Defence Procurement Oversight Committee Part II

Two days after Malaysian Defence wrote about the need to set-up the Defence Procurement Oversight Committee for the sake of transparency, MINDEF came out with this press release (courtesy of Bernama).

Subs And Fighters Procurement Above Board – Mindef GeneralApril 26, 2007 23:35 PM
KUALA LUMPUR, April 26 (Bernama) — The Defence Ministry (Mindef) today refuted allegations by certain quarters that there had been hanky-panky in the procurement of Sukhoi fighter jets and Scorpene submarines (pic) for the Malaysian Defence Forces (ATM).In a statement here today, Mindef said that their procurements were above board and in accordance with procedures set.

They involved various levels of approvals including by a Technical Committee and a Price Negotiation committee after exhaustive studies on their purchase were made to ensure that needs of the ATM were met, said the statement.It was issued to clarify negative remarks made about the procurements by certain political figures from the opposition who had alleged that there had been hanky-panky in the purchase of the jets and submarines.

According to the statement, before approval (for the purchases) was obtained, references were made to the Attorney-General’s Department.

All the terms and approvals for negotiating the purchases were then submitted to the

Finance Ministry (MOF)and the purchase contracts were only signed after the MOF gave the go ahead, said the statement.Mindef also denied that the government had paid a RM540 million commission to political analyst Abdul Razak Baginda (now facing a charge of abetment in the murder of a Mongolian woman) or making any payment to Perimekar Sdn Bhd, in the procurement of the Scorpene submarines and described allegations that it did as baseless.

The Scorpenes procurement were done on a direct negotiation basis with the principals, ARMARIS of France and NAVANTIA of Spain, with both companies having obtained the permission of the respective governments for the transactions.Perimekar Sdn Bhd actually was given a contract to provide support and coordination services regarding the procurement worth Euro 114.96 million (RM540 million), progressively payable until the end of the procurement process.Perimekar is jointly owned by Lembaga Tabung Angkatan Tentera (LTAT), Boustead Holdings Bhd and K.S. Ombak Laut Sdn Bhd.The statement further said that the scope of support services also included providing accommodation facilities and ancillary equipment besides insurance coverage for 27 families in the project team in France and Spain for six years.

The company also had to provide a management office and accommodation for 156

Royal Malaysian Navy (RMN) sailors in France and Spain for four years, and pay them daily allowances of Euro 50 each for the first three years and Euro 60 each for the next three.Perimekar also had to defray the flight costs for the submarine crew to return to Malaysia once very four months (three times a year) besides looking into their other needs during their stay in France and Spain, the statement added.

Among the coordination services by Perimekar were involving Malaysian companies to participate in the construction of the subs and helping Malaysian companies with potential to take part in offset programmes arising, coordinate the RMN sailors training for submarine operations and provide update reports every six months.Mindef also clarified that the Euro 114.96 million was not Perimekar Sdn Bhd’s nett profit but involved direct and indirect costs as stated in its contract.On the Sukhoi SU30MKM procurement, Mindef explained that it was done through direct negotiations with its principals, Rosoboronexport, which is owned by the Russian government.Direct negotiations were required by Russia and it was the same with other countries that traded in military hardware, the ministry said.

All the procurement contracts were signed by a Mindef representative on behalf of the Government of Malaysia with the principals, it added.The purchase of the jets were also in accordance to procedures, said Mindef.Mindef also said that Rosboronexport appointed a local company to make it easier to facilitate its (Rosboronexport’s) dealings in Malaysia and that the government was not involved in any way in the appointment (of the local company).With the explanation, the Ministry hoped all parties would understand the true situation and not make statements that only created confusion and cast the ATM, Mindef and the government in a negative light.– BERNAMA

Malaysian Defence does not wish to argue further about the release (which came about from the Ijok By-election) but having an independent committee (still under auspices of MINDEF) would prevent such allegations from being made.

Committee members could come from the Govt (since such matters are SECRET) like high-ranking officials from the Anti-Corruption Agency, Finance Ministry and such. Technical matters could be explained by somebody from MINDEF’s very own STRIDE (the Science and Technology Div) which certainly need more things to do to justify their existence.

Once the tender is signed and the Minister announced the contract, the deliberation of the Oversight Committee could be published in parliament excluding of course the technical details.

So if there is another multi-billion ringgit deal (like the proposed new frigates to be built in Sabah) no one could question the integrity of the MINDEF and of course its minister. Unless of course, they got something to hide.

The press release however did not stated specifically whether or not Abdul Razak Baginda was somehow involved in the submarine procurement programme. Abdul Razak, I believe, despite the allegations was not a pimp. He may be a crony but I believed was a target of a foreign spy agency.

He could have walked away, if he had been brave enough to contact the MI instead of trying to solve the problem on his own.