The Malaysian government’s budgeting process still does not give its armed forces a clear vision of what procurement to expect, and when.
In contrast to its neighbours in South East Asia, progress in Malaysia’s defence has been limited since 2018 due to a combination of various factors. The main factor has always been fiscal limitation with successive Malaysian governments unwilling to fund defence by cutting government spending elsewhere or reducing the size of the armed forces by reducing manpower and equipment.
The 2024 defence budget allocated $4.16 billion (RM19.73 billion) for defence, but the allocation for salaries and allowances for 2024 amounted to $1.7 billion (RM8.2 billion), which is slightly over 40 percent of the total defence budget. In contrast the allocation for procurement amounted to $1.2 billion (RM5.71 billion), a slight increase from 2023’s allocation of $1.06 billion (RM5.04 billion). However, given the depreciation of the ringgit and the fact that Malaysia sources much of its equipment from overseas, and domestic manufacture is also significantly dependent on foreign OEMs, there may not actually be a real gain in procurement funding with the increase merely compensating for the ringgit’s depreciation.
At the same time, it has to be noted that the allocation for asset procurement under the 2024 Defence budget (or any other annual defence budget for that matter) is not an exact indication of the funding available for defence procurement. The allocation includes scheduled progressive payments for ongoing programmes and procurement contracted for that are to be paid in that year, such as the scheduled contractual payments for the procurement of 18 KAI FA-50 light combat aircraft from South Korea, the progressive payments for the construction of the troubled Maharaja Lela class Littoral Combat Ship and payments for scheduled and ongoing capability improvements of the Airbus A400M transport aircraft among others.
It also includes funding for intended single year procurements in that particular year as well, such as for small arms, communication equipment, small quantities of specialised vehicles or support vehicles and so on. Funding for large ticket items or programmes that require multi-year payments are usually assessed by the finance ministry. This is then subject to cabinet approval as to whether the country can afford to fund the programme with the money then set aside but not included in the annual budget for the year. It is only allocated once a formal procurement contract has been signed and then placed into the fiscal year budgets of the years that progressive payments are to be made.
Therefore it is difficult to actually assess how much is available for defence procurement in a given year as the funding availability for defence procurement programmes and requirements are assessed behind closed doors by the Finance Ministry on a case by case basis. Once done this is then sent for approval with the Prime Minister and his cabinet having the final say on a large ticket procurement, and any outcome only known if the government decides to announce it rather than being published in official publicly accessible documents. For example on 15 March this year, Malaysian Defence Minister Khaled Nordin announced on his social media account on X that the Royal Malaysian Air Force (RMAF), for this year, had been allocated $232 million (RM1.13 billon) to carry out all its programmes such as procurement, supply, replacement and upgrades of assets and national airspace equipment. “This amount does not include the phase 1 procurement for the RMAF of 12 new helicopters of which $590 million (RM2.8 billon) had been approved this year with delivery of the helicopters scheduled in 2028”, posted Khaled.
Government change
Another factor that has also hindered Malaysia’s defence development has been the frequent change of governments since 2018 which since that year has seen Malaysia go through four Prime Ministers and governments before a general election at the end of 2022 bought about the present administration. The current political opposition has even talked of ousting the present government via defections of Members of Parliament (MPs) and political parties from the ruling coalition. Coupled with the need to revitalised a slow economy, the government is still grappling with the fiscal cost of the Covid-19 pandemic and an overall need to cut spending and reduce the national deficit giving it more than enough priorities to focus on outside of defence. It has approved and funded some programmes that had been initiated by past governments and is going through the process of approving a few other programmes. The following paragraphs details the main procurement priorities and status of the three Malaysian Armed Forces services.
Malaysian Army
Of the three services, the Army’s main programmes for self-propelled howitzers (SPH) and the replacement of the 4×4 Condor Armoured Personnel Carrier have been in limbo since the Barisan Nasional (BN) government lost the 2018 general election.
In April 2018, the then BN government agreed for the procurement of 29 Excess Defense Articles M109A5 155mm Self Propelled Howitzers from the United States with plans to refurbish 19 for service and 10 cannibalised for spares. This was then cancelled in 2019 by the succeeding Pakatan Harapan (PH) government, which had come into power in a general election in May 2018. The PH government shortly after cancelling the M109 deal was ousted from office through defections of MPs by the end of February 2020 before it could put an SPH programme in place though the Army had then formalised the requirement stating that it wanted a wheeled SPH instead of a tracked SPH. The Covid-19 pandemic prevented the succeeding Perikatan Nasional (PN) government from implementing an SPH procurement programme and in August, the PN government collapsed when BN members of its coalition withdrew support. A subsequent BN government was formed though it incorporated the MPs and parties which previously formed the previous PN government. The BN government subsequently put in place a Letter of Intent (LoI) to purchase 18 MKE Yavuz 155mm self-propelled howitzers from Turkey but following a general election in November, the Unity Government (consisting of PH and BN MPs along with MPs of East Malaysia political parties) cancelled the deal in January 2023.
The latest in the Malaysian Army’s SPH odyssey is the reply given in Parliament on 12 March by Defence Minister Khaled Nordin when Member of Parliament Awang Hashim stated that he had heard that a $169 million (RM805 million) LOI had been awarded by the Ministry of Finance for 18 EVA 155mm SPH and that the Malaysian Army had issued a protest note on the selection since the Army had selected the Caesar 155mmm SPH. Awang asked Khaled for a response on the situation. The Malaysian Defence Minister replied that the SPH procurement had not been finalised yet and that the Ministry of Defence was still awaiting a decision.
Meanwhile the Malaysian Army is awaiting Finance Ministry approval for the procurement of 136 High Mobility Armoured Vehicle (HMAV) according to an interview by Malaysian local newspaper Harian Metro with Army Chief General Muhammad Hafizuddeain Jantan published on 21 January. The HMAV is to replace the Condor APCs used by two of the Army’s armour regiments though the actual requirements were for 224 vehicles according to the Army Chief in the interview. Gen. Hafizuddeain did not state if the Army had selected a specific vehicle or would carry out an open tender for the vehicles.
The Malaysian Army is expected to begin operations with four leased Sikorsky Blackhawk helicopters this year. The $39 million (RM187 million) contract was signed with Aerotree Services during the Langkawi International Maritime and Aerospace (LIMA) 2023 exhibition. The leased Blackhawks will allow the army to build up basic and initial proficiency and capability in operating the helicopters with the eventual goal of procuring 12 new Black Hawks. The Malaysian Army made it clear to the government that it was not interested in any other helicopter type as only the Black Hawk met the Malaysian Army’s operational requirements. The Malaysian Army is familiar with the Black Hawks, having carried out numerous exercises with US Army Blackhawks, particularly under the Malaysian Army – US Army Keris Strike annual exercise series.
Royal Malaysian Navy (RMN)
The Royal Malaysian Navy (RMN) also faces its own odyssey with the Maharaja Lela Littoral Combat Ship, which is actually a Gowind corvette design. The LCS name was selected by the RMN at the programme’s beginning in 2014 to emphasise that the ships were for operations in Malaysian waters rather than seapower projection. The programme’s delays and problems have been well reported and thus superfluous to repeat here. The latest development has been Defence Minister Khaled stating to Parliament on 12 March that the first ship was on track to begin harbour trials and sea acceptance trials in November 2024 and a planned commissioning in 2026.
On 13 March, the Malaysian Defence Minister, in a written parliamentary reply, stated that the Malaysian government had decided that procurement of the Batch 2 Littoral Mission Ship (LMS) would be carried out via government to government negotiation with the Turkish government. The Malaysian Ministry of Defence would be the principle agent for the Malaysian government and the negotiations conducted with the state owned Savunma Teknolojieri Muhendislik (STM) representing Turkey. Khaled wrote that currently the Ministry of Defence and RMN were in negotiations on the specifications of the ships before moving on to discussions on the price before finalising the procurement. The LMS Batch 2 is likely to be a modified Ada class corvette, though the capabilities and equipment on it would depend on the costs for three ships. Malaysia has not officially released any information on the exact amount budgeted for the ships but industry sources have put the cost at $527 million (RM2.5 billion) for three ships.
An outstanding unfunded requirement for the RMN is the acquisition of six anti-submarine warfare helicopters to replace its six Super Lynx helicopters, a requirement that is unlikely to be funded in the near term given the ongoing cost of the LCS program and the planned procurement of the batch 2 LMS.
Royal Malaysian Air Force (RMAF)
With the procurement of 18 FA-50 fighters resolving the RMAF’s requirement for a light fighter and lead in fighter trainer to replace its dwindling BAE Systems Hawk fleet and the grounded Aermacchi MB-339CMs, the RMAF’s procurement focus now is for 12 medium lift helicopters to replace the Sikorsky S-61A fleet that was phased out in 2020. Budgetary considerations resulted in a stop-gap measure in 2022 with the lease of four Leonardo AW139s but as mentioned earlier, funding is now available for a procurement of 12 helicopters. Logically, this RMAF requirement should be fulfilled by additional Airbus H225M helicopters given the service was the first South East Asian nation to operate the type and now has more than 10 years of experience. However the Malaysian government’s general criteria of having open tenders for procurements means that the eventual helicopter type that will be purchased is an open question. Leonardo and Airbus naturally are the front runners given the RMAF operates their helicopters but it could be any other manufacturer’s helicopters given that Malaysia does not find it an issue in operating a mix of aircraft types simultaneously for the same roles.
Successive Malaysian governments since the PH government of 2018 have stated that the RMAF’s requirement for a multi-role combat aircraft will only come about in 2030 despite the fact that the RMAF’s main fighter fleet now comprises of 18 Su-30MKMs and eight Boeing F/A-18 Hornets. Despite constant talk from Malaysia of procuring second hand Kuwaiti F/A-18s, no formal negotiations have been carried out. The current government realistically is unable to afford the fiscal cost of a multi-role fighter procurement anyhow and in the future it may seem that a second batch of 18 FA-50s in a more advance configuration may be the more affordable fiscal alternative to a multi-role combat aircraft procurement.
by Dzirhan Mahadzir
