Thursday, April 22, 2010

RM8 billion for 257 Armoured Personnel Carriers

We would like to state upfront that we are disgusted by the most recent transaction by the Ministry of Defence to award the purchase of 257 8x8 Armoured-Wheeled Vehicles for the astronomical amount of RM8 billion. The amount is shocking as each of these non-combat vehicle is priced at a ridiculous RM31.1 million.

The transaction first defies believe due to the price the Ministry of Defence will be paying to DRM Hicom wholly owned subsidiary, Defense Technologies Sdn Bhd (Deftech).

The Portugese Army bought 353 Pandur II 8x8 armoured vehicles for the amount of EUR364 million (RM1.56 billion), or an average of EUR1.03 million or only RM4.41 million each!

The latest version of Piranha III 8x8 armoured-wheeled vehicle developed by the Swiss MOWAG GmBH cost only US$1.2 million, or RM3.9 million.

In 2009, the U.S. Army has awarded a USD$2.2 billion contract to General Dynamics Land Systems-Canada, one of the best military vehicle and equipment manufacturer in the world, for 724 Light Armored Vehicles (LAV) or equivalent of US$3.04 million or only RM9.9 million each, meant for Saudi Arabia!

Even the best-in-class main battle tank produced in the United States, M1 Abrams M1A2 deployed extensively in Iraq, Kuwait, Saudi Arabia and Australia cost only US$6.1 million or approximately RM19.8 million!

Despite the price-tag, Deftech admits that they are only at the stage of developing a prototype.

"We have an order for 257 8x8 AWV units but right now, we are going to come up with the prototypes meant for testing purposes by the army before we develop the whole range of armoured vehicles," Deftech chairman Datuk Seri Mohd Khamil Jamil said at a press conference during the 12th Defence Services Asia 2010 exhibition on Tuesday 20 April 2010.

The second reason why the above transaction disgusts us is the fact that the Barisan Nasional Government is clearly missing the woods for the trees in the entire financial management of the country. At the same time when the Ministry of Finance has issued strict treasury circulars for all Ministries to reduce their operational expenditure by as much as 20% which has resulted in no food on weekends in boarding schools, restricted the use of classrooms due to the need to conserve electricity, the Ministry commits to a purchase that completely mocks the attempt by the Government to be thrifty.

What is worse, it makes a complete mockery of the Government's excuse to implement new tax schemes such as the Goods & Services Tax (GST) which will only raise RM1.3 billion, when the Government splurge an astronomical RM8 billion just to purchase armoured-wheeled vehicles.

The Prime Minister, Datuk Seri Najib Abdul Razak has proudly announced that the Government has the necessary political will to pursue the New Economic Model by eradicating rent-seeking and patronage, to promote competition. What we see here is continuing abuse and mismanagement by the Ministry of Defence which has been plagued by repeated scandals and failures over the past few years, such as the RM6.75 billion purchase of naval patrol boats from crony company, PSC-Naval Dockyard, the RM3.4 billion purchase of 2 submarines with a RM500 million “commission”, and more recently a laughable RM2.7 million purchase of ladies leather shoes for female civil servants.

We hope the Ministry of Defence will now inform us that this is another decimal point error in the contract value. Otherwise, we call upon the Government to review and cancel the above award which is a complete wastage of the Government's limited resources, and more importantly for the Government to demonstrate its commitment to transparent procurement process which will curb wild excesses of the past.

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