KUALA LUMPUR: Malaysia has warned regional nations to reconsider defence procurement dealings with Norway following the unilateral cancellation of an export licence for the Naval Strike Missile (NSM) system.
The move could cost Malaysia more than RM1bil in claims and related expenses.
Defence Minister Datuk Seri Mohamed Khaled Nordin said the cancellation by the Norwegian government affected the Navy’s Littoral Combat Ship (LCS) programme as well as existing vessels KD Jebat and KD Lekiu.
"Norway had introduced a new policy restricting the export of sensitive defence technology only to its closest allies, including Nato members and strategic partners," he said.
"The action raises serious questions about the reliability of international commitments and reflects an erosion of trust in relations between nations," Mohamed Khaled added.
He spoke during a visit to the Lumut Naval Shipyard to inspect the progress of the LCS project.
The minister said that when commitments could be cancelled unilaterally, it undermined confidence in the wider system of international contracts.
Malaysia has already paid 95% of the procurement contract value, amounting to 126mil Euros, to the Norwegian company involved.
The overall contract was valued at RM634.7mil and covered the LCS fleet, KD Jebat and KD Lekiu.
Mohamed Khaled said a notice of claim had been submitted to the Norwegian company seeking compensation for both direct and indirect losses.
Direct losses involve the amount already paid, while indirect losses include the cost of reopening existing ship installations, retraining personnel and integrating an alternative missile system.
The estimated total claim is expected to exceed RM1bil.
Despite the setback, he stressed that only the NSM system was affected, while three other key weapons systems involving surface-to-air, surface-to-submarine and electronic warfare capabilities remained unaffected.
"However, we acknowledge that the absence of the NSM system would impact integration works, system testing and crew training, although the ships themselves were still expected to be completed according to schedule," he said.
The navy is currently evaluating alternative missile systems to ensure the vessels are equipped as originally planned.
As of April this year, construction progress for the five LCS vessels stood at 84% for LCS 1, 79% for LCS 2, 71% for LCS 3, 60% for LCS 4 and 49% for LCS 5.
The delivery schedule remains unchanged, with LCS 1 expected to be handed over in December this year, followed by LCS 2 in August 2027, LCS 3 in December 2027, LCS 4 in August 2028 and LCS 5 in April 2029.
