Last November, Malaysia inked its first major defense deal with China, agreeing to buy four littoral mission ships (LMS) from Beijing during Prime Minister Najib Razak’s six-day visit there (See: “Malaysia is Not Pivoting to China With Najib’s Visit”). Given the significance of what Najib himself termed “a landmark agreement,” it is worth as well as evaluating where it is at this point in time as we move into the second month of 2017.
Significance
The LMS deal was no doubt a significant move for Malaysia and China. For one, it was yet another sign of a deepening Sino-Malaysian relationship that, despite its share of irritants, has increasingly begun to make inroads not only on economic and people-to-people ties, but in the security realm as well. Over the past few years, we have seen a number of modest but still notable advances in the defense dimension of the relationship, from a new formal consultation mechanism to the first joint exercises between the two countries.
But from Malaysia’s perspective, beyond the China angle, the deal was also important from the perspective of its ongoing military modernization efforts. As I have noted previously, a key challenge Malaysia has faced over the past few decades is how to generate greater efficiency savings to bolster its defenses to address a wide range of security threats amid the country’s difficult economic position (See: “Malaysia’s South China Sea Policy: Playing it Safe”). As an indicator of these constraints, last October, the country announced a defense budget that represented a 12 percent cut from the previous year, the largest made to defense since 1998 when it was reeling from the Asian Financial Crisis.
One of the initiatives which illustrates Malaysia’s need to “do more with less,” as one defense official put it bluntly to me last year, is the 15-to-5 Armada Transformation Program proposed by the RMN. The 15-to-5 program, introduced in 2016, would see a reduction of the country’s current 15 class of vessels, which average 30 years and are sourced from seven different countries – France, Germany, Italy, South Korea, Sweden, Britain, and Malaysia itself – to just five categories. These are: Littoral Mission Ships (LMS); Multi-Support Ships (MRSS); Littoral Combat Ships (LCS); New Generation Patrol Vessels; and submarines.
Under the 15-to-5 program, old ships deemed too costly to maintain would be retired and sold, which would provide additional funding for new purchases as needed. The RMN planned for 18 LMS under the program, and China was long rumored to be one of the candidates being considered primarily because it was the only country that really matched the low price point. As a result, it was no surprise that although many foreign media outlets focused only on the China angle of the LMS purchase, Malaysian officials cast it as merely one component of the wider 15-to-5 program. Since one of the key objectives of the 15-to-5 program is building up local capability in line with cost minimization, most of the remaining LMS will likely be built in Malaysia.
Terms
The deal inked last year was for the construction of four LMS, two in China and two in Malaysia. Following the conclusion of the agreement, Malaysia’s Defense Minister Hishammuddin Hussein said that the construction of the four LMS will be done through a joint venture between Boustead Naval Shipyard Sdn Bhd and China Shipbuilding & Offshore International Co. Ltd, with monitoring being led by the Malaysian defense ministry as well as China’s State Administration for Science, Technology and Industry for the National Defense (SASTIND).
Though Malaysian officials had said that the low price of the vessels was a major reason for the deal, the exact cost of the agreement was not publicly disclosed (though Hishammuddin told a press conference that the cost of the vessels would be no more than 250 million ringgit). The allocation for the purchase was officially characterized as off-budget, with funds coming from the RMN through savings acquired from the 15-to-5 transformation program.
Malaysian defense officials have not disclosed much in the way of specifics, including what kinds of weaponry may be fitted on the LMS and how the vessels will be used. In general, though, LMS are missile-carrying patrol vessels that are equipped with a helicopter deck. And within the mix of other vessels Malaysia has, LMS will likely be used for missions like patrolling, border security, as well as basic search and rescue operations.
Prospects
Not long after the deal was inked, some already began to wonder whether the LMS deal would actually materialize as quickly as both China and Malaysia would hope.
To be sure, there are reasons one might be skeptical. Over the past few years, Malaysia has been grappling with a rather grim reality of an aging fleet that needs urgent modernization amid rising manifold threats on the one hand and a political and economic environment that is not conducive to funding much-needed capability boosts on the other (See: “What Does Malaysia’s New Defense Budget For 2016 Mean?”). New defense programs and even some capabilities mulled to help close gaps have been shelved due to budgetary constraints, while some projects running locally had also run into delays and funding shortages. That may lead one to believe that the LMS deal could become yet another casualty of this.
The nature of this agreement in particular may also lead to further doubts. Part of this is due to the standard suspicion around quality issues with respect to Chinese defense equipment, which, to be fair, is not altogether unfounded in some cases. This is also the first time that both countries are entering into a deal together, so there may be reason to believe that it could take longer to work out the specifics relative to a country Malaysia has traditionally been working with.
That said, the fact that LMS is integrated into the 15-to-5 transformation program which was advanced by the navy makes it a priority purchase and makes it more likely that it will be realized soon. Apart from the backing the program has and the way it is funded, there is also the reality that it works best when new vessels can be commissioned as old ones are decommissioned to minimize gaps during the transition. That further incentivizes Malaysia to ensure that the new vessels come in on time.
Defense officials, for their part, have also been at least speaking in terms of concrete, shorter term timelines. Hishammuddin has said that new vessels under the 15-to-5 program will have to arrive by 2020, and he has also said separately that the first LMS vessel would arrive within 18 to 24 months.
The RMN, for its part, ideally wants to have the four LMS ships in so it can begin decommissioning older ones. And though no specifics have been publicly unveiled so far, Malaysia’s navy chief Ahmad Kamarulzaman Ahmad Badaruddin has been satisfied with the progress of the 15-to-5 program, tweeting earlier this week that it was “on track” with LMS “ready to go” and Malaysia getting ready to purchase MRSS next. As both countries move forward on signing follow up contracts and working out specifics leading up to construction as they are expected to do through 2017, we will get an even clearer sense of how close the will be to their intended timeline.