DEFENCE Minister Hishammuddin Hussein must explain the irregularities in the procurement of littoral combat ships (LCS), PKR deputy president Rafizi Ramli said.

His statement today came after the Public Accounts Committee (PAC) questioned the government’s role and neglect in handling the LCS project which has been ongoing since 2011.

Taking the matter to Facebook, Rafizi said the matter was serious as it involved multiple aspects. 

“There is misappropriation of public funds to build a national defence system where the project was awarded directly to a company controlled by a trust fund that is supposed to care for soldiers’ welfare.”

“When the funds are misappropriated, not only the trust fund suffers losses, our national defence system is exposed to various risks when equipment and weaponry become obsolete and outdated.

“If the embezzlement did not happen, the money could have been used to give allowances and pensions to our armed forces personnel,” Rafizi said.

PAC today said in its report that the government’s due diligence on Boustead Naval Shipyard Sdn Bhd (BNS) had failed to detect the company’s financial weaknesses.

“As such, the government had to pay an upfront fee of RM1.36 billion to BNS, which is against government protocols,” said PAC in a statement.

“BNS’ poor financials were caused by abuse of power and mismanagement. As of 2018, BNS owed the OEM company RM801 million and another RM956 million to banks.”

According to PAC, BNS had appointed two other companies to procure equipment from the OEM company causing cost overruns.

PAC has released its report on the Defence Ministry purchase of LCS from BNS. Although the government has already paid RM6.08 billion, none of the LCS ships has been delivered. 

According to the original schedule, five LCS should have been delivered to ministry by this month.

According to PAC, the terms and conditions of the LCS contract was unfavourable to the government as payment for the project was based on development and item procurements instead of actual progress of the LCS.

The newly elected PKR deputy president said he will continue to raise the issue until Hishammuddin, former prime minister Najib Razak and ex defense minister Ahmad Zahid Hamidi speak up.

“The scandal happened under their supervision and they are duty-bound to provide an explanation to the people,” he said. – August 4, 2022.