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Tuesday, July 26, 2011

Umno moneyspinner: Eurofighter at RM3bil each is 8 times listed price

Sulaiman Kamal | 2:43 AM | | | | | | | Best Blogger Tips

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The Russian-made MIGs were meant to last a long period of time under the harshest of conditions so it is odd that the Malaysian military has chosen to replace them after only 10 years of service.
A statement by the Minister of Defence Ahmad Zahid Hamidi that they were planning to replace the 10 MIGs with the Eurofighter Typhoon because the Eurofighter was a multi-role combat aircraft sounds rosy and nice until you look into the details of the aircraft which were conveniently left out of the picture.
It is also rather presumptuous of the defense minister to simply say Malaysia will consider purchasing new hardware at a time when the country should be looking at keeping its expenditures low and returning more money into the hands of its citizens.

The Eurofighter Typhoon is a money pit, not only to those who would benefit from commissions but also in the true sense of the word. Upkeep, upgrading and maintenance of the aircraft is expensive and countries who have placed orders for the aircraft are trying to cut down due to its escalating overall cost.
The Typhoon, a multi-purpose twin-engine fighter jet introduced in 2003, is built by a consortium made up of the European Aeronautic Defence and Space Company, Britain's BAE Systems and Alenia/Finmeccanica of Italy.
One Eurofighter Typhoon costs GB£68.9 mil or €77.7 mil or US$122.5 mil (2008 Unit Production Cost). On 17 June 2009, Germany ordered 31 aircraft of Tranche 3A for €2,800mil, leading to a system cost of €90mil per aircraft.
So the estimate that the Malaysian defense minister gave of RM3 bil or US$1bil apiece is slightly off-tangent.
The ful costs including maintenance
Maybe the minister, Ahmand Zahid Hamidi, was pointing out the fact that the aircraft with all its fittings for a multi-role capability would come up to US$1 billion or roughly 10 times its production cost..
Yet, the cost for a multi-role capable Eurofighter Typhoon, capable of air-to-air and air-to-ground combat, escalates over a short time. This point was highlighted by Britain’s National Audit Office (NAO) in a report release in March 2011 when it audited Britain’s purchase of the Typhoon.
Britain originally ordered 232 Typhoons in the 1980s. The number has been cut by 72, but development costs have risen by a fifth to £20.2 billion ($33 billion, 23.8 billion euros) and support costs have also gone up.
The NAO further estimates that each individual aircraft is 75 percent -- or £55 million -- more expensive than originally anticipated and the total programme cost will eventually hit £37 billion.
While Typhoons are performing well in air-to-air missions, £564 million of work on adapting them for ground attacks is unlikely to be complete until 2018, the report said.
In short the report pointed out that the purchasing of the high-tech air-craft was a bad business decision. Furthermore, Eurofighters were grounded last year in several countries due to the problematic ejectors after a crash killed a Saudi pilot and Italy has also slashed its order of 121 jets by 25 in a bid to cut costs.
The Eurofighter is an expensive piece of machinery and whether the Malaysian Ministry of Defence is aware of this is beyond our knowledge since escalating cost for purchasing military equipment and their maintenance is nothing new to the ministry.
Not the first time Zahid has 'over-priced'
Petaling Jaya Utara MP Tony Pua was among the first to raise the alarm when Zahid first proposed the acquisition of 6 Operating Patrol Vessels at RM6 billion or RM1 billion apiece. Tony had decried the high costs, citing the Royal New Zealand Navy's fleet which was similar but only cost NZ$90 million (RM210 million) each.
A leap from RM210 million to RM1 billion each is a huge leap and one that needs to be explained in detail. Is the escalating cost thrown into upgrading the craft with extra equipment or advance technologies? What about the cost of maintenance for each craft?
Maintenance cost seem to be the missing equation in military hardware purchase by the Ministry of Defense. Take the Scorpene submarine purchases.
Who could forget the amount of tax-payers money that went into the purchase of two Scorpene submarines that were later proven to be unsuitable for the waters surrounding our country?
The initial maintenance cost, according to the Defence Minister, by Boustead stood at RM50 million/year for 6 years - apparently that figure was only an estimate. Now the cost would be RM417 million in total. And increase of RM117 million from its original RM300 million price tag.
With such examples of escalating costs already on its books, the Ministry of Defense should take a hard look at their acquisition of state-of-the-art military hardware. It is never prudent that a country can have the best in military toys when the everyday citizen is reduce to poverty.

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