UMNO president Ahmad Zahid Hamidi’s claim that he was not involved in the littoral combat ship (LCS) procurement was untrue, according to a newly declassified report. 

Malaysiakini reported that the 106-page declassified report from the Special Investigation Committee on Public Governance, Procurement and Finance showed that Zahid had consented to the project by way of annotation on a letter sent by Boustead Naval Shipyard (BNS) Sdn Bhd on July 8, 2010.

BNS had written the letter to Zahid, who was then defence minister, to ask for a letter of intent (LOI) for the project.

In the letter, BNS managing director Ahmad Ramli Mohd Nor, who is also former navy chief, said the company had been planning the LCS project for two years. 

Ramli said in the letter that the LOI is needed to convince original equipment manufacturers (OEMs) that the project has the government’s mandate and consent. 

Malaysiakini reported that acting on the letter, Zahid noted on the top right corner of the letter: “SUB Perolehan, sila laksanakan (Procurement division secretary, please execute).”

Ramli claimed trial yesterday to three counts of criminal breach of trust involving RM21 million in connection with the LCS scandal.

Following Zahid’s instructions, the Finance Ministry in a memorandum on August 2 said the LCS project cost would run high, and that it should be weighed against the country’s priorities and resources before the LOI is issued. 

Subsequently, the Economic Planning Unit (EPU) wrote to the Defence Ministry to delay issuing the LOI until the ceiling price for projects under the 10th Malaysian Plan was reconfigured.

The EPU, however, caved in to the request for the LOI following an appeal by the Defence Ministry.

The LOI was finally issued to BNS on October 15. In it, it was noted that discussion had to take place between the minister and BNS on matters of pricing and technical knowhow.

On February 1, the Defence Ministry then requested that the Finance Ministry undertake the procurement via direct negotiations with BNS. 

The declassified report also showed that this is not BNS’ first attempt in requesting the LOI. It had been trying to get the LOI since 2008, when Najib Razak was defence minister.

The ministry, under Najib, had also asked the Finance Ministry to issue an LOI to BNS on January 15, 2008.

This was however not approved, even after Najib became finance minister. It is unclear why. 

Zahid had previously commented that it was not right to blame him for the failure of the LCS procurement as he was not defence minister when the project was awarded.

Zahid, who was defence minister from April 2009 to May 2013, said any party that caused the delay of the project should be responsible for providing an explanation to the Public Accounts Committee (PAC).

He added that the contract awarded to BNS was in accordance with the direct negotiation procurement application guidelines dated April 17, 2002.

The RM9 billion LCS project has been beleaguered with cost overruns and delays, without a single vessel delivered to date. 

In a report, the PAC said the government’s due diligence on BNS had failed to detect the company’s financial weaknesses.

The PAC report said BNS had appointed two other companies to procure equipment from an OEM, resulting in cost overruns. According to the original schedule, five ships should already have been completed and handed over to the navy this month. – August 17, 2022.