COVID adds to Malaysian Defence Funding Problems

Delivery of 257 AV8 AFVs will be completed by the end of this year. Shown here is the IFV-25 variant using a Sharpshooter turret with 25mm gun. However the future of the production line in Malaysia is open to question with no follow on order from the Malaysian Army and no export orders yet.

Published in the September/October 2020 issue – Malaysian defence acquisition, not rapid at the best of times, has been hit hard by frequent changes in government and by the worsening economy caused by COVID-19.

The current COVID-19 situation is likely to result in Malaysia having to limit its defence procurement plans. The impact of the virus is not only expected to cause the economy to contract but will lead to government prioritising funding towards mitigating the impact towards Malaysia’s populace. The effect on defence will only be seen when the 2021 Defence Budget is unveiled in November together with the 12th Malaysia Plan (2021-2025) in early 2021. It also remains to be seen if the current Perikatan Nasional government which ousted the Pakatan Harapan government in March this year is able to remain in office until the next General Election in 2023. The outlook is not positive for defence procurement despite the Perikatan Nasional government giving its approval for the Royal Malaysian Air Force (RMAF) to acquire one ground based radar system, unmanned aerial vehicles (UAVs) and Maritime Patrol Aircraft (MPA) in 2021. However this may now be stalled.

Due to COVID-19, the Malaysian government initiated the ‘Ops Benteng’ border control operation to prevent illegal entry into Malaysia by land or sea. The operation was initiated due to fears that migrants and refugees illegally entering Malaysia could bring in additional Covid-19 infection clusters. Ops Benteng is a multi-agency operation involving the Malaysian Armed Forces, Royal Malaysian Police, Malaysian Maritime Enforcement Agency (MMEA) and the Immigration Department. The government has released funding to the Armed Forces for small scale procurements of all terrain vehicles, 4×4 transports, rigid hull inflatable boats and fast interceptor craft, in addition to leasing two helicopters for the Royal Malaysian Navy (RMN).

The Defence White Paper

In December 2019, the Pakatan Harapan government issued the country’s first Defence White Paper (DWP) although it was largely underwhelming and failed to address the critical question of how the Malaysian Armed Forces should be structured and what was the exact fiscal and timeframe roadmap to achieve the capability requirements as stated in the DWP. It did not appear to acknowledge some of the challenges facing defence and the armed forces such as the cost of manpower, where in the 2020 Defence Budget, salaries and allowances accounted for around $1.76 billion (MYR 7.4 billion) out of the total defence budget of $3.7 billion (MYR 15.57 billion). Nor was there any mention of how to overcome the delays behind the Maharaja Lela class Littoral Combat Ship (LCS) programme. Instead it mentioned that LCS would be a key asset for the RMN though the first ship is now delayed to 2023.

The DWP did stress on the need to develop the indigenous defence industry but the exact specifics were said to be still under discussion, particularly in regard to what would be focused upon and how the government’s mechanism of collaboration with the defence industry would be restructured. The current Perikatan Nasional government has stated that the Ministry of Defence (MoD) is studying supplementary papers and policies based on the outlines of the DWP.

Malaysian Army

Of the three services, the Malaysian Army is probably the least affected by the financial situation given that a number of its programmes are either ongoing or near completion. Deliveries of the 257 AV8 Gempita armoured fighting vehicles (AFVs) is expected to be completed this year, although the continuation of Malaysian manufacturer DEFTECH’s production line is uncertain as it has yet to secure any export order or follow on order from the Malaysian Army. Prior to the COVID-19 and the collapse of the Pakatan Harapan government, there had been talk that the Army would initiate a 6×6 AFV acquisition programme to replace the 4×4 Condor armoured personnel carriers (APCs) in service but this is now very unlikely due to the economic situation. Delivery of the six MD Helicopters MD-530G ordered by Malaysia, of which a first batch of three was to be delivered early this year, has been delayed due to the pandemic in the United States. Speaking in Parliament on 3 August, Defence Minister Ismail Sabri stated that three helicopters had been completed while another three were not fully completed and that Malaysia had planned to dispatch a Malaysian Armed Forces team earlier this year to the United States to conduct pre-delivery inspections, but travel restrictions had prevented this. The MOD rescheduled the team’s departure to the end of August but the Defence Minister said he was uncertain if this could be carried out due to the ongoing high infection rate in the US. He also disclosed that the contract for the helicopters ended in November 2021.

The Army is also expected to receive 18 Nexter LG1 105mm howitzers which will equip the artillery battery assigned to the 10th Parachute Brigade. A larger requirement to replace the aging 105mm Model 56 Pack Howitzers in service exists though no funding has been allocated yet.

Royal Malaysian Navy

The RMN’s chief problem is the troubled Maharaja Lela class Littoral Combat class ships under construction by Boustead Naval Shipyards. Based on the Naval Group’s Gowind corvette design, the six ship class are 3,100t will incorporate stealth characteristics with an armament of a single BAE Mk3 57mm gun in a stealth copula, two MSI Seahawk 30mm guns, two launchers for Kongsberg Naval Strike Missile anti-ship missile (each with four missiles), a 16 cell SYLVER Vertical Launch System for the MBDA Mica surface to air missile and two J+S Marine triple torpedo launchers. However despite the launch of the first ship in 2017, the contract for the Mica SAM has yet to be signed and the scheduled date of delivery has now been pushed back from a projected date in 2019 to 2023. Then Defence Minister Mohamad Sabu stated in Parliament on 29 October 2019 that the programme required an additional $333 million (MYR 1.4 billion) over the original contract ceiling of $2.17 billion (MYR 9.1 billon) owing to delays in construction, though he did not state what caused the delays. He stressed that the government was committed to the program and could not cancel it as it has already paid out $1.42 billion (MYR 6 billion) for the ships. He added then that the government was discussing on the additional allocation. However on 3 August 2020, Defence Minister Ismail Sabri stated in Parliament that the government would not allocate further funding for the programme and that as of 31 July, 2020, was at 56.7 percent completion compared to the original target schedule of 85.73 percent, making it also 31 months behind schedule.

The Defence Minister stated that three possible options were now being considered. Firstly, to assign France’s Naval Group as the Relief Contractor and using the remaining balance of the contract ceiling to enable completion of at least two ships. The ceiling for the LCS program is Malaysian $2.179 billion (MYR 9.1 billon). The second option was to have Boustead Naval Shipyards continue with the remaining balance to complete at least two ships. The final option was to terminate the contract with Boustead and the MOD would then initiate efforts to salvage the programme.

The Littoral Mission Ship KD Keris
The Littoral Mission Ship KD Keris on its arrival in Malaysia in January this year. A total of four ships were contracted for, but the recent coronavirus is likely to affect the timeframe for the return of the second ship from China and the construction and delivery of the remaining two ships to be built in Wuhan.

The future of the RMN’s 15 to 5 Transformation Plan also now remains unclear. The Plan, introduced in 2016, sought to streamline the RMN fleet to five classes of ships from the present 15 classes. The five ship classes comprised: submarine, LCS, Kedah class next generation patrol vessels (to which 12 additional and more heavily armed ships would be procured to add to the six in service), the Littoral Mission Ship and the Multi-Role Support Ship (MRSS). The 15 to 5 plan now faces difficulties in meeting these goals. The six LCS were to be followed by six more LCS. However, Malaysia already faces enough difficulties getting the current LCSs completed and this assumes no problems arising during sea trials and early operational use. With Boustead Naval Shipyards also being the shipbuilder of the Kedah class and now tied up with the construction of the LCS which is delayed, it would seem unlikely that the 12 additional and more heavily armed Kedah class will be contracted anytime soon.

Meantime the 68m Keris class Littoral Mission Ship faces its own issues. The Pakatan Harapan government was contractually bound by the previous Barisan Nasional’s government’s contract for four such ships from China with two to be built there and another two by Boustead Naval Shipyards. But the Pakatan Harapan government did renegotiate and modified the contract to have the remaining two to be also built in China. The first Littoral Mission Ship, KD Keris arrived home to RMN Kota Kinabalu on 17 January following its commissioning on 6 January in China where the ship had been constructed. However, the outbreak of the Coronavirus now makes it uncertain as to when the second ship, KD Sundang, will return to Malaysia. Originally scheduled to return in April 2020, the ship’s crew had been in China training on the vessel prior to a formal handover, but had returned to Malaysia owing to the Chinese New Year holiday period. With the outbreak of the virus the ship’s crew has yet to return to China to complete their training and formally take control of the ship and the handover and delivery, as disclosed by Boustead in its annual report released in June 2020. The delivery and handover of the second ship has now been rescheduled to October 2020. Boustead also stated in the report that the COVID-19 pandemic is expected to result in up to a four month delay in the construction of the remaining two LMS, which are also being built in China, and were originally scheduled to be completed in mid 2021. An additional 14 LMS were projected under the plan but as yet nothing had been committed. The Keris class design would be used and the additional ships contracted from China. Meantime the three ship MRSS requirement continues to be unfunded.

The only positive note for the RMN is that it received the first six of 12 US donated Boeing Insitu ScanEagle UAVs in May with another six to be delivered in September. The ScanEagles will be operated by the RMN out of the Kota Kinabalu naval base by 601 Squadron RMN, formed specifically for the purpose of operating UAVs. An initial batch of personnel completed training in the US last year, but as of the time of writing the RMN has yet to begin usage of the ScanEagles, due to the service wanting to wait until US contracted personnel are able to enter Malaysia to assist with the initial stage of operations. Malaysia has been closed to entry by foreign nationals save for special exemptions.

Royal Malaysian Air Force

The appointment of General Ackbal Samad as Royal Malaysian Air Force (RMAF) Chief on 3 January makes him the fifth RMAF Chief who will have to grapple with the much delayed Multi-Role Combat Aircraft (MRCA) requirement of the RMAF, which was to replace the now deactivated MiG-29 fleet and has been in existence since 2009. The prospect of an MRCA replacement continues to remain remote.

Malaysia’s Defence White Paper did not mention the need to replace the MiG-29s but instead only spoke that a new fighter would replace the Boeing F/A-18 Hornets and Su-30MKMs in the timeframe of the 14th (2026-2030) and 15th Malaysia Plan (2031-2035), while priority would be given for the Light Combat Aircraft programme though it put no timeframe on that and there has been no direct fiscal allocation for such though there is a possibility that an LCA programme could be funded under the 13th Malaysia Plan (2021-2025). The DWP did state that the RMAF was looking to acquire an additional 10 F/A-18 to augment the current eight aircraft in service. These are likely to be the Kuwait Air Force F/A-18s which are expected to be phased out as it transitions to the Boeing FA-18E/F Superhornet.

The RMAF is looking towards adding ten more F/A-18s to the 8 it already has in service. The ten aircraft are likely to be the ones belonging to the Kuwait Air Force.

Plans to overhaul the RMAF’s F/A-18 aircraft in batches of two in Australia have been delayed due pandemic concerns. The first batch had been scheduled to fly to Australia in mid-April this year but have been postponed indefinitely. The RAAF is already assisting in supporting Malaysia’s F/A-18 fleet by donating stocks of surplus F/A-18 parts as the RAAF withdraws its own F/A-18 fleet from service. The parts provision agreement was signed in 2018.

The RMAF will phase out its Sikorsky S-61A Nuri fleet owing to its age according to RMAF Chief General Ackbal Samad during a January 2020 media conference. He waid the RMAF was assessing the options for replacement though the initial stage would be likely a lease of helicopters to conduct transport missions until funding was available for procuring a capability. The decision leaves the 12 Airbus H225M as the RMAF’s sole operational mission helicopters. General Ackbal announced on 1 June 2020 that under Phase1 of the RMAF CAP 55 Development Plan (the RMAF’s Development plan covering up to 2055) which begins officially on 1 January 2021 and ends in 2031, the RMAF has received approval to carry out acquisition programmes for a single fixed stationed, ground based air defence radar, unmanned air vehicles and a maritime patrol squadron. Initial approval for these acquisitions had been given by the Barisan Nasional government and subsequently re-approved by the Pakatan Harapan government prior to its collapse in March 2020. It appears that the current Perikatan Nasional government has also given its approval for the acquisitions to begin in 2021 though another government change may cause the programme implementation dates to slip further. On the positive side, the US has provided funding for the RMAF to convert three of its seven RMAF Airbus (CASA) CN-235 transports into Maritime Surveillance Aircrafts. The conversion work will be carried out by manufacturer PT Dirgantara (PTDI) in Indonesia while the mission systems integrators will be US companies Science and Engineering Services International and Integrated Surveillance and Defence. The conversion will be done one aircraft at a time and is expected to take between six and eight months. However the COVID-19 has again delayed conversion of the first aircraft given the travel restrictions for Malaysian and US citizens who would have to be in Indonesia for the conversion work.

An Army Air Corps S-61A Nuri helicopte
An Army Air Corps S-61A Nuri helicopter with an underslung 105mm Model 56 Pack Howitzer. The Malaysian Army is seeking replacements for both but funding remains an issue.

In 2022 Malaysia will also receive a single Lockheed Martin TPS-77 mobile radar system provided by the US as part of the Section 333 Building Partner Capacity provision of the 2017 National Defense Authorisation Act.


The likelihood is that defence spending will remain very limited owing to the economic and fiscal situation in Malaysia though the current government seems to have taken an optimistic view that some programmes can be carried out by authorising the UAV and MPA acquisitions to begin in 2021, though it remains to be seen whether the authorisation merely means gathering Requests for Information (RFIs) and Requests for Proposal (RFPs) rather than an actual procurement tender. It is also uncertain whether the current government will be able to continue into office until the next election but ultimately the fact remains that the impact of COVID-19 on the country’s economic recovery will mean funding for defence will be on a lower priority.

by Dzirhan Mahadzir