What indirect costs is Malaysia claiming beyond the RM634 million contract value?

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Malaysia Seeks Over RM1 Billion in Compensation From Kongsberg Due to NSM Export Approval Cancellation

Malaysia is pursuing over RM1 billion in compensation from Kongsberg, encompassing both direct and indirect expenses incurred as a result of the cancellation of the export approval for the Naval Strike Missile (NSM) system. This compensation claim addresses the financial repercussions stemming from the contract's termination, which has necessitated significant adjustments to Malaysia's defence infrastructure.
Costs Associated with System Removal and Integration

A substantial portion of the indirect costs involves the removal of already installed missile mounting systems on Malaysian naval assets. Furthermore, the integration of alternative missile systems from different suppliers is also factored into these claims. These processes are complex and resource-intensive, requiring specialised labour and equipment to ensure the seamless transition to new defence capabilities.
Advance Payments and Procurement Value

Malaysia had already fulfilled 95 per cent of the RM634 million procurement value for the NSM system. This significant upfront payment underscores the substantial financial commitment made by Malaysia prior to the export approval being revoked. The cancellation thus represents not only a loss of the intended capability but also a substantial financial outlay that needs to be recouped.
Broader Implications of Contractual Disruption

The cancellation of the export approval has led to a broader disruption of Malaysia's defence modernisation plans. The initial contract, signed in 2018, was intended to bolster Malaysia's maritime defence capabilities. The subsequent need to source and integrate replacement systems from other suppliers indicates a deviation from the original strategic procurement, incurring additional, albeit unspecified, indirect costs beyond the immediate logistical and integration expenses.

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What indirect costs is Malaysia claiming beyond the RM634 million contract value?

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