Letters

Defence industry targets growth

NEWS about the launch of a third national car caused consternation among the people, who have been accustomed to paying a high cost to protect the development of a national car.

This is not unusual as other developing countries have done the same, like South Korea.

Somewhere along the way, the Malaysian automotive development policy stunted the growth of Proton.

It did this by allowing a few companies to masquerade as national automotive companies to challenge the hegemony of Proton.

It is must be noted that at least two other companies, which were perceived as national companies, had the backing of their original equipment manufacturers overseas in the form of research and development, amortisation, minimum rejection from soft-tooling to hard-tooling ratio, and vendor support programmes.

Proton just could not compete on its own.

Thus, the obvious happened, which is the near demise of Proton.

But little is known about the development of the indigenous defence industry which, in the early days, saw a similar trajectory in growth.

Malaysian defence industries originally belonged to the government and were privatised during Prime Minister Tun Dr Mahathir Mohamad’s privatisation policy: Air Force Aerospace Inspection Repair and Overhaul Depot became Airod; Naval Dockyard became Boustead Naval Shipyard; and Army Ammunition Depot became SME Ordnance Sdn Bhd.

The above highlights how most of these companies inherited the facilities, workforce and expertise from the government and thereafter expanded via privatisation.

Only DRB-Hicom Defence Technologies (Deftech) was established purely as a defence company with the investment and resources from its parent company, DRB-Hicom Bhd. Therefore, Deftech’s dynamics is different from the rest.

The development of Deftech began with a strategy known as “crawl, walk and run” when it was established in 1996. During its inception, the “crawl” phase was the modification of Isuzu FS 32 Series and FS 33G Truck Series from a commercial version to the militarised version known as Handalan I & II with 4x4/auto transmission and hardened chassis.

Close to 3,000 units were supplied and maintained, which became the bread-and-butter product of Deftech.

The “walk” phase started in 2000 with Deftech’s strong partnership with “iron brother” FNSS of Turkey.

This was the assembly of the Turkish derivative of the successful M113 Armoured Personnel Carrier/Infantry Fighting Vehicle, which the Malaysian army named Adnan.

The assembly line in Pahang churned out close to 242 Adnans with an additional 12 variants of the 120mm mortar carrier.

This project was completed in 2003 and carried out maintenance of Adnan vehicles till last year.

It also did other modernisation programmes, such as Scorpion/Stormer Combat Vehicles, Jernas carrier and PT-91 tanks.

In 2006, the Malaysian army floated the idea of replacing the ageing Condor with a wheeled 8x8 IFV armoured vehicles, taking a lesson from Operation Iraqi Freedom, where main battle tanks and big calibre guns will be a thing of the past.

Deftech fell back on the time-tested partnership with FNSS to initiate this uncharted road of manufacturing and integrating the armoured wheeled vehicle programme — this was the “run phase”.

The initial design of the AV8 amphibious multirole armoured vehicle was based on the FNSS Pars vehicles, but upon comments and configuration change from the Malaysian army, it became a unique vehicle of its own.

The other partners in this programme — such as Thales, Denel and almost 15 original equipment manufacturers (OEMs) as the sub-vendors of this vehicle — were based on the army’s requirement.

What Deftech obtained from these OEMs was learning from their best practices and knowledge in manufacturing.

It must be noted that the AV-8 Gempita is manufactured from the ground up in Pahang by Malaysian engineers, system integrators and skilled workers.

The only thing imported is the steel hull and engine as it does not make any sense for Deftech to establish a “blast furnance” mill for 259 vehicles.

For a local defence industry to achieve such a pinnacle is an achievement, owing to the motivated Deftech workforce.

Without the support of our technological partners, Deftech cannot stand alone in this industry. Moreover, the spillover effect it created — with the vendor development programme and cross-fertilisation between the army and the industry — was a novelty.

The benefit of this AV8 programme is tangible in the form of small- and medium-scale enterprises that support it.

There must be an industrial mindset with the right pedigree, workforce and support from the government to drive the local defence industry, since military equipment are not retail items.

It is usually for a single customer, which is the Defence Ministry.

The spate of contracts to questionable companies — with the procurement of Scorpene submarines, MD 530G Light Scout Attack Helicopter and 105mm guns — raised eyebrows but also irked the defence industry.

The danger in giving contracts to companies that are not an industry is evident when delivery and controversies were tied to this procurement. In the end, the users suffer.

With limited budget and scarcity of resources, the new government is trying to implement good governance to achieve prudence.

But open bidding cannot be used as a template for every segment.

For instance, it is fine to have open bidding for buildings or road construction. But for defence procurement, with the exception of clothes and food, more discretion must be exercised.

It should be closed bidding to companies only with industrial standing — that is, facilities, workforce and certification — as opposed to opening to all.

Additionally, the greatest danger of all is to give maintenance, repair and overhaul to another company than OEMs to be seen as transparent.

If commercial consideration is the only denominator in defence procurement, then the defence industry cannot progress.

JEYAGANESH GOPALSAMY

Kuala Lumpur

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