The government said today that the first two boats in a controversial multi-million-dollar navy deal are finally ready after lengthy delays, and will be delivered next year.

Defence Minister Najib Razak said the vessels have successfully undergone sea trials in line with navy specifications and would be ready in the first quarter of 2006.

The navy "is satisfied with the capability of the first new-generation vessels and will conduct the cannon trial in the near future," Najib was quoted as saying by the official Bernama news agency.

Both the boats were initially slated for delivery in 2004 but the handover was postponed due to numerous technical problems that arose during sea trials.

The construction of four more such vessels at the PSC-Naval Dockyard in northern Perak state was being carefully monitored, said Najib.

"We are looking into it, There are a lot of details, but what is important is that we have crossed the first hurdle with the two ships," he said after inspecting one of the boats at a maritime exhibition on Langkawi island.

RM24 bil contract

PSC-Naval Dockyard in 1998 signed a RM24 billion contract to build 27 heavily-armed offshore patrol vessels over 10 years for the Malaysian navy, together with foreign partners led by Germany's ThyssenKrupp.

But the order has been plagued by technical problems and delays, with PSC-Naval Dockyard reportedly seeking more than RM1.8 billion from the government to complete the vessels.

Malaysia's opposition has urged a probe into the delays, saying it could turn into "the biggest financial scandal in Malaysia's history".

In September PSC Industries' controlling shareholder, Malaysian conglomerate Boustead Holdings - which is 70 percent owned by the armed forces pension fund - bought a 30 percent stake in PSC-Naval Dockyard for RM166.5 million.

It had already paid RM25 million previously to increase its stake in PSCI to 32.72 percent.