Malaysia today announced that it has concluded a technology transfer deal with China, raising the likelihood that it will be purchasing Chinese medium range surface-to-air missiles under the upcoming Ninth Malaysia Plan.

Under a package proposed by China on Tuesday, Malaysia will purchase Chinese KS-1A medium-range anti-aircraft missiles, and in exchange, China will transfer its technology expertise to Malaysian firms to build another missile system.

"We have just concluded an agreement for the transfer of technology, but we have not decided on the purchase of medium range surface-to-air missiles.

"But, it is one of the systems being seriously considered," Defence Minister Najib Razak said after speaking at a conference on 'Emerging China: Implications and Challenges for Southeast Asia'.

Under the technology transfer deal, state-owned China National Precision Machinery Import and Export Corp will provide SME Ordnance Sdn Bhd and Aneka Bekal Sdn Bhd knowledge and rights for the assembly and customisation of its FN-6 shoulder-launched missiles.

However, Najib, who is also deputy premier, declined to reveal how much the system would cost, if adopted.

Early this week, Najib revealed new plans to further bulk up the defence budget, including a budget request for an additional RM1.6 billion to purchase weapon systems that would allow Malaysian armed forces to "operate in a wider area".

Going for self-reliance

He also announced that a 'defence blueprint' to build up the local defence industry is currently being drawn, and this would include dishing out more long-term contracts to companies.

According to Najib, these 10 year contracts - also known as 'five-plus-five' contracts in reference to the additional five years given to companies to recoup research costs - are expected to make the industry more 'self-reliant' and would be included into the Third Industrial Masterplan (2006-2015).

Since 2000, Malaysia has been on an arms purchase spending spree, which among others included RM3.4 billion worth of Russian Sukhoi fighter jets, American F/A 18 F fighters at RM5.7 billion, Polish battle tanks at RM1.14 billion, French submarines, Russian MIG 29s, British long-range helicopters and Jernas missile defence system, as well as Ukrainian heat-seeking missiles.

Malaysia's defence budget has risen sharply over the years, from RM1.7 billion in 1981 to RM4.8 billion in 2001, to finally the RM6.4 billion original allocation this year.

But the latest supplementary budget request would place the defence budget at RM8 billion for 2004.

However, the government has been quick to assure raised eyebrows that the new acquisitions would be purely for defensive purposes.