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Friday, August 5, 2011

2 firms, 2 Scorpenes and a path of death and corruption

Sulaiman Kamal | 9:42 PM | | | | | Best Blogger Tips

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French naval ship builder DCNS seems to be a favourite of the Malaysian Defence Ministry and is lead consultant for Malaysia’s own upstart company to build naval vessels - Boustead Naval Shipyard Sdn Bhd.
Boustead Naval Shipyard (BNS) is a young start-up, which had its beginnings as PSC-Naval Dockyard (a sub-company of Penang Shipbuilding Corporation).
It was in 2005, after the Public Accounts Committee (PAC) brought to light gross management irregularities in PSC-Naval Dockyard's handling of the building and delivery of the New Generation Patrol Vessels (NGPV) for the Royal Malaysian Navy, that a major revamp was put into place to salvage the NGPV project.
Under the intervention of the Malaysian Government, a new management team was put in place and the project was revived. Boustead Holding Bhd, also a GLC, took up a 37% stake in PSC, becoming the single largest shareholder. As a division of PSC, PSC-ND therefore merged into Boustead Holding Bhd and renamed under Boustead Naval Shipyard Sdn Bhd.

Gross mismanagement
As the only naval shipyard company in Malaysia, Boustead, was first linked to allegations of irregularities when an opposition lawmaker claimed the government was paying Boustead 870% more than market price for six offshore patrol vessels (OPVs) for RM6 billion.
The exuberant price for the OPVs can be traced back to the findings of the PAC when investigating PSC-ND. The PAC claimed that RM120mil would be needed to salvage the first two OPV vessels, and that the Government also needed to pump in at least RM80mil to pay off local vendors, suppliers and contractors.
Reports of nonpayment to some 40 sub contractors who were owed RM180 million surfaced along with news that PSC-ND had also failed to remit some RM4 million in contributions to the Employees Provident Fund (EPF), the Inland Revenue Board and the National Co-operative Organisation despite having made salary deductions from its 1,500 staff. PSC-ND has also reportedly sought another advance of 1.8 billion ringgit from the government to complete the vessels.
Under the management of Boustead, these issues were seemingly solved and two vessels were delivered and accepted by the Royal Malaysian Navy in 2006.
In charge of upkeeping the Scorpenes
Boustead is also charge with the upkeep of the two Scorpene submarines purchased from French naval ship builders DCNS. Again Boustead is mired in controversy when the cost of maintenance of the two submarines were not factored into the budget when acquiring the two subs.
The initial maintenance cost, according to the Defence Minister in June of 2011, by Boustead stood at RM50 million/year for 6 years - apparently that figure was only an estimate. The actual cost would be RM417 million in total. An increase of RM117 million from its original RM300 million price tag.
In July 2011, the Defence Ministry received an additional RM493.3 million in allocations, which would go to maintaining the country’s two Scorpene submarines. The additional amount raises the ministry’s total budget to whopping total of RM11 billion.
Allegation have now surfaced that French DCNS and Boustead have received a contract to build patrol vessels worth RM10 billion. The patrol boats are to be built in Perak by Boustead with full supervision by DCNS. Owing to Boustead’s past experience, there is no surprise if the initial price of RM10 billion would escalate and cost tax-payers more than announced.
Why the Malaysian government chooses to do business with DCN is a mystery, when DCN has been embroiled in its own corruption scandal since 1994.
A bad and violent record
DCN was already being investigated for corrupt practices involving retro-kickbacks in arms deals with Pakistan and the sale of frigates to Taiwan when they sold submarines to Malaysia. A fact that was largely ignored by, then Defence Minister, Najib Razak when he convinced Parliament to use taxpayers money to purchase two Scorpene submarines from DCNS for RM7 billion.
In 2002, a car bomb in Karachi killed 11 French nationals who were working on a joint Franco-Pakistani project to build three Agosta 90B class submarines. The 11 were all DCNS employees and though initially reported as a terrorist attack, another version of the story surfaced in 2009, following the investigation of Judge Marc Trévidic.
In a note dated 2002, a former French secret service, ex-officer of the Directorate for Territorial Surveillance (DST), Claude Thevenet said that the Karachi attack was related to a case of retro-commissions and kickbacks involving the Pakistani state and French politicians for an arms deal. The attack was in reality “punishment” by corrupt Pakistani officials against France, following the cessation of payments of commissions by Jacques Chirac in 1996.
The depth of the DCN commission scandal in the Pakistan arms deal is immense and took a sensitive turn when in June 2010, a police report filed in Luxembourg, named Nicolas Sarkozy as having been the architect of the covert funding mechanism for the retro-commissions in 1994 while he was minister of the budget. Nicolas Sarkozy is the current French President.
SUARAM became suspicious
In Malaysia, Suaram’s suspicions arose as it studied the scandals involving DCN and it began enquiring about the possibility of pursuing the commissions involved in the Scorpene deal amounting to 114 million euro (RM500 million) to Perimekar Sdn Bhd, a subsidiary of KS Ombak Laut Sdn Bhd, of which the wife of Najib’s aide Abdul Razak Baginda is a principal shareholder.
It was at this juncture that Suaram approached William Bourdon, who was pursuing the corruption case against DCNS within the French judiciary system, who took an interest in DCN’s dealings with Malaysia. Suaram commissioned him to pursue a case for the commissions paid out to Perimekar Sdn Bhd.
Suaram applied through its French lawyers as a civil party for a judicial review in the French court in November 2009 to investigate the submarine deal. In April 2010, the French courts accepted the request to investigate Suaram’s claim of corruption. The French investigative judge who will hear the case will be picked next month.
Somewhere at the bottom is Altantuya
The deportation of William Bourdon from Kuala Lumpur in July, was a sure sign that Najib and his administration were desperate to cover up there involvement in the commission scandal and links to the murder of Mongolian national, Altantuya Shaariibuu.
The mechanisms for abuse and corruption are in place. Boustead by virtue of being the sole naval shipyard in Malaysia stand to milk the country’s coffers dry by servicing the two Scorpene submarines. A joint partnership with DCNS to build more naval vessels would mean more money being siphoned into meaningless defence endeavours, money that could have gone to better use in developing Malaysia.
Meanwhile, the French prosecution is ready to go on full trial over the submarine fiasco that could see Prime Minister Najib Razak called to testify before the French court. And along with the truth behind the commissions, we may also finally learn what truly happened in the murder of Altantuya Shaariibuu.

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