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Saturday, April 23, 2016

Local Defence Industry

The recently concluded DSA or Defence Services Asia 2016 held several pleasant surprises to me.  I had originally planned not to attend.  But a window of opportunity opened and I decided to drop by.

Noted several noteworthy improvements made by the local defence industry which I must say have far surpassed what I thought it would be 3 years ago.  Back then, the only key players were Deftech, BNS and SMEO.  Today, we have a a few other noteworthy new players; Global Komited, Destini Berhad, Aegis Malinnov, just to name a few. And interestingly, some of these companies are self-funded.  Some even garnered interest from foreign countries and at least 1 locally developed system had been approached by a foreign conglomerate for joint-venture.

I didn't snap photos during the show; there were many others doing that and the internet is flooded with photos of the exhibition by now.  Besides, my main objective was to learn what are the latest news in the industry.

Apologies too as recently I was caught up with one too many things.  I don't have much time to write my articles.  Hence, I have yet to complete my next installment on defence procurement.  In a worst-case scenario, I may have to postpone that to mid-June as working full time in an unrelated industry and going for my Masters at the same time do make it difficult for me to write.  But write I will, as writing has already become part of my character.

Since I had touched on the local defence industry earlier in this article, I have decided to share this article of mind which was written 3 years ago.  The original version was in Malay, and published by the Perajurit.  I have not made any changes to this article except for language; some words were change to reflect the proper name.  Note, as this was my view 3 years ago, there may be some updates that had invalidated my view then.  Not everything though.  I still hold strongly onto the NGPV scandal.

Writings in italic reflects updates that I decided to include into the article.

Importance of a Strong Indigenous Defence Industry for National Sovereignty

In discussing the defence capabilities of a nation, the most favourite comparison method is of the nation’s defence assets or OrBat (for Order of Battle).  Today, we are beginning to see the proliferation of indigenously produced combat assets being used by the Malaysian Armed Forces, from our NGPV to Adnan AIFV.

Introduction of indigenously produced combat assets are a step forward towards creating a self-reliant military capable of defending the nation’s sovereignty.  However, these procurements had been dogged by several scandals that had brought disrepute to the local defence industry.  This had brought calls to the MAF to obtain combat equipment from reputable international defence equipment suppliers using the off-the-shelf concept.

Before going further, best that we have a look into several scandals that had brought disrepute to the industry.

NGPV Scandal

At the cost of RM24 billion, RMN’s plan to obtain 27 new generation patrol vessels (NGPV) from PSC Naval Dockyard Sdn Bhd was a long term evolution plan.

With aging ships which are not suitable for modern maritime warfare, the NGPV contract was expected to give RMN the capability to wage a maritime warfare and to defend our territorial waters, including the Economic Exclusive Zone.

Due to high cost, RMN had split the contract into a two-tranche contract, with the first tranche consisting of 6 vessels amounting RM5.35 billion with the balance of the contract to be concluded upon RMN’s satisfaction of the performance of the ships from the first tranche.

Unfortunately, the main contractor was found to have mismanaged the project.  Salaries and wages were not paid and compulsory EPF deductions were not remitted even though deductions were made.  An addition fund of RM1.4 billion had to be made available to complete the project.

It was with the intervention from LTAT via Boustead Holdings Berhad by taking over control of PSC Naval Dockyard and renaming it as Boustead Naval Dockyard that the project was completed.  While it might be seen as if LTAT had wasted precious funds to rescue the project, we must not forget that the users of the patrol vessels are also members of LTAT.

Until today, former chairman of PSC Naval Dockyard, Datuk Amin Shah is still free and had not been sued to obtain back the misused funds.

ACV300 Adnan Tracked Pad ‘Scandal’

The introduction of 259 units of ACV300 AIFV Adnan had significantly increased MAF ground combat capabilities and ushered in a new era.  Operated by 4 Mechanized Brigade, Malaysian Army had finally begin its transformation from a counter-insurgency centric army to a conventional warfare centric army.

Even though the ACV300 Adnan (FNSS had changed the name from ACV300 to ACV15) was a design by FNSS of Turkey, most of the ACV300 procured were in fact assembled at DRB Hicom Defence Technologies Sdn Bhd (DEFTECH) facility in Pekan, Pahang.  The project also resulted in the building of the only testing circuit to test armoured assets in the country.

The 4th Mechanized Brigade was overenthusiastic to receive the equipment and in a very short time had been able to be declared as operational with the Adnans.  However, either due to oversight to obtain additional supplies of rubberized tracked pads or too frequent trainings spares for the tracked pads was used up and had resulted in supply deficiency.  This had resulted in 4th Mechanized Brigade to be unable to operate at full capacity.

What came next was a wave of miscommunication as the media outlets had insinuated that there were elements of embezzlement in the contract.  Without clearly understanding the issue, some comments were thrown that Adnan were not safe for use.  The truth was the need for rubberized tracks were to protect the tarred road from being damaged by the excessive grip that is produced by the Adnans.

Problems with Steyr Assault Rifle

When MAF decided to switch from M16A1 to Steyr AUG in the early 90’s, it was seen as a paradigm shift as for the first time, all soldiers will be equipped with a weapon with a built-in optical sight.

The selection of Steyr was also seen as following the trend to use bullpup-type rifle as other nations within the FPDA pact had switched to bullpup-type rifles (Britain had chosen L85A1, Australia and New Zealand Steyr AUG and Singapore SAR21).

The selection however had resulted in a logistics nightmare which was not identified then.  Even though all the said rifles used the same 5.56 x 45mm NATO rounds, the magazine for the rifles were incompatible.  At least 2 types of magazines were used; L85A1 and SAR21 were able to take STANAG-compliant magazine, while Steyr uses its own proprietor magazine.  (MAF may be wanting to consider to switch to 7.62mm NATO as our rounds for rifle as New Zealand had recently changed their rifles from AUG Steyr 5.56mm NATO to LMT 7.62mm NATO rifle.  This is remain to be seen on how Australia and Singapore deal with this)

While the problem may be seen as small, it has a potentially deadly implication, especially in the heat of battle.  A soldier carrying a weapon with STANAG-compliant magazine who had exhausted his ammunition will not be able to immediately utilize the ammunition carried by another soldier carrying a weapon that utilizes non-STANAG-compliant magazine.

Beside the magazine problem, the Malaysian-made Steyr rifles had problems with its gas regulator, which was said to detach itself too easily, thus resulting in the weapon being rendered unusable.
A perennial issue with bullpup design is it is not friendly to lefties.  While the original Austrian-made Steyr had this solved by having detachable ejection port cover, the Malaysian version was said to have the cover permanently attached, resulting the spent casing be ejected only to the right.

Another lesser known weakness that plagued the Malaysian-made Steyr is that the polymer used by SME Ordnance is more brittle.  This was observed on many of the Steyrs with cracked butt when this writer had attended the 2013 Army Day in Port Dickson recently.

The Iraqi T72 Nightmare

When the Iranian monarchy under Shah Pahlavi was overthrown and replaced with a theocratic Islamic Republic of Iran, the first nation that was actually threatened by the turn of event was not the United States of America, but Iraq.  This was due to the fact that the modern day Iraqi territories were carved out from the Babylon Empire which in turn had been occupied by the Persian Empire.
When the British had administered the region and carved out the borders for both Iraq and Iran, they did not consider the ethnic and religious demographic distribution.  This had resulted in many areas within Iraqi borders with high Persian/Shiite population.

The then Iraqi president, Saddam Hussein had wanted to be a military powerhouse in Middle East and the Persian Gulf.  Taking advantage of a weaker Iranian Government struggling in the midst of power struggle, he decided to launch a pre-emptive strike to invade Iran.

Iran fought back ferociously.  Within a short span of time, all occupied Iranian territories were liberated.  Iraq had a problem.  As Iraq does not have a domestic defence industry, most of its military equipment was imported.  High prices of imported military goods coupled with Iraqi oil export being interrupted by constant attacks, Iraq began to suffer problems to procure replacements for lost and destroyed equipment.  This was made worse by the fact that some of the international weapons suppliers were selling to both belligerents.

Iraq decided to launch its defence industry, albeit belatedly, focusing on producing T72 MBT.  The T72 MBT license was obtained from USSR and the Iraqi version were named as Asad Babil (Lion of Babylon).

The Iraqi-made T72 apparently became infamous during the First Gulf War.  When the US Army M1A1 Abram met with Iraqis T72 in battlefield, the US forces were shocked that Iraqis T72 had poor armour durability.  Many T72s were destroyed with single shot.  In a single contact, an M1A1 Abram had managed to destroy 2 T72s with a single cannon fire; the round had exited the first T72 before hitting the second T72 behind it.

After the Second Gulf War, US military intelligence was finally able to piece up the puzzle when they managed to take hold of intelligence from the Iraqi T72 producer.  Apparently, the T72 had not been built according to specification, with some mismatched parts.  Concurrently, Iraqi metallurgical knowledge was still low.  Thus, a single hit from a depleted uranium round was able to destroy a single Iraqi tank.

Is investing in Defence Industry Worth It?

In view of the problems faced by MAF and other nations when it comes to using indigenously procured defence assets, it seems to be a wasted effort.  However, this view is premature and there are compelling grounds for Malaysian government to invest diligently into the industry.

Argentinean Experience in the Falkland War

The Falkland Islands, located 310 miles from the Patagonian shores of Argentina are an archipelago of islands had been administered by the British since 1833.  The Argentinean claims the islands belong to them as the islands were once administered by Argentinean former colonial masters, Spain.
On 2 April 1982, Argentinean forces launched Operation Rosario to claim back Islas Malvinas, as they called the islands by force from the British.  The operation was a success minimal bloodshed.
The Argentineans were confident then as they had within their OrBat French-made Super Extendard jets equipped with Exocet missiles and were very suitable against British naval forces in the event Britain chooses to retaliate and to retake the Falklands.  Other than the Super Extendard, they also have A4 Skyhawks.

At the same time, Argentinean Navy also operate a Colossus class aircraft carrier (ironically, was sold by the British to the Argentinean few years earlier) ARA Veinticinco de Mayo, 6 destroyers of different classes, 5 corvettes of different classes and 2 submarines.  Britain on the other hand was suffering from an economic crisis that had resulted in huge cut in the defence budget.

On paper, it was an easy task for the Argentineans to defend their position on the Falkland Islands.  However, their advantages soon became a liability.  Most of their equipment suppliers had divulged the weaknesses of their equipment to the British.

The French government had given to the British military the source code for the Exocet targeting system.  Thus, Argentinean forces were only able to destroy HMS Sheffield using the Exocet in its unmodified state.

Another ship, the Atlantic Conveyor, merchant navy ship was hit by an Exocet that had originally targeted a Royal Navy frigate.  Possibly, electronic countermeasures targeting the source code emitted from the frigate had confused the Exocet targeting and navigation system.

Another British ship, HMS Glamorgan was hit with another Exocet.  The Exocet, originally meant for aerial deployment had been modified to be fired from land and the modification may have negated the electronic countermeasures specifically to fool the Exocets.

The war ended on 14 June 1982 when British forces managed to wrest back the Falkland Islands from Argentinean forces.

Argentina’s bitter lesson should be an important lesson for Malaysia.  While Malaysia has cordial relationship with most countries in the world doesn’t mean that they will not assist our enemies in time of war.  It doesn’t mean that we will be strong and safe if we obtained the best and most modern military equipment in the world, as our enemies can easily ask for the source codes that will disable these assets in the field of battle. Only by having a strong indigenously developed defence industry will prevent us from suffering the same fate as Argentina and strengthened our sovereignty.

United Nations Weapons Embargo

Despite the vast ocean that separates South Africa and Indonesia, they both had suffered the same fate of being on the receiving ends of United Nations weapons embargo.

The embargoes on both countries, though at different time and for different reasons had unfortunately being placed upon them when they had urgent needs to modernize their armed forces.

South Africa

The military equipment embargo was imposed as part and parcel of economic sanctions on South Africa as gazetted by United Nations under Resolution 421 (1977).  The sanctions were imposed due to the apartheid regime practiced by the South African government then.

The economic sanctions did not have much effect on the South African economy.  However, the military equipment embargo stung them badly as South Africa was directly involved in the Angolan civil war.

South African involvement in the civil war was not just in terms of moral support to Jonah Savimbi’s UNITA rebels, but also in terms of military support.

The Angolan civil war was one of the few civil wars which had communist leaning belligerents on both sides; USSR and Warsaw Pact communists on one side supporting MPLA, and on UNITA’s side, China (PRC).  South Africa had no choice.  If they did not help and UNITA fell, Angola will be a communist country with Marxist Leninism leaning.  And if UNITA win the civil war without South African help, Angola would be a Maoist communist country.

Having a communist country at its doorstep was not a pleasant choice for South Africa as the ANC (African National Congress) had been infiltrated with communist militants.  In fact, the militant wing of ANC was established by Nelson Mandela (who later became South Africa’s first post-apartheid president) with assistance from South African Communist Party.  If Angola becomes a communist-leaning nation, the communist insurgency in South Africa might flare up in accordance of the domino effect theory.  The theory then seemed hold true as after the fall of South Vietnam government to the communist North in 1975, communist insurgencies throughout Southeast Asia flared up again.
Facing the military might of Warsaw Pact, the embargo was like a death sentence on South Africa.  Though China was Jonah Savimbi’s ally, South Africa could not let UNITA to rely too much on China as this would probably pushed UNITA towards communism too.

Without any choice, South Africa went ahead to develop its own indigenous defence industry to face the war.  Today, South Africa has a well-regarded defence equipment manufacturer and designer in Denel, making equipment from artillery pieces such as G5 and G6 system and the Rooivalk attack helicopter.


As an archipelago nation, Indonesia stretches across several time zones.  With hundreds and thousands of populated islands from Sumatera to Papuan islands, Indonesia has 8 main ethnic groups and countless other sub-ethnic groups.  With its bloody independence history, thus it is not a surprising fact that till today Indonesia still suffers insurgency movements in several of its territories, namely Acheh and Papua.

Timor Timur (today’s East Timor) was one of the territories that were forcibly annexed by Indonesian forces.  When the East Timor independence movement grew popular and stronger, the Indonesian military was accused of human rights violation against the civilian population of East Timor.  This had resulted in the US Congress to stop the deliveries of spare parts for the newly procured F16.  Lesson learnt, Indonesia began to focus on its own defence industry.  Today, Indonesia can proudly claim to be able to make APC and light infantry weapons.

Defence Industry – A Heavy Industry with Multiple Supporting Industries

To support a defence industry, different supporting industries will need to be developed at the same time.  To name a few, cast iron industry, shipping, computer technology, laser optic, communications; the list does not end here.

These industries require a highly skilled workforce with high level of education.  Thus, a growing defence industry will be able to create job opportunities to support all these industries.  As these industries will probably involve our nation’s security, these offerings will probably be filled up by Malaysians.

The economic benefits from defence industry are not miniscule too.  Singapore’s defence industry in 2011 reached SGD304 billion or RM733.96 billion.  This is compared to our planned SGPV project cost of RM6 billion only.  At the same period, Malaysia’s GDP growth (production basis) was at RM881.08 billion.

MAF will not and could not be the sole users of Malaysian developed defence equipment as MAF itself suffers from budget constraint annually.  Thus, these companies must be ready to be proactive and to explore for their own opportunities at defence exposition held worldwide.

A good name itself is not sufficient.  Both government and private sector have to be ready to invest large amount of funds into the industry to make this work.  Research and development subsidies need to be provided by the government, but at the same time, these companies must not just wait for government grants if they want to enlarge their customer base.

With that in mind, both Malaysian government and Deftech had made the right move in the AV8 AIFV project.  At the cost of RM7.3 billion for 257 units, the project seemed to be overvalued.  This had resulted in the project being misconstrued and politicised in the social media.  What was revealed in the social media sites that were against the project was that the cost was inclusive of intellectual property right for Deftech to manufacture AV8 for export markets without the need to pay for licensing.

Having international clients does not mean that the secrecy over the equipment will be compromised.  When foreign clients come into the picture, the overall cost to produce the equipment will then go down due to higher economic of scales.

We must not forget that development of indigenous defence industry is also part and parcel of HANRUH (Pertahanan Menyeluruh or Total Defence) that has been our defence doctrine since the late 90s.

Concurrently, increase in utilization of indigenously developed equipment will help to lower not only of our dependency of foreign equipment but also outflow of funds and increase the liquidity of our own economy.

While we may forge ahead into building our own defence industry, it is to be reminded that it does not mean that we will no longer need to import equipment from foreign sources.


Defence industry is here to stay.  A strong defence industry will provide to a stronger Malaysia and a boost to our sovereignty.  And the returns are not only a more peaceful Malaysia, but also in improving the livelihood of Malaysians economically.


This article was originally published in the Perajurit June 2013 edition in Malay.  The original Malay version of this article is titled Kemandirian Industri Pertahanan Tunjang Pertahanan Negara.  Go and get the original article from Perajurit as they have other very good analysis written by other writers too.

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