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Monday, March 7, 2016

Procurement Shift in the Pipeline?

It has been about a week since I last updated this blog.  Despite last week being a week with loads of updates, especially from the defence world, I just didn't have the time to write anything.  Work life balance had gone down the drain last week and I probably need a week or two to recover.  With Mr. Note 4 (yes, I ended up buying a Note 4 and those notes joke in the past were not just mere jokes) suffering some catastrophic damage, I had to send it in for repairs, depriving me of my favourite platform to update my blog.

Anyway, let's cut the gibberish talk and go straight into business.

Big News
Let's start with what I deemed as what may be the most critical shift in Malaysian defence procurement doctrine in years.
Chief of Defence Forces, General Tan Sri Dato' Sri Zulkefli bin Mohd Zin

Announcement by Chief of Defence Forces, General Tan Sri Dato' Sri Zulkefli bin Mohd Zin that Malaysia is going to procure 30 units of M109A5 Paladin, with 24 units upgraded to A6 standards and another 6 units for spare parts and training purposes grabbed the attention of many defence watchers.  First broke to the public by renown defence writer, Marhalim Abas on his blog, Malaysian Defence on 28 Nov 2015 (read here), many took to the news as pure rumours despite Marhalim's very credible reputation.

The purchase of the Paladin was made via US Govt EDA programme, or Excess Defence Assets programme which was a surprise to many as Malaysian Govt was known to not favouring purchase via the programme as the purchase does not guarantee that Malaysia would be able to obtain transfer of technology.

A Chilean Army M109A5 Paladin

In fact, the last notable purchase made by Malaysian Govt via EDA was made almost 30 years ago, ie the purchase of A4PTM Skyhawk, where Malaysian Govt had purchased 88 units of ex-USN A4 Skyhawks and had them upgraded to Malaysian requirements. The purchase which was made during the height of increased tension in the region, part of the PERISTA programme, to prepare the nation for eventual invasion from Vietnam, which thankfully did not materialise.

I will not delve deeper if the M109A6 Paladin would be suitable for Malaysia.  It is a moot point to argue if Malaysia should go for tracked SPH (self-propelled howitzer) or wheeled SPH.

However, what interest me and what attracted me to the purchase is the timing of the announcement.

The announcement was made one day after the former Prime Minister, Tun Mahathir Mohamad resigned from the ruling party, UMNO.

While I would usually try to steer away from bringing politics into defence discussion, but in this case, it is inevitable.

As mentioned earlier, the last significant Malaysian purchase via EDA was the purchase of A4PTM, which was made under Tun Mahathir.  The purchase which was fraught with controversy as although Malaysian Govt had inked to purchase 88 units, not all were delivered to Malaysia.  Why these were not delivered was never made known to public.


The A4PTM itself was also fraught with number of crashes, with 1 RMAF pilot had to be declared as killed in action as his plane was never recovered after went missing during flight from Kuantan to Labuan.

There onward, Malaysian Govt seems to avoid the EDA as if it was jinxed.  All future Malaysian Armed Forces purchases were made via middlemen, with the so-called intention of getting Malaysia into obtaining necessary defence technology, with the noble intention of building our indigenous defence industry, much like Singapore.

The procurement process, which was introduced by Tun Mahathir, requires the manufacturers to appoint local partners who would then ideally receive the technology used to build the procured assets.  In an utopia, the company would then be able to reverse-engineer the technology and would be able to produce the assets or, at least to use the knowledge to produce their own versions of the assets.  As the purchases involved transfer of technology, the manufacturers would have to price their products higher than what they would, a small price to pay considering we are obtaining the technology.

Unfortunately, nearly every single local benefactor of the procurement process,ie the partners have yet to be able to prove that they have been able to produce their own product.  The worst of all the local partners would be PSC Naval Dockyard, which today had evolved into Boustead Naval Dockyard.

PSC Naval Dockyard not only wasted tonnes of federal fund, but had also effectively resulted in a weakened navy via their sales of Meko 100 class New Generation Patrol Vessels (NGPV).  Of the supposed procurement of 24 vessels, only 6 were procured.  Worst still, these vessels are still just equipped with just 76mm main cannon.

KD Pahang of the Kedah class patrol vessels
Credit - Defence Update
But the cream of the cake is when Malaysian Govt decided to proceed with the Second Generation Patrol Vessel (SGPV), Boustead Naval Dockyard decided to obtain a new design, ie Gowind. Never mind that BNS technically still has the licensing rights to the Meko 100 design.

But then again, the SGPV project did not suffer the same folly of NGPV as the planned vessels are armed to the teeth as compared to the Kedah class vessels.

Notable Success
A notable success from this programme are AIROD and Deftech.

Deftech AV8
Airod had been recognised as a go-to maintenance, repair and operations operator, getting contracts to refurbish Hercules C-130 for air forces of different nations.  In fact, AIROD became so proficient that they were entrusted to lengthen RMAF C-130 for maritime patrol.

While Deftech has yet to obtain as single overseas contract, their cooperation with FNSS of Turkey has bore fruit in Gempita AV8.

It is still too early to assess if the purchase of the Paladin is really a doctrinal change in the procurement process.  For all we know, it could be a one-off event.

However, if this is true, we would be able to see either a much leaner budget for the Defence Ministry or more for-value assets coming our way.  Too bad to all those local partners who had been sleeping on their jobs.  Their loss, not mine.

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