LTAT CEO: Portion of funds used to settle debts

PETALING JAYA: Boustead Holdings Bhd had to take over debt-laden PSC Industries Bhd (PSCI) after the privatisation of the construction of Navy ships had failed, says Armed Forces Fund Board (LTAT) chief executive officer Datuk Ahmad Nazim Abdul Rahman.

He also said the construction of the vessels stipulated in the now controversial Littoral Combat Ship (LCS) project was in fact ongoing.

Ahmad Nazim said a portion of the funds allocated for the LCS project was used to pay off the debts of PSCI, which was eventually taken over by Boustead Holdings and is now known as Boustead Heavy Industries Corporation Bhd (BHIC).Boustead Holdings had to take over the debt-laden PSCI to rein in losses after the failure of the privatisation project, he added.

“The takeover includes a major bank debt which is now being footed by Boustead Holdings and Boustead Naval Shipyard Sdn Bhd (BNS).

“Hence, a portion of the LCS funds was used to pay off the debts of PSCI. This is in the Public Accounts Committee’s (PAC) report,” he said.

Bursa Malaysia-listed PSCI had secured a RM5.4bil contract to build six ships known as offshore patrol vessels (OPVs) for the Navy in the late 1990s. However, the vessels were never delivered.

This reportedly was part of a larger deal to build 27 OPVs for a whopping RM25bil. LTAT-controlled Boustead Holdings eventually took over PSCI, which was previously led by businessman Tan Sri Amin Shah Omar Shah, and restructured the company.

On Dec 16, 2011, the Defence Ministry issued a letter of award to BHIC’s unit to design, construct, equip, install, commission, integrate, test and conduct trials and deliver six Second Generation Patrol Vessels LCS (Frigate Class) for RM9bil.

The first vessel was originally scheduled for delivery in 2017.

The LCS controversy gained momentum over the past few days after the PAC revealed that none of the ships has been completed so far, although five should have been delivered by this month.

Ahmad Nazim, however, said: “The LCS construction is in progress at the Lumut Shipyard.”

“I can confirm that the construction of the ships is ongoing,” Ahmad Nazim posted on Facebook yesterday, adding that their hulls could be seen if one travels to Pangkor Island by boat.

Ahmad Nazim also said the contract stipulates that all six ships must be built concurrently, adding that the Lumut Shipyard was huge and had the capacity to accommodate the project.

He also addressed why RM6bil out of the contract value of RM9bil was paid when the construction of the first five ships had merely reached an average stage of 55%.

“RM6bil was spent on almost all items needed to procure the equipment needed to build all six ships,” he said, adding that buying the necessities in bulk was a cheaper option.

“A big portion of the expenditure was for the basic design and detailed design that France-based Naval Group came up with.”

He added that each ship would cost around RM1.5bil, which is cheaper than what other countries have spent on LCS vessels.

To illustrate his point, Ahmad Nazim said Egypt and the United Arab Emirates each spent almost RM1.9bil on one LCS ship of French make.

Comparatively, the United States, which has built a more advanced vessel, spent RM2.4bil.

Nevertheless, he said the LCS shipbuilding project by BNS had created technical and engineering job opportunities for almost 3,000 engineers and 400 local vendors in several fields, with a project value of RM4bil.

He added that the project was put on hold in 2019 and resumed with the cheapest option following a Cabinet decision in April 2022.

“The decision was taken based on three options,” he said.

This included the government having to scrutinise BNS’ restructuring plan, which took about eight months.

Nazim said he was directly involved in the LCS project recovery plan along with the Defence Ministry and the Navy.

He added that he had visited the Lumut Shipyard several times to monitor the project.

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