Overhaul in defence procurement process needed to give Malaysia better bang for its buck

Malaysia’s defence spending has stagnated at roughly one per cent of its national GDP.

In 2021, Malaysia saw an increase in its defence spending, at RM15.86 billion. In 2022, the figure went up to RM16.14 billion, while the amount allocated under Budget 2023 was RM17.74 billion, a nominal increase of 10 per cent over the previous year’s.

Evenly split between capital and operational expenditure for the three branches of the Armed Forces, the final amount is clearly barely enough to splurge on large-ticket acquisitions, while maintaining operational readiness of our Armed Forces sees the ringgit being stretched to its very limits.

As a non-aligned nation, Malaysia buys its weapons systems from a number of sources. The United States and Russia are two of Malaysia’s largest arms suppliers, followed by the United Kingdom.

With the United States, Malaysia’s weapons acquisition programmes are parked under a scheme known as Foreign Military Sales (FMS).

The FMS approach is a government-to-government method for procuring and transferring defence-related equipment and services. The approach is based on several key principles: transparency, accountability, and effective oversight.

The United States Department of Defence (DoD) regulates the FMS and maintains responsibility for the acquisition, transfer, and safeguard of weapons systems, equipment and defence technologies, overseen by Congress.

“It is essentially a fixed-price, fixed contract arrangement,” said a former fighter pilot.

“Let’s say you’re buying 36 Boeing F/A-18F Super Hornets to equip two squadrons in fiscal year 2023.

“The contract will be finalised in 2026, for instance. So that’s three years for you to reach full squadron strength, and your initial operational capability (IOC) on your Super Hornets.

“Let’s say that the aircraft support is for 15 years, until 2038. Under FMS, in that 15 years, the unit price of an engine, an AIM-9X Sidewinder air-to-air-missile, or an SCS-Mod (an upgrade programme) – everything you signed up for – will be the same as what you had agreed on in 2023.

“You pay more, of course, for the entire package … but throughout the ownership of the aircraft, your prices are fixed. Guaranteed.”

The FMS approach ensures a more transparent procurement process, providing fair competition, targeted budgeting, and better communication between the buyer and the seller’s governments throughout the procurement process.

“What it does is, it cuts out the middleman or ‘agent’. This is purely a G-to-G arrangement. So, there’s no room for profiteering or price manipulation,” he added.

In the early days, to kickstart Malaysia’s push into the defence, specifically the aerospace business, the government created a system where foreign companies would have to appoint a local partner or agent if they wanted to bid on a local defence contractor. The idea was to build Malaysia’s knowledge, research and development, and manufacturing capacity, with the end goal of becoming self-reliant.

The idea was sound, theoretically, but in the end, it added to the cost of doing business in Malaysia. This problem came to a head in the MiG-29 Fulcrum debacle.

In 1995, the Royal Malaysian Air Force inducted 18 examples of the much-feared Fulcrums into its service. The MiG-29 had blistering performance, powered by two Tumanskiy (later Klimov) RD-33 engines. It was designed as a point-defence fighter and as such, had limited range. But it was a potent and agile dogfighter, with an excellent turn radius, roll rate, and high angle-of-attack (AoA) capability. The engines were remarkably resistant to disturbed airflow and gave the pilot ‘carefree’ handling.

However, the Fulcrum’s Achilles heel was that it required heavy maintenance. The mean time between failures (MTBF) of the components was low. The RMAF had demanded that the MTBF for the Klimov engines be upped, to around 450 hours. The initial versions of the engines only lasted about 300 hours.

Around 2010-2011, the MiG-29 fleet began suffering serious serviceability issues. Parts were difficult to come by, and when they were available, they were prohibitively expensive. Parts availability from Russia became such a problem that the RMAF was forced to look for stocks from other countries that operated the MiG-29. India and Belarus were looked at, but due to the laws of supply and demand, the suppliers could demand top dollar for the parts.

By 2013, the government made the decision to withdraw the MiG-29 from RMAF service in 2015, after only 20 years in service. The airframes reportedly still had at least 600 flying hours left in them when they were retired.

By contrast, the eight Boeing F/A-18D Hornets, bought and delivered in 1997, are still going strong, after 26 years in service with No. 18 Squadron, ‘The Mighty Hornets’. The Hornets, bought under the FMS programme, have undergone two SCS-Mods (SCS-25X Standard and SCS-29C), and recently underwent a service life extension programme (SLEP) to enable them to counter newer, potential adversaries.

The defence procurement process in Malaysia has been a significant concern over the years due to a lack of transparency and inefficiencies. These can lead to corruption and other difficulties, putting the country at risk.

Adopting the FMS approach, or a similar model, could help to address the issues of transparency and accountability, and provide an effective oversight in the defence procurement process.

It would also ensure an open, fair, and competitive procurement process and allow the government to allocate funds throughout the procurement process.

Above all, it would ensure that the end users are provided with the right weapons systems to carry out their missions effectively, and that the platforms can be maintained throughout their service life and not be held to ransom by cut-throat agents.

Main image: Royal Malaysian Air Force

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