still more attacks before the enemy can respond.

The USN budgeting to build small aircraft carriers called LAW  at USD 100 million each. 

Compare this to our LCS which works out to about RM 2 billion each should it eventually get built. RM 2 billion is USD 500 million each LCS. That would have been 30 LAW vessels for the RMN. We would have been a deep and blue water navy!

In comparison the 4 LMS built in China works out to USD 250 million each which is still expensive but the contract went through BHIC. I think the actual build cost would have been very much less but there again what else is new.

The idea of building naval vessels locally is to save cost and for technology transfer. We are achieving neither.

When BHIC reported lack of talent as one of the reason the failure of LCS build by them, we are wondering if can't the talents be seconded from other galaxies around us?

Talents can be sourced....but will political leadership allows it instead of siphoning money from the projects...we need servant leaders; not self-serving leaders...

And when the Patriot BG Raji trying to put the blames to the user (RMN) for changing the equipment and specification , the previous chief is not happy with the statement. Here some of the respond to the Patriot statement:

1. Usually shipbuilding starts by formulating complete documentation approved by the customer (TLDM) especially the Contract Building Specifications (CBS), Ship Work Breakdown Structure (SWBS), Inspection, Test & Trials Procedures & Protocols in addition to some other documents such as some categories design drawings . All this is customized by the ship equipment outfit designed e.g machineries, weapons and sensors and many more. If all the documentation is ready and ready to go, or has gone half-way, then there is a change in equipment outfit then many complications arise revamping the affected documents and redesign and reworks. Usually, when all the documentation is completed the construction work becomes smooth, in short in the order of Equipment manufacture by OEM, Eqpt FAT / PDI, Eqpt delivery, Eqpt setting-to-work (STW), Eqpt Installation, Eqpt Installation Test, Eqpt HAT, Eqpt Integration, Eqpt / System Integration Test (SIT), Eqpt SAT and Eqpt Final Acceptance Test & Eqpt Commissioning. In analyzing the LCS construction delay, Patriot, as an outsider not privy to these chain of shipbuilding procedures need to be careful in making sweeping statement with regards to the Project and resulting in free-for-all unfounded public comments. Only the RMN Project Team and it's counterpart BNS Project Management Team know the true problems,

2. I was called upon to respond to President Patriot's press release. I do not agree with the statement "Request for change of Weapon system and equipment by TLDM halfway into design and construction was the main contributory factor for the project delay." If true, it did not happen during my time as a PTL. I never asked for a weapon system change after the project started. But I once disputed the selection of Exocet and VL Mica as SSM (Surface to Surface Missile) and SAM (Surface to Air Missile) systems by the Ministry of Finance at the beginning of the system selection phase for this project again. Both systems chosen by the Ministry of Finance are not only considered inferior and outdated, but more expensive than those proposed by the RMN. TLDM has chosen NSM for SSM, and ESSM for SAM. The election by the Ministry of Finance has clearly turned its back on the election and the TLDM proposal. Missile Exocet has been converted to NSM missile but VL Mica is still maintained. For your information, NSM is the SSM system chosen by the US Navy for their new ship project, while the current VL Mica System is considered obsolete! For your information, all documents regarding this matter are stored in duplicate in a special file and archived. I have met 4 times with the PM at that time to raise the TLDM's disagreement in the selection of the two systems since the beginning of the project, not halfway into design and construction

From the PVTLDM brainstorming

Zahid ready to be probed over RM6bil-vessels purchase

LUMUT: Defence Minister Datuk Seri Dr Ahmad Zahid Hamidi is willing to be investigated if there are indeed elements of fraud and corruption in the Government's decision to procure six Second Generation Patrol Vessel-Littoral Combat Ships (SGPV-LCS) at a cost of RM6bil.
He said opposition MP Tony Pua should come forward and provide evidence to the Malaysian Anti-Corruption Commission (MACC) to allow the commission carry out an investigation on the matter.
"What is he so afraid of? Please give whatever evidence (you have) to the MACC."
"I'm ready to be investigated, my officers are also ready to be investigated if there are any irregularities in the procurement," he told reporters after a working visit to the Boustead Naval Dockyard here on Monday.
Dr Ahmad Zahid said he would provide a full answer in the next Parliament sitting about Pua's allegation that the Government was buying the six SGPV-LCS at a cost 870% more than that paid by other countries for similar ships.
He said the allegation made by the DAP MP was politically motivated.
"I would like to remind the DAP and other opposition parties not to politicise the country's defence and security."
"We can differ in our opinion but do not ‘spin’ the country's defence and security," he said.
Bernama had quoted a MACC source as saying that the commission was waiting for Pua to come forward with facts to support his allegations so an investigation could be carried out.
However, the DAP national publicity secretary said filling a report with the commission would be irrelevant as he merely wanted the Minister to justify the purchase.
A defence analyst with Asian Defence Journal was recently reported as defending the Government by saying that the figure of RM6bil was a standard ballpark figure in the naval ship building industry.
The analyst added that the high cost of procuring the six SGPV-LCS was rational, taking into consideration the capability and sophistication of the ships