SHAH ALAM: Defence Minister DS Mohamad Hasan told Dewan Negara on June 27 that Malaysia should take the opportunity to become the regional maintenance, repair, and overhaul (MRO) hub for the Korean Aerospace Industries KAI T/FA-50 trainer and light combat aircraft.
He said the procurement of the 18 FA-50 FLIT/LCA would also include local content programme.
“We are studying the details of the offset programme and the industrial collaboration programme which we want to include MRO activity in our country,” he was quoted in the Dewan Negara Hansard dated June 27. Mohamad was answering an additional question from Senator Hatta Ramli.
Hasilnya saya yakin, terutamanya akan ada aktiviti local content yang akan
dibuat. Umpamanya Tuan Yang di-Pertua, kita menandatangani pembelian LCA FA50 daripada Korea. Kita sedang meneliti program offset dan juga ICP yang mana kita mahu supaya aktiviti maintenance repair and overhaul (MRO) mesti diadakan di negara kita. Kita hendak mengambil peluang ini kerana LCA FA-50 ini telah pun diguna pakai di Indonesia, di Thailand, dan juga di Filipina tetapi mereka belum ada lagi apa yang dipanggil sebagai MRO punya fasiliti di negara mereka.
Jadi, kita hendak ambil peluang supaya Malaysia menjadi sebagai regional center MRO untuk LCA FA-50 ini nanti. Insya-Allah Tuan Yang di-Pertua
As you are probably aware, three other countries in the region are already operating the T/FA-50 FLIT/LCA namely Indonesia, Philippines; and Thailand. Anyhow, at LIMA 2023, it was reported that KAI has offered the MRO hub to Malaysia as part of the deal for the 18 FA-50s. Apart from this KAI is also preparing for the local assembly of some of the FLIT/LCA as part of the RM3.8 billion deal.
Comments
Based on the minister’s statement at Dewan Negara, it is likely that the MRO hub will be part of the deal for the 18 aircraft though as usual no official details have been made public (and likely never will). And it appears that the minister and the Defence Ministry are enthuse about the idea.
It must be noted that there is no confirmation that the three other countries are agreeable in sending their aircraft to Malaysia for their maintenance needs. Both Indonesia and Thailand have a long history of conducting the MRO and upgrades of its fighter planes in country with the cooperation of the OEMs and even other aircraft or avionics manufacturers.
Indonesian Air Force worked with Lockheed Martin to upgrade its F-16A/Bs to the latest standards. It is the same with Thailand though it got the state-owned Thai Aircraft Industries (with LM as well) to do it for them. Both had operated the T/FA-50 much longer than us and clearly, they had the experience in maintaining them and have the people to do it in country.
So that leave the Philippines then. It is not that rosy as well, as the Philippines Air Force has even sent its Hercules airlifters to the United States for deep maintenance works. This despite Airod marketing their capabilities in doing the same thing for some time now.
Yes, I understand things change but in the case of the regional hub, the offer from KAI sounds good on paper but unlikely to work in practise. Apart from the industrial angle (all three countries already spent a lot of money to pay for their support infrastructure), the military side remained the biggest limiting factor.
Even though we are part of Asean, on the military side, none of us are allies in the same vein like the NATO countries which could share aircraft and even maintenance facilities.
I do not begrudge KAI for making the offer, the officials are looking out for the company. The local assembly and MRO hub are likely its way to meet the obligations for the contract for the 18 aircraft. The obligations I am told is 100 per cent of the contract price, which comes to RM3.8 billion as announced at LIMA 2023 (though the government has the right waive the requirement or reduced the amount). The contract figure as announced by the ministry differed from the figure announced by KAI, which is US$920 million.
It is up to our government and its official to find the best solution (the offset terms and the ICP), of course but again history has told us that they have not. For the record most of the offset programmes for past purchases (Hawk, Fulcrum, Hornet and Flankers) have had little impact on the local aerospace and defence industry. That is the reason we continue to see news headlines about the potential of both industries in creating jobs and economic potential.
Do I need to remind you what about happened on the aircraft maintenance deal for the A400M procurement? I believe it is the same thing with this local assembly and MRO hub deal.
* Updated with the full answer on the MRO hub from the Dewan Negara Hansard and the off-set terms.
— Malaysian Defence
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View Comments (15)
No chance of any of ASEAN other Golden Eagle users sending their aircraft for MRO in Malaysia due to the obvious reasons.
IMO one of the biggest offset effect was ironically with the F/A-18 Hornet deal. Malaysia got one of the first few rapid prototyping machines in the 90s with the offset located in Technology Park Malaysia (TPM) , and that was used to develop proton cars such as Waja, Satria Neo, Savvy (and a few that remained prototypes such as the MSX) and also Lotus cars of the era.
With the Hawk, there is quite a lot of offset related to that
- a handful of unflyable aircrafts for TUDM Museum (havard and tiger moth if not mistaken)
- type certificate and wing strengthening parts AD for Scottish Aviation Bulldog (which lapsed now) to SME Aero
- overhaul of 2 ex TUDM bulldog to flyable status and passed to Kedah Flying Club
- design IP and manufacturing line of MD3-160 Aerotiga to SME Aero
- hawk weapons pylon subcontract to SME Aero
Fulcrum, nothing much mostly paid in palm oil as offset, MRO center
Flanker, a malaysian to space, MRO center
we are one of a few non-warsaw pact countries that mostly overhaul our russian planes in country and not send it to russia, belarus or ukraine (other than the engines)
"MRO hub will part of the deal for the 18"
Ohh we will be the regional hub alright... but only TUDM will be its customer. Everyone gets scott free because nobody is wrong; KAI fulfills their contract, the Menhan was accurate that a hub was setup, local jobs will indeed be created, but again it will be us, the taxpayers, that will lose when such facility gets underutilised or worse; becomes privatised, make huge losses, and later needs a bailout with our money. We can change Govt but nothing has changed.
"other countries are agreeable in sending their aircraft to Malaysia for their maintenance"
This is also another of those insurmountable issues to tackle before ASEAN can truly become like EU. And also its not like Korea is halfway around the world ie USA that they cannot easily send them back to OEM for maint.
"The obligations, are about 50 per cent of the contract price"
Meaning without national interest, these planes could have been much cheaper but half the cost goes to sideshow and many pockets. Again nothing has changed.
"aircraft maintenance deal for the A400M procurement?"
Ahhh but this time the shoe is on the other foot as we are the earliest & most experienced user of A400M, with the highest usage hours per nation somemore. Just as we'd be distrustful to seek more mature ID & TH experience for T/FA50, they too would reciprocate if/when they get A400M too.
Basically this is another blackhole for our defence budget to throw into. Nothing has changed.
rather than the useless local assembly of the FA-50, i would prefer the offset $$$ value to be given to Malaysia in the shape of
- investments in malaysian semiconductor industry (say LG buying shares in Silterra as an offset)
- surplus ROKAF Blackhawk helicopters + spare parts (a dozen will be good)
- 100-200 surplus KIFV (to be able to set up a mechanized brigade in East Malaysia)
- surplus Metis-M ATGM reloads
- surplus KM167 Vulcan Anti-aircraft gun and K263 KIFV Vulcan (for anti-drone air defence)
- surplus MD500 helicopter + spare parts (can be upgraded to MD530G standard)
- surplus Ulsan class frigate (2-3 units, can be used by TLDM to prepare manpower for Gowind Frigates, then passed on to APMM after the gowinds have been completed)
For a USD920 million contract, all the surplus offset cost no more than USD100 million, and it would be at zero cost to KAI anyway as those items are surplus/no longer used by Korean Military. Those surplus items would be a useful addition to malaysian military, unlike the planned local assembly.
The MKM offsets is probably the reason why we are still able to maintain or Su-30MKM in acceptable readiness despite dodgy after sales support from Russia. Other than that plenty of research paper on material science and engineering is also written by local researchers and scientists which have access to MKM and we are able to develop in house NDT standards which is useful not only for MKM but also for other aircraft.
ToT offsets shouldn't be looked on superficial level only.
On FA-50 offsets we can capitalize on malaysia being an already established aerospace OEM parts manufacturer and produce some of the fuselage, wings, panel parts not only for our use but also to integrate Malaysian manufacturers like CTRM into KAI supply chain ecosystem. As KAI is looking to expands its T-50/TA-50/FA-50 production they can source some of the parts from Malaysia to ensure smooth and timely deliveries. Countries like Thailand and Philippines doesnt have to send their planes here for us to reap the benefit. They could buys parts from Malaysia and do it themselves if they're too proud to send their birds here
It's the same thing happen with MKM. More often than not we're sourcing parts from India and sometimes even China due to russian having unreliable after sales support
" On FA-50 offsets we can capitalize on malaysia being an already established aerospace OEM parts manufacturer and produce some of the fuselage, wings, panel parts not only for our use but also to integrate Malaysian manufacturers like CTRM into KAI supply chain ecosystem. As KAI is looking to expands its T-50/TA-50/FA-50 production they can source some of the parts from Malaysia to ensure smooth and timely deliveries. Countries like Thailand and Philippines doesnt have to send their planes here for us to reap the benefit. They could buys parts from Malaysia and do it themselves if they’re too proud to send their birds here "
200% agree on this point, but this should be just a portion of the offset, not in its entirety.
The usual reasons why the "make Malaysia a hub" plan fails is because of local partnership requirements (end up with a bad partner or a rent-seeker that "hit and run" and doesn't develop the business), and no follow up orders. If local partner is required and KAI does not control the business, then it becomes a franchise model - KAI can just ignore the Malaysia MRO hub if the performance is poor or the price is too high or both. The other issue is it being a Golden Eagle MRO hub instead of a KAI MRO hub. A KAI MRO hub has much greater potential since KAI is developing the KF-21, transport helicopters, is developing light attack helicopters, UAVs, has civilian fixed wing and rotary aircrafts. Lastly the issue of insufficient planes in the region to sustain a regional hub - its bad business. However, if Malaysia follows through with FA-50 batch 2 and selects the KF-21 for half the MRCA requirement, we might be looking at 54 KAI jets in RMAF which should be sufficient to sustain a Malaysia KAI MRO hub - assuming the business is managed well.
See the SAE story for context. Anyhow even if we bought the KF21 and KAI helicopters, again we will not be a hub for anything apart from doing our own aircraft.
KAI like TAI are not Boeing nor airbus that's can provide plenty of commercial industrial offsets. We don't have the luxury of waiting a decades more for the red hawk.
As for the purchasing price, if not mistaken the poles are paying the same price as us. So it's not like the Korean are cheating us or our birocracy is arranging a horrible deals.
If anything, some maybe disappointed that it's doesn't have the foreign worker sweats smells on the jet though I don't have a problem with having local assembly plant for reasons I had stated in the past particularly one that could assembled LM products.
Thought the birocracy would need to step up the plate to make sure continuous assembly programs so that the factory is not empty like Deftech currently is or the obvious lack of order post 2030 at BNS.
... - “IMO one of the biggest offset effect was ironically with the F/A-18 Hornet deal”
It was signed with McDonell Douglas before the deal was signed for the Hornets.
... - “100-200 surplus KIFV (to be able to set up a mechanized brigade in East Malaysia”
Great on paper but putting aside the funding; my question is how long would the army need to sort out the administrative and host of other issues related to raising a mechanised brigade. We also have to look at overlooked practicalities such as land suitable for a mechanised brigade [not necessarily as a whole] to conduct live fire and manoeuvre. Sounds easy on paper but hard to do; given funding issues and that the speed in which the wheels of bureaucracy turn.
... - “– surplus Ulsan class frigate (2-3 units, can be used by TLDM to prepare manpower for Gowind Frigates, then passed on to APMM after the gowinds have been completed”
The MMEA would probably say no “no thank you” [like they would have to any proposed Laksamana transfer] to aged high mileage and resource for extensive frigates. As it stands the MMEA has a huge footprint and limited resources.
... - “we are one of a few non-warsaw pact countries that mostly overhaul our russian planes in country and not send it to russia, belarus or ukraine (other than the engines”
Because Russia, Belarussia and the Ukraine were the most heavily heavily owned industrialised and had an aerospace sector. Poland also falls into this category.
Dundun - “ due to russian having unreliable after sales support”
One problem is that almost everything has to go through Rosboroexport and when the client can deal with the OEM direct; it might be located in the wilds of Siberia with nobody able to reply in an English email or fax. I could tell you stories from the 1990’s when things were much worst. The Russians had no idea how to compete competitively and no idea as to marketing. At the 1st LIMA brochures were in black and white.
My only wish is all 18 FA50 will be receive without delay or problem. Also wish there will be a second batch
Kel - “The usual reasons why the “make Malaysia a hub” plan fails is because”
Because of a lack of continuity; insufficient funding and the lack of a holistic and realistic appraisal of what we intend to achieve and what we realistically can.
Using paragraphs rather than a large blob makes it easier for others to read and shows consideration for others.