RM1.4bil of LCS allocation used for other purposes, says PAC

KUALA LUMPUR: Some RM1.4bil in government allocation for the multi-billion-ringgit Littoral Combat Ship (LCS) project was used for other purposes including cost overruns, says the Parliament's Public Accounts Committee (PAC).

This was among some of the findings contained in the bi-partisan committee's 250-page report which was tabled in Dewan Rakyat on Thursday (Aug 4).

"Payments made by the government to Boustead Naval Shipyard Sdn Bhd (BNS) was not fully utilised for the LSC project," PAC chairman Wong Kah Woh told reporters in Parliament's media centre on Thursday (Aug 4).

He said a witness testified that RM400mil was used to repay previous debts incurred under the New Generation Patrol Vessel (NGPV) project.

"Another RM305mil was used for an integration facility in Cyberjaya while another RM700mil was cost over run which was above the ceiling which had been agreed under the LCS contract," he added.

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The two-year probe by the PAC also revealed that the RM9bil project was done through direct negotiations with BNS and inked in 2014.

"The government paid out RM6.083bil for the project but not even one ship has been completed.

"Based on the original schedule, five ships should have been completed and delivered by August 2022," he added.

Other findings in the PAC report include 63.8% was paid for completed work for the first ship although only 42.7% work was done.

Also revealed was that about RM255mil or 15% out of some RM1.7bil worth of LCS equipment kept in stores for the project is now obsolete.

The PAC probe also revealed that financial standing of BNS was critical and weak as one of the reasons resulting in abuse of power and discrepancies in the company's financial management.

"As of 2018, BNS debts to original equipment manufacturers (OEM) amounted to RM801mil while the company owes RM956mil to financial institutions," added Wong.

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Meanwhile, Wong called on the relevant authorities to charge those involved with corruption linked to the LCS project.

"We can't wait any longer anymore," he said referring to recent reports that the Malaysian Anti-Corruption Commission has since wrapped investigations into the LCS scandal.

He said that the Defence Ministry will have to report back to the PAC in the next two months on their recommendations.

"This is the largest single procurement by the Defence Ministry in history.

"As such, for the first time, the PAC will require the ministry to report back on the work progress every three months till the LCS is finally completed," he added.

Under the project, a total of six ships was to have been built by BNS with the first delivery in 2019.

So far, none have been built despite the government having paid RM6bil to the company.

The PAC began its probe into the procurement of the ships in late 2020 and had called several officials to testify before the committee.

The issue was first raised in the Auditor-General’s Report 2019 Series with the PAC calling former defence minister Datuk Seri Dr Ahmad Zahid Hamidi and several former seniors officials to testify before the committee.

In November 2020, BNS’ parent company Boustead Heavy Industries Corporation Bhd (BHIC) lodged a report with the MACC on the possibility of irregularities concerning the LCS project.

Several individuals have since been arrested by the MACC in connection with the case, including a former top BHIC official.

Last Wednesday (July 27), Deputy Defence Minister Datuk Seri Ikmal Hisham Abdul Aziz told Dewan Rakyat that the MACC has wrapped up investigations into the scandal and has submitted recommendations for the Attorney General to decide on the next course of action.