What’s Holding Malaysia’s Navy Back?

On January 7, Tan Sri Abdul Aziz Jaafar, the chief of the Royal Malaysian Navy (RMN), delivered his annual address, laying out his service’s priorities and requests for the years ahead. While Abdul Aziz’s address contained key requirements for the RMN to achieve its growing ambitions, recent events as well as broader trends suggest that they are likely to meet significant budgetary and political challenges.

According to Jane’s Intelligence Review, in his speech Abdul Aziz said that the RMN had requested funding for 36 programs costing an estimated $2.86 billion dollars under the 11th Malaysia Plan, which outlines Malaysia’s spending plans from 2016 to 2020 and is expected to be announced in June. His wish list included corvettes, anti-submarine warfare helicopters, training helicopters, and a multirole support ship.

These are all much-needed capabilities for the RMN given the scope of its mission as well as the growing naval challenges Malaysia faces. Policing Malaysian waters is inherently problematic given the country’s geography. Malaysia is divided into two halves – Peninsular Malaysia and East Malaysia – by a large body of water and surrounded by two strategic sea lanes: the Strait of Malacca and the South China Sea. The sea is central to Malaysian interests. Around 95 percent of the country’s trade is seaborne, while much of its oil and gas – which account for about a third of government revenue – come from fields and platforms located in the South China Sea.

Many of Malaysia’s challenges necessitate a navy to respond. Incursions by China into Malaysia’s exclusive economic zone (EEZ) in the South China Sea have been on the rise, with several public incidents around James Shoal off the coast of East Malaysia. But the more worrying threats have come from Malaysia’s neighbors, most notably the Philippines. The 2013 invasion of Sabah by Filipino militants seeking to reclaim it for the Sulu Sultanate – known locally as the Lahad Datu incident – was an eye-opener for Malaysia that exposed its vulnerability in its east. Then a spate of kidnappings in 2014 by Filipino gunmen involving Chinese nationals in Sabah garnered significant attention, resulting in declining tourism from China for several months thereafter.

These challenges loom large for the RMN, which has a relatively small fleet of around 40 ships.

Abdul Aziz has gone on record several times in the past to say that the Navy simply cannot perform basic duties – like policing Malaysia’s waters – with its aging equipment and limited capabilities. Indeed, many of the items in Abdul Aziz’s 2015 wish list are replacements or upgrades of existing equipment or are aimed at obtaining funding for previous, unfulfilled requests. For example, the eight requested corvettes are all meant to replace current Malaysian craft, while a separate ask is for a service life extension and upgrade for four vessels in another class of the RMN’s missile corvettes. The request for six anti-submarine warfare helicopters is a repeat request.

While these requests are quite basic given the RMN’s mission as well as the challenges it faces, the Malaysian government may have a hard time approving them in 2015 – and perhaps even beyond that – due to a number of structural constraints. First, budgetary constraints impose severe limits on what the government can finance. If the past few years in Malaysia have already been challenging for procurement, the situation could be even bleaker in 2015. Falling oil prices, a weakening currency, and devastating floods make for a rather gloomy economic outlook. Last month, the government instructed government-owned and linked companies and bodies to cease acquiring foreign assets. And on January 13, Malaysian Prime Minister Najib Rezak announced that he would have to reexamine the country’s budget in the wake of worsening economic prospects. This is hardly a favorable environment for new defense acquisitions.

Second, the political priorities of the Najib administration may not be aligned with the RMN’s own objectives. In particular, while Abdul Aziz’s wish list is geared towards addressing a range of challenges, Najib appears to be overwhelmingly focused on addressing threats to Malaysia’s east. For instance, the little of Najib’s 2015 budget speech delivered last October that touched on defense focused exclusively on securing Malaysia’s east, including additional army battalions, upgrading runways, procuring high-capability monitoring radar, and sea basing. These moves to secure Sabah are clearly aimed countering the fierce domestic criticism that his administration has faced following the Lahad Datu incident and the 2014 Sabah kidnappings. But they also do not signal a desire to fund Malaysia’s services beyond the extent to which they serve the ruling party’s immediate political needs.

Of course, it would be incorrect to suggest that the Najib administration has been entirely averse to resourcing Malaysia’s naval ambitions more generally. For instance, in October 2013, Defense Minister Hishammuddin Hussein said Malaysia would set up a marine corps and establish a naval base in Bintulu in the South China Sea, a move that insiders say was inspired both by the Lahad Datu incident as well as Chinese incursions into Malaysia’s EEZ. The administration has also agreed to fund a key RMN priority: the six-ship Second Generation Patrol Vessel – Littoral Combat Ship class. Even though the first ship is scheduled to be delivered in 2017 and Malaysia will have to wait for 2020 to get all six, it will be a major boost to the Navy’s capabilities and the government has managed to shield it thus far from transparency and budgetary concerns.

Despite these boosts, the bottom line is that there is very little to suggest that 2015 will be a year that is conducive to resourcing Malaysia’s naval ambitions. Indeed, given the rather bleak environment that the Najib administration faces, as well as competing political priorities, the RMN should not be surprised if it secures only partial approval of Abdul Aziz’s wish list for now, and will be lucky if programs already in place are not scrapped as they have been in the past.