KUALA LUMPUR (March 13): The government has paid a cumulative sum of RM7.02 billion for the beleaguered littoral combat ships (LCS) project to date, Defence Minister Datuk Seri Mohamed Khaled Nordin revealed in Parliament on Wednesday.

The figure constitutes 62.49% of the total project cost of RM11.22 billion, paid in accordance with the stipulated contract, Khaled said in a written parliamentary response to Datuk Seri Ikmal Hisham Abdul Aziz (PN-Tanah Merah).

Ikmal inquired about the latest costs incurred by the government for the LCS project and whether they included the debts of Boustead Naval Shipyard Sdn Bhd (BNS), now known as Lumut Naval Shipyard (Lunas).

In response, Khaled clarified that the debt of BNS falls outside the jurisdiction of the Defence Ministry and is subject to the management of the new company that will take over BNS.

Khaled also said the construction of the LCS resumed after the signing of the sixth additional contract on May 26, 2023. As of January 2024, progress on the project — including design, construction, equipment, and testing — stood at 67.57%.

The LCS project came under the spotlight in recent years because of delays and cost overruns, with the initial budget of RM6 billion escalating to RM9.18 billion and eventually reaching a whopping RM11.22 billion. The targeted delivery of six vessels was also reduced to five, with the revised delivery schedules set for August 2026, April 2027, December 2027, August 2028, and April 2029.

The prolonged delays led the government to intervene and acquire BNS for RM1 via the Ministry of Finance’s special-purpose vehicle, Ocean Sunshine Bhd.

In a separate written parliamentary response to Ikmal, Khaled announced that the Defence Ministry is procuring Littoral Mission Ship Batch 2 (LMSB2) for the Royal Malaysian Navy through direct negotiations with a Turkish government-related company, Savunma Teknolojieri Muhendislik (STM), using a government-to-government approach.

"Approval from the Finance Ministry was obtained on Jan 18, 2024. Subsequently, the Defence Ministry issued a letter of intent to STM on Feb 5. STM responded on Feb 8, expressing readiness to negotiate with the Defence Ministry," Khaled said.

He added that the ministry is currently in the stage of detailed negotiations regarding the specifications offered and will further carry out price negotiations before finalising the procurement.