Graft watchdog questions Malaysian govt awarding new contract to scandal-tainted conglomerate

A corruption watchdog on Thursday questioned the Malaysian Defense Ministry’s decision to award fresh contracts to a company being scrutinized for a protracted delay in delivering warships to the Navy under a multibillion-dollar contract.

The Center to Combat Corruption & Cronyism (C4) said it was “shocking” that the U.S. $31 million in two new contracts were awarded to a unit of Boustead Heavy Industries Corporation Bhd (BHIC), a firm linked to a probe into alleged irregularities and mismanagement in the manufacturing of the combat ships.

On Wednesday, the firm announced that its wholly-owned unit, BHIC Submarine Engineering Services Sdn Bhd (BSES), was awarded the contracts for the upkeep of the Royal Malaysian Navy’s “Prime Minister’s Class Submarines” and its facilities. 

“[I]t is shocking the ministry would risk a repetition of this scandal by awarding more defense contracts to another company directly linked to BHIC, especially when investigations have disclosed that the losses in the LCS [littoral combat ship] scandal were partially attributable to abuse of power and failures within Boustead Naval Shipyard,” Pushpan Murugiah, the acting CEO of C4, told BenarNews. 

“The manner in which these contracts have been awarded seems to be by way of direct negotiations rather than an open tender, which raises further questions as to the reasons why the defense ministry opted for such a controversial company to handle this project,” he said.

BHIC is a major shareholder in Boustead Naval Shipyard (BNS), which was awarded a 9 billion ringgit (U.S. $2.2 billion) contract in 2014 for the construction of six littoral combat ships, but has yet to deliver a single one.

The combat ship project has been marred by mismanagement and irregularities, with no ships delivered despite 6 billion ringgit ($1.3 billion) already spent, according to a Public Accounts Committee report last year.

A forensic audit report also revealed the company potentially lost 890 million ringgit ($196 million) of that money.

After these reports were released, Ahmad Ramli Mohd. Nor, the former Navy chief and BHIC managing director, was charged last August with three counts of criminal breach of trust amounting to 21.08 million ringgit ($4.6 million) related to the project.

The Malaysian Anti-Corruption Commission (MACC) chief commissioner, Azam Baki, told media in March that the investigation into the LCS construction project was ongoing. 

“We will call up more witnesses not only in Malaysia but also abroad to record their statements. As our investigators needed help to get statements from overseas, we require a bit more time,” he said, according to media reports.

Prime Minister Anwar Ibrahim has also repeatedly emphasized the need for the graft agency to take follow-up action and identify the culprits responsible for the delay in the warships’ construction project, as part of his commitment to combat corruption.

‘Provide an explanation to the public’

Meanwhile, one analyst called for the government to explain its award of the submarines’ upkeep contract to BSES. 

“The first thing people need to know is the justification behind the government’s decision to choose a Boustead-related company, despite their involvement in the LCS fiasco,” Mohd. Mizan Mohammad Aslam, a professor at the National Defense University of Malaysia, told BenarNews. 

“It is crucial for the government, at the ministerial level, to provide an explanation to the public.”

Mizan believes the contracts may have been given to the company because of its expertise in naval matters. 

“We have to admit that the expertise in dealing with the Navy or naval-related matters – only a few engineering companies are able to do that. And BSES is one of them,” he said.

Security analyst Mohamad Faisol Keling emphasized the need to prioritize national defense without politicizing the contract awarded to Boustead. 

“The issue of the LCS ship issue should not be made a political issue anymore because various investigations have been carried out,” Faisol, a senior lecturer in International Studies at Universiti Utara Malaysia, told BenarNews.

“All parties need to make national defense the country’s priority.”