The original report was published in The Daily Telegraph on Saturday, July 16, 2011
Collaborations bolster defence industry
The proposed Malaysia Defence and Security Technology Park will be the first of its kind in ASEAN and make Malaysia the region’s defence industry hub
Sungkai is a small town located in Perak some 75 miles from Kuala Lumpur. Easily accessible via the North-South Expressway, it is set in an area of lush greenery, hills, streams and rivers, and the nearby Sungai Klah Hot Springs Park is reputed to be one of the best in Malaysia.
In the not too distant future, however, Sungkai will be known as more than a place for a relaxing break and a detox. For this is the chosen location for the proposed Malaysia Defence and Security Technology Park (MDSTP). The 3,115-acre zone will be dedicated exclusively to providing high-tech manufacturing facilities and services for local, regional and global defence and security companies.
The Government has hired London-based Blenheim Capital Partners to finance and develop the zone, using hundreds of millions of dollars owed to Malaysia from offset clauses in defence equipment deals. Such obligations already total around £125 million and the amount will increase with planned future defence spending.
Dato’ Seri Dr Ahmad Zahid Hamidi, Malaysia’s Defence Minister, says the MDSTP will be the first of its kind in the Association of Southeast Asian Nations (ASEAN) region, turning Malaysia into a regional hub for the industry and creating opportunities that will contribute significantly to the prosperity and growth of the country.
“With the Malaysian De-fence and Security Technology Park we are seeking to propel Malaysia into an innovation-led economy, by hosting the most advanced and fully integrated centre for research and development, producing innovative defence industry related products,” he says. “We have been inviting companies from Europe, North America, Korea, Australia and New Zealand, and we have indicative investment of around £940 million so far.”
“The Government is providing the infrastructure so that companies can set up there, and tax incentives will be given to foreign investors who would like to invest in MDSTP,” Dr Ahmad Zahid adds. “We are working with two universities to provide the workforce and with financial institutions locally to partly finance soft loans.”
The park will be managed by Masterplan Consulting, one of the leading security and defence companies in Malaysia, which is forming a joint venture with Blenheim Capital. Ahmad Faris Bin Abdul Halim, Masterplan’s chief executive officer, says: “There is much work to be done to design and deliver the strategy for the park but this framework positions us well for success and I am sure that together Masterplan and Blenheim will deliver.”
MDSTP reflects a desire by Malaysia to develop profit-making activity in its defence sector. Dr Ahmad Zahid sees the industry as an emerging industrial activity that could become an important contributor to the economy.
Malaysia has spent big on defence in recent years. From 2005-2009 it had the largest increase in defence spending of any Southeast Asian nation, according to the Stockholm International Peace Research Institute. Spending on defence and security accounted for 10.6 per cent of development expenditure under the 9th Malaysia Plan – £4.38 billion.
In a recent interview, Dr Ahmad Zahid was quoted as saying that over the five years covered by the 10th Malaysia Plan the outlay would be £5.42 billion, about 10 per cent of which would be for procurement. He added, however, that Malaysia was unlikely to spend much more during the remainder of the decade because of the need to channel state investment into education, health and infrastructure projects.
The focus of the Defence Ministry now is on continued modernisation and on improving Malaysia’s own defence production capabilities.
At last year’s Defence Services Asia (DSA) exhibition at the Putra World Trade Centre in Kuala Lumpur, the Ministry signed deals for the procurement of defence equipment and spare parts worth more than £2.17 billion. The largest of these was for 257 8X8 armoured personnel carriers (APCs) for the Malaysian army.
The vehicles will be designed, developed and manufactured locally over six years by DRB-Hicom Defence Technologies (Deftech) working in partnership with FNSS – one of Turkey’s leading defence firms and itself a joint venture between the Nurol Group and BAE Systems. FNSS will provide the technical assistance and technology transfer to enable Deftech to produce the vehicles in Malaysia.
“This effort will not only benefit the Malaysian Army, but will also further develop the indigenous capability in Malaysia,” said John Kelly, vice president of exports and international business for BAE Systems’ Land and Armaments sector when the joint venture was announced.
Dr Ahmad Zahid says Malaysia needs to build its own defence industry, rather than simply acquiring military assets developed and manufactured in other countries.
“We are creating our own technology domestically, working with the National Defence University and the Technology University of Malaysia and other higher education institutions, andwith the private sector to commercialise the end product,” he says.
“We have been working very closely with British defence industry players as well as a few cluster companies which are doing R&D for defence products. We are going to use Malaysia as a hub to market any products that British companies make over here for the ASEAN market as well as products from North America. We are also collaborating with other ASEAN countries to manufacture products and market products.”
Malaysia is also keen to capture a larger share of the growing and lucrative maintenance, repair and overhaul market (MRO) and to develop its potential as a one stop MRO centre in Southeast Asia. MRO Entry Point Projects under the Economic Transformation plan could create 21,000 extra jobs and contribute an additional £2.63 billion by 2020.
Earlier this year Abu Dhabi-based Mubadala Aerospace signed a memorandum of understanding with Malaysia’s National Aerospace and Defence Industries (NADI) to explore joint defence and commercial MRO cross-referral and partnership opportunities.
Malaysian forces have contributed to peacekeeping efforts with the United Nations in Lebanon and Afghanistan. Through cooperation with its neighbours, it plays a key role in keeping the region stable and peaceful.
This year marks the 40th anniversary of the Five Power Defence Arrangements (FPDA) between Malaysia, the UK, Singapore, New Zealand and Australia. Dr Ahmad Zahid says much of the value of the agreements lies in training, developing human capabilities and exchanging ideas. “We have been working very well together so far; we have joint programmes and exchange programmes – we send our officers to Sandhurst in the UK for example,” he says.
Visiting Malaysia to discuss defence and security issues of concern to both nations earlier this year, Britain’s Defence Secretary Liam Fox said Malaysia was an important regional power and described the FPDA as “the corner-stone of our engagement in Southeast Asia.”.
Southeastern Asia, peninsula bordering Thailand and northern one-third of the island of Borneo, bordering Indonesia, Brunei, and the South China Sea, south of Vietnam
total: 329,847 sq km
country comparison to the world: 67
land: 328,657 sq km
water: 1,190 sq km
AREA - comparative:
slightly larger than New Mexico
tropical; annual southwest (April to October) and northeast (October to February) monsoons
tin, petroleum, timber, copper, iron ore, natural gas, bauxite
GEOGRAPHY - note:
strategic location along Strait of Malacca and southern South China Sea
Muslim (or Islam - official) 60.4%, Buddhist 19.2%, Christian 9.1%, Hindu 6.3%, Confucianism, Taoism, other traditional Chinese religions 2.6%, other or unknown 1.5%, none 0.8% (2000 census)
Bahasa Malaysia (official), English, Chinese (Cantonese, Mandarin, Hokkien, Hakka, Hainan, Foochow), Tamil, Telugu, Malayalam, Panjabi, Thai
note: in East Malaysia there are several indigenous languages; most widely spoken are Iban and Kadazan
28,728,607 (July 2011 est.)
country comparison to the world: 43
name: Kuala Lumpur
31 August 1957 (from the UK)
AGRICULTURE - products:
Peninsular Malaysia - rubber, palm oil, cocoa, rice; Sabah - subsistence crops, coconuts, rice; rubber, timber; Sarawak - rubber, timber; pepper
Peninsular Malaysia - rubber and oil palm processing and manufacturing, light manufacturing, pharmaceuticals, medical technology, electronics, tin mining and smelting, logging, timber processing; Sabah - logging, petroleum production; Sarawak - agriculture processing, petroleum production and refining, logging
$210.3 billion (2010 est.)
country comparison to the world: 23
$163.2 billion (2009 est.)
$156.6 billion (2010 est.)
country comparison to the world: 28
$117.4 billion (2009 est.)