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From Scorpene Scandal to Mistral Mystery

COMMENT French Defence Minister Jean Yves Le Drian will be visiting Malaysia tomorrow, Sept 1, 2015, and Malaysians who have just mourned the loss of billions of ringgit from 1MDB, the introduction of the goods and services tax as well as the drastic fall in the value of the ringgit should be very cautious.

Malaysia’s Defence Minister Hishammudin Hussein has said that his discussions with his French counterpart will be over the acquisition of the French Dassault Aviation Rafale multi-role combat aircraft.

Despite Malaysia’s dire economic crisis, Hishammuddin has just announced that his ministry will proceed with acquiring assets for the Armed Forces under the 11th Malaysia Plan (11MP).

He said among efforts to be taken by the ministry were the upgrading of the ‘Nuri’ Sikorsky S-61A-4 helicopter, Hercules C-130, Admiral Class Corvette and the acquisition of other assets for the three wings of the Armed Forces. According to Hishammuddin, the acquisitions can only be carried out if the financial package offered fulfils the requirements set by the Finance Ministry.

Hishammuddin ( photo ) said: “It can be done in the near future, and with transparency. The asset is not cheap, and it must be accepted by the public. It must be something that we need, but at the same time we must be realistic on whether or not we can afford it.”

So what are these “other assets” that the defence minister did not specify? He omitted to mention another big purchase that has been highlighted in the international defence news portals.

The French Tribune newspaper recently suggested that Malaysia is also a possible contender for purchasing one of the Mistral aircraft carriers which had been ordered by Russia from STX France before being cancelled after the Ukrainian standoff in 2014. The French defence minister is reported to be in talks with Malaysia to sell us one of these Mistral aircraft carriers.

According to the French newspaper La Tribune , Malaysia has been interested in buying an aircraft carrier similar to a Mistral for at least 10 years. So why the mystery if an aircraft carrier is considered essential for the country’s security needs? Or is it? Where is the transparency in the discussions over our defence needs?

Can we afford the Mistral and Rafale fighter jets?

For these defence procurements to be accepted by the public, Malaysian taxpayers should be given breakdowns of how much the defence purchases, including thr Mistral aircraft carrier, will cost.

To give you an idea of the cost of a Mistral aircraft carrier: In 2010, Russian President Dmitry Medvedev approved the purchase by Rosoboronexport of two Mistral class ships from France for 1.37 billion euros (RM6.435 billion). The sale of the Mistral warships would have been the largest ever sale of military hardware by a Nato membver country to Russia.

Thus the cost of buying and running just one of these Mistral warships will be in the region of RM4 billion at the very least. That’s 4,000 new schools or 400 new hospitals!

Then there is the question of maintenance. To give Malaysians an idea of the cost of maintaining an aircraft carrier, we only need to look at British cooperation with France over the use of aircraft carriers. In a sweeping review last year, Britain cut its defence budget by scrapping its only aircraft carrier. Their cooperation with France may eventually lead to the creation of identical ships, equipment and similar training in order to cut down maintenance costs.

Thus, if a country such as Britain can do without any aircraft carrier, does Malaysia so desperately need one, especially when, following the British-French example, cooperation within Asean should be the way forward?

Likewise, can we afford fighter jets like the Rafale ( photo ) when their prices are spiraling way out of control and they so quickly obsolete?

Again, to give Malaysian taxpayers an idea of the cost of these fabulous flying machines of war: Qatar just signed a 6.3 billion euros (RM29.58 billion) agreement for the purchase of 24 Dassault Aviation-built Rafale fighter jets (at more than RM1billion a piece?) which included missiles and training for pilots.

We need to bear in mind that even countries selling these fighter jets, such as Britain and France, could not sustain fighter jet sorties against Syria for more than two or three weeks recently, much to the chagrin of their US ally!

So, to answer Hishamuddin’s question: No, we cannot afford Rafale fighter jets or a Mistral aircraft carrier!

Lessons from the Scorpene submarines purchase

Before our Defence Ministry commits any public funds to these purchases, Malaysian taxpayers should learn the lessons from our purchase of the two French Scorpene submarines. The cost of two Scorpene submarines, together with logistic support and training was close to one billion euros (RM4.69 billion).

Then, there was the payment to Perimekar Sdn Bhd for “coordination services” of 114 million euros (at the time, close to RM500 million). Malaysian tax payers will still need to pay even more for maintenance services, support and test equipment, missiles and torpedoes, infrastructure for the submarine base, training of crew, etc. The total bill for these two submarines came to more than RM7 billion.

It is also important to take into account the often hidden “commissions” involved in such arms shopping sprees. Before 2002, when new laws in France and the OECD Convention were brought in to make bribing of foreign officials a crime, any money used to bribe foreign officials was even tax deductible! This is not surprising when we bear in mind that arms make up some 60 percent of the total exports of France.

In September 2008, during the course of the Karachi Affair in which 11 French engineers were killed and also involving DCN (the French state company that makes the Scorpene submarines, photo ), the notebooks of Gérard-Philippe Menayas, former chief financial officer of DCN, who was indicted in the case, confirmed the suspicions of hidden commissions.

his memorandum, Menayas mentioned the Malaysian submarine contract as follows: "Since the entry into force of the OECD Convention regarding the fight against corruption in September 2002, only two contracts have been signed; the first with India, and the second with Malaysia in 2002. These two contracts are the result of commercial actions undertaken prior to the OECD Convention. Furthermore, they are both suspected of non-compliance with this Convention. I have evidence to support this”.

Coming back to the Scorpene scandal, more than 100 documents submitted by the French prosecutor's office in Paris are the fruits of more than two years of investigations by the French police into the workings of the French state arms company, DCN.

From among these documents is a reference by DCN officials who characterised Perimekar as: "…nothing more than a travel agency…The price is inflated and their support function is very vague… Yes, that company created unfounded wealth for its shareholders… A separate agreement sets other compensation consisting of a fixed amount independent of the actual price of the main contract. The beneficiaries of these funds are not difficult to imagine: the clan and family relations of Mr Razak Baginda ( photo ). In addition, these funds will find their way to the dominant political party."

Thus, Malaysia’s purchase of the two Scorpene submarines should serve as a lesson for Malaysian taxpayers, who should be wary of the defence minister’s statement that the acquisition of these multi-million assets “… can be done in the near future, and with transparency”.

Does Malaysia need an aircraft carrier?

What is Malaysia’s need for such “assets”? Our biggest security challenges in recent years have involved an altercation with 200 to 300 members of a “rag tag army” (in the words of the defence minister) of Suluks at Lahad Datu, Sabah, and also the pirates in the South China Sea and the Straits of Malacca. There seem to be no bigger “enemies” than those seafaring marauders.

Are state-of-the-art fighter jets, submarines, and now an aircraft carrier, the appropriate weaponry against these pirates and marauders? Such “assets” would likewise be of little use if “international terrorists” and suicide bombers choose to target Malaysia.

When the aerial bombardment finally began at Lahad Datu, it was mentioned that the navy had formed a cordon to prevent the intruders from getting into Sabah all these years.

Looking at the geography of the area, it is clear that our two Scorpene submarines that cost us more than RM7 billion that are sitting at Sepanggar Bay, off the Sabah coast, and our six New Generation Patrol Vessels (costing RM9 billion) were not the most suitable vessels in the circumstances.

Surely, shouldn’t our priority ought to be researching and acquiring the most appropriate vessels for our navy for any effective defence of Sabah’s long and convoluted coastline?

The RM5 billion arms deal with Britain in 1989

Again, to give Malaysian taxpayers an idea of the most appropriate military equipment we need, let us see how such defence decisions were made during Dr Mahathir Mohamad’s term in office.

As part of the RM5 billion arms deal signed between Mahathir and then British prime minister Margaret Thatcher in 1989, we procured two corvettes built by the Yarrow shipbuilders and costing RM2.2 billion.

At the time, the Royal Malaysian Navy said it really required 16 offshore patrol vessels (OPVs) but due to financial constraints, the RMN could only afford four or five of these locally-built OPVs. Mindef had budgeted only RM85 million per OPV! Now, in the light of the recent incident at Lahad Datu, Malaysians will be in a better position to see which are the more appropriate vessels in securing the Sabah coastline.

Yes, and we finally got the chance to use our F18 fighter bombers and Hawk 208 fighter jets against the Lahad Datu marauders, whom the defence minister had initially described as a “rag-tag army”? Wouldn’t armoured cars, tanks and mortars have sufficed in that four square kilometre area of land against that motley crew?

No transparency in defence decision-making

So, exactly how are decisions made by the Ministry of Defence to purchase submarines, corvettes, frigates (costing billions) and now an aircraft carrier instead of more patrol boats to guard our coastlines? No doubt the “professionals” in the Armed Forces can think up any number of possible scenarios to justify the purchase of all this expensive defence equipment.

There is no limit to arms spending if we choose to embark on an arms race with our neighbouring countries. The fact of the matter is that we simply cannot afford such an arms race and it is time Asean countries seriously talk about disarmament and joint defence agreements instead of an arms race within Asean.

Any disputes over territories should be settled through international arbitration as was done over Pulau Batu Putih with Singapore. The dispute over the Spratly Islands should be solved in a similar way.

Clearly there is great mismatch between what we need and what Malaysia is continuing to buy!

Review our national defence policy and budget

Who are Malaysia’s enemies and what appropriate weaponry do we need? One would expect this to be the first question the Ministry of Defence asks in the multi-billion ringgit decisions to procure armaments. Yet do you know our National Defence Policy has never been properly debated in parliament?

The current economic crisis has put pressure on governments to reduce public spending. The weaker demand for our exports and higher costs of imports have been caused by the weak ringgit.

Our external debt is scarily high at RM359 billion and this will rise further with the further fall of the ringgit. Malaysia’s annual defence budget of around RM10 billion makes up two percent of the GDP. Thus, spending on armaments needs to be diverted to essential human needs: confronting climate change, sustainable food security, battling deadly diseases and achieving the Millennium Development Goals.

We need a strong movement to demand top priority for social and development needs; expanding and reorienting our economy to meet human needs; and public investment in health and education, housing and transport, employment and energy. This can be achieved by re-directing military budgets to these urgent social needs.

In the light of the current chronic economic crisis facing the country, we call on the Malaysian government to:

• Review our national defence policy to promote a culture of peace and disarmament;

• Cut the defence budget to below one percent of the GDP and apportion a correspondingly higher budget for health, education and social services;

• Set up a Parliamentary Defence Committee chaired by an Opposition MP as well as an independent Ombudsman to oversee the defence budget;

• Initiate an effort within the Asean countries to pool resources and to slash military spending so that it can be diverted into productive and social investments; and

• Promote a culture of peace in our society that respects human dignity, social justice, democracy and human rights.

Thus, to answer Hishammuddin three qualifications for buying any fancy French military equipment: there must be transparency; it must be accepted by the public; and it must be something that we need and can afford.

Malaysian taxpayers want to say to the French minister tomorrow: “Non, non, non! Merci!”

KUA KIA SOONG is adviser to Suara Rakyat Malaysia (Suaram).

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