Malaysia Pays More for Invisible Ships

Anwar’s administration follows Najib’s into naval scandal

By: Cyril Pereira

You thought you’d seen the back of this?

“We must arrest and stop this nonsense” railed Anwar Ibrahim in 2022 as opposition leader. The government contracted six littoral combat ships (LCS) costing RM9 billion (US$1.95 billion). It paid Boustead Naval Shipyard RM6 billion without any being delivered. The navy declares the French design unfit for purpose. Admiral Abdul Aziz Jaafar (now retired) wrote 10 letters of protest to defense ministers and prime ministers without response. The gamers ignored the naval chief. “It was an unwinnable war,” lamented the Admiral, who kept his counsel without going public.

Prime Minister Anwar Ibrahim promised to root out corruption with the full force of the law. He projects fierce anti-corruption theatrics -- especially if ambassadors, foreign businessmen, and international press are in attendance. But Anwar’s cabinet has just approved RM11.2 billion to revive the ill-fated LCS contract -- paying more for less -- five instead of six ships. None of the hijacked funds have been recovered. No minister or senior bureaucrat has yet been carpeted.

Defense minister Zahid Hamidi overturned the navy’s preferred Dutch coastal patrol specifications in July 2011, for a French version. Zahid Hamidi is now Anwar Ibrahim’s deputy (of two). Zahid is leader of the split United Malays National Organization (UMNO) which “makes up the numbers” in parliament, to keep Anwar in office.

Not me, don’t know who

The current defense minister (for the second time) Hishamuddin Hussein, was in the chain of the sordid LCS procurement from 2013-18 and signed the formal contract in July 2014. He now feigns ignorance. The heist required authorized signatories at every stage to formulate contract terms, approve claims and funnel the funds through nine defense ministers from 2011. None admit responsibility. The LCS contract acquired an autonomous life of its own.

Najib Razak as defense minister in 1990 contracted two French Scorpene submarines that could not dive -- which also caused the murder in 2006 of Mongolian model Altantuya Shaariibuu, who acted as interpreter on the deal. It is the same French contractor DCNS/Thales which was abruptly awarded the LCS job by Zahid Hamidi in his U-turn from the Dutch Sigma design to the French Gowind LCS. There is speculation that Najib may have influenced the decision.

Activists are upset that Anwar has redacted sensitive details of the Parliamentary Accounts Committee investigation, under the Official Secrets Act. Zahid Hamidi faces 47 further charges of criminal breach of trust, corruption, and money laundering in a different scandal. The redacted portions of the PAC report would possibly have implicated Zahid and former ministers in legal liability.

When Zahid was acquitted of money laundering charges on visa approvals as home minister in September 2022, the Attorney-General instructed the prosecution not to appeal. The same Attorney-General has been retained in Anwar’s new administration. Nothing has changed bar Anwar’s anti-corruption slogans that are losing credibility.

Incestuous web of crooks

The MACC (Malaysian Anti-Corruption Commission) traced LCS payments to three Singapore-registered companies. It called in a high-level Boustead Heavy Industries Corporation executive and a lady CEO of another company for statements about the payment flows. But the MACC has studiously avoided investigating the masterminds behind the scam. No ministers or secretaries-general of the ministries of defense and finance are being investigated. They were the key enablers.

The C4 Center (Center to Combat Corruption and Cronyism) charted the nexus of cross-holding companies, publishing the diagram in September 2022, titled “(LCS) Scandal -- The Crooks & Villains behind Malaysia’s Defense Procurement.” A central player named Lodin Wok Kamaruddin, is a confidant of Najib Razak in politics and crony business schemes.

Lodin Kamaruddin was chairman of the infamous 1MDB Bhd, and at various times or simultaneously, chairman, deputy chairman, CEO or director, of: Perimekar, Najib’s buying agent run by crony Razak Baginda; Boustead Heavy Industry Corp; Boustead Naval Shipyard, the phantom builder; Affin Holdings Berhad which flushed massive funding through Affin Bank; and even Pharmaniaga, which profited highly through mandatory Covid vaccines paid by the government.

Razak Baginda’s wife, Mazlinda Makhzan, owned a paper company KS Ombak Laut which held 60 percent of the shares in Perimekar, the buying agent. His son, Abdul Malim Baginda, had 10 percent shares in another paper company Terasasi in which Razak held 90 percent. French investigators say Terasasi was paid €30 million in 2010 for “consultancy work” which they suspect was a funnel for kickbacks.

Najib also appointed Lodin as CEO of the Armed Forces Fund Board (LTAT) to tap its pension savings. The LTAT had 59 percent equity in Boustead Holdings Bhd which in turn held 65 percent of Boustead Heavy Industry Corp (BHIC) which had 20 percent equity in Perimekar and 20 percent in Boustead Naval Shipyard.

Same cabal strikes twice

What is amazing is that the same corrupt cabal that created the Scorpene fiasco is involved in the LCS scandal, while the first disaster remains unresolved and the crooks remain free. The incestuous web of real and paper companies living out of each other’s pockets as owners, buyers, sellers, suppliers and procurers, make for a dizzy paper trail that creates no value but vacuums cash from citizens, into private pockets.

Billionaires were created overnight from the grand theft of public assets. Real entrepreneurs sweat to steer sustainable commercial enterprises. The undeserving on whom national monopolies were plonked attended meetings, carried files, played golf and added mistresses.  As Malaysia Airlines, MISC, statutory bodies and “privatized” national assets failed spectacularly, they were bailed out. Banks were told not to press loan repayments. Taxpayers are routinely fleeced by their government for failed social engineering.

Like its notorious 1MDB cousin, the LCS disaster was engineered by players with the same impunity of political power subverting due process. Neither 1MDB nor LCS are isolated cases. They follow the script first designed by Mahathir and Daim Zainuddin for bumiputera empowerment. A Malay civil service is committed to the Malay Agenda and processes the paperwork swiftly to facilitate. The mafia of political elites have their agents and enforcers wherever there is money to be hijacked in the system.

Now and then, by exception, scandals spill out into the public domain, like Bumiputera Malaysia Finance 1982, Bank Negara’s FX losses in the 1980s and 1990s, the Scorpene submarines of 2002, the National Feedlot scandal – “cowgate” – of 2012, 1MDB, and the latest LCS naval procurement. But these are just the tip of the iceberg of systematic pilferage. It has become the institutional norm.

Ultra rich grow fat fast

Not even the Pilgrim’s Savings Fund, Tabung Haji, was spared by those charged to manage it. It was alleged in 2018 that RM22 million was misused for political financing. The sale of 95 percent of an Indonesian plantation to a Borneo company was cooked by insiders to pocket millions in the transaction.

The annual Knight Frank Wealth Report on the Ultra Rich, defined as net worth of US$30 million (RM139 million), classifies Malaysia in the top ten for rate of growth. While the global ultra-rich population shrank from 602,553 in 2021 to 579,625 in 2022, Malaysia’s grew from 659 in 2021 to 721 in 2022. Political patronage, ethnic privilege, and patriarchal feudalism entrench a system largely accepted as entitlement, by the majority population.

Where does Anwar Ibrahim fit into the new Malaysia? His rhetoric and harsh ground reality drift further apart by the day.

Cyril Pereira is former publisher of Asia Magazine and resides in Hong Kong, his home since 1985.