'Wrong - Tony Pua's analysis of warship costs' - Dzirhan Mahadzir

DAP's Petaling Jaya Utara parliamentarian Tony Pua was making unreasonable comparisons when he claimed that the Defence Ministry is going to pay up to 8.7 times more for the warships it is proposing of buying, said a defence analyst.

According to Dzirhan Mahadzir, correspondent for noted defence magazine Jane's Defence Weekly, this is because the specifications of the vessels mentioned by Pua vary.

“Some warships he compared are less in tonnage and size than the (vessels proposed for purchase)…so it is like comparing a Mini Cooper to a four-wheel drive in price,” he said in a lengthy commentary on his Facebook page.

It is also very difficult to make comparisons by dividing price by tonnage as even similar sized ships can come in very different specifications, he said.

“Even if (the ships) are similar in size, the type of equipment they mount such as weapons, electronics, engines ... and their design, along with construction material ... make substantial differences in price.”

Dzirhan, who is also published in academic journals and had lectured at the Royal Military College, said that the time the ships were ordered also plays a significant role in determining price.

For example, he pointed out, the contract for the Israel Saar V (right) offshore patrol vessel (OPV) mentioned by Pua in his press statement yesterday was made in the early 1980s.

Nevertheless, the ship which cost US$260 million (RM791 million) is about RM200 million cheaper than the RM1 billion budgeted by the Defence Ministry for each OPV, and which has similar specifications.
Both have anti-air and anti-ship missiles, anti-submarine weapons and a helicopter hangar and helipad.

“Finally, a contract for a ship is not just for the ship but also for maintenance, support, training and delivery,” he said, noting that negotiations could bring down the cost of these aspects.

The analyst also said Pua's comparison to the US Littoral Combat Ship (LCS) is also wrong because the function is completely different to that of the OPV.
While the vessel was budgeted to be built at a price of US$300 million (RM913 million), the final cost was US$637 million (RM1.93 billion) and US$704 million (RM2.14 billion) for each of the two different designs purchased, he said.

'Common practice'

On Pua's contention that the Defence Minister Ahmad Zahid Hamidi is announcing the budget of RM6 billion for six warships before the price has been finalised, Dzirhan said this is a common practice.

“The problem is Pua (left) confuses a letter of intent…and OPV announcement as an actual contract. A potential value is announced by the government in a letter of intent for various reasons.

“However, it often is not the actual value when the contract occurs, particularly in regard to complex arms purchases.”

Previously, one of the most common complaints of defence companies was that Malaysian government often would not provide indications of how much a potential deal is worth, said Dzirhan.

“(This) made it hard for companies to justify their efforts to shareholders and investors and also obtain financial backing,” he added.