[UPDATED] LCS saga: prosecute those involved, PAC urges MACC

KUALA LUMPUR – Parliament’s Public Accounts Committee (PAC) has recommended the Malaysian Anti-Corruption Commission (MACC) to take prosecutive action against those behind the multi-billion-ringgit littoral combat ship (LCS) scandal.

In a statement today, PAC chairman Wong Kah Woh said the recommendation was based on the findings made under several reports, namely PAC’s report, as well as the Special Committee on Governance Investigation, Government Procurement and Finance (JKSTUPKK) report, and the forensic audit report.

“The JKSTUPKK report regarding the acquisition of six second-generation patrol vessel LCS of the Royal Malaysian Navy (RMN) Malaysia, under the Defence Ministry, should be fully declassified,” he said, following the release of the PAC report on findings related to the LCS procurement, today.

The report, he said, was compiled following nine proceedings conducted regarding this issue between November 18, 2020 and March 8 this year.

This issue cropped up following findings made by the National Audit Department, which were reported in the 2019 Auditor-General’s Report (Compliance Auditing of Ministries and Departments), as well as contained in the JKSTUPKK report.

Among witnesses who were summoned to the proceedings include Defence Minister Datuk Seri Hishammuddin Hussein, former defence minister Datuk Seri Ahmad Zahid Hamidi, and Defence Ministry (Mindef) secretary-general Datuk Muez Abd Aziz.

Others include JKTSTUPKK chairman Tan Sri Ambrin Buang, RMN chief Tan Sri Mohd Reza Mohd Sany, former RMN chief Tan Sri Abdul Aziz Jaafar, Armed Forces Fund Board (LTAT) chief executive officer (CEO) Datuk Ahmad Nazim Abd Rahman, Boustead Heavy Industries Corporation Bhd CEO Sharifuddin Md. Zaini Al-Manaf, and Boustead Naval Shipyard Sdn Bhd chief operating officer Low Kok Chiang.

Wong, who is also Ipoh Timur MP, said among the key findings made following the proceedings include:

- The contract for the LCS was awarded by the government to BNS via direct negotiations. While the government has paid a total of RM6.083 billion for the project, not a single LCS ship was completed. According to the original schedule, as of August, five LCS ships should be completed and delivered;

- Feedback from RMN as the end user was completely ignored by Mindef and BNS during the implementation of the project. Originally, the Sigma design of the ship, which was the choice of RMN, was agreed upon by Mindef. However, the decision to change to the Gowind design occurred on July 11, 2011 following BNS’ proposal on July 8 the same year. According to Abdul Aziz, the former RMN chief, the decision was “something gravely wrong”;

- The due diligence done by the government against the BNS failed to detect the financial problems of the company. This is proven when the government had to make an advance payment of up to RM1.36 billion to BNS, contrary to the Treasury Circular No. 5 of 2007, which was in force at that time;

- The financial position of the BNS company is weak and critical due to wrongdoing, abuse of power and flaws in financial management. As of 2018, BNS’ debt to OEM is as much as RM801 million, while BNS loans with financial institutions amount to RM956 million; and

- Equipment kept in storage for the LCS project is estimated to be valued at RM1.7 billion, with an estimated 15% of the equipment already obsolete.

As such, Wong said PAC also recommended Mindef to review all options and determine the best course of action for the LCS project, as well as ensure that public money is spent appropriately and responsibly.

“Mindef must submit its progress report for the LCS project every three months to the PAC until the project is completed,” he added.

The report can be downloaded and viewed at PAC’s website. – The Vibes, August 4, 2022