The Democratic Action Party (DAP) said PSC Naval Dockyard Sdn. Bhd. was to have delivered the first six of 27 heavily-armed offshore patrol vesselslast year as part of the deal.

But the handover was postponed in February after numerous technical problems during sea trials of the first offshore vessel last year, it said in a letter to Deputy Prime Minister and Defence Minister Najib Razak.

The government has so far invested 2.5 billion ringgit in the project, and the DAP warned it could turn into the "biggest financial scandal in Malaysia's history" if no serious action was taken.

"The failure of the first OPV to carry out its duty is not only a waste of our investment but it has also exposed the country to the risks of enemy threats, whether from neighbouring nations or from pirates," said DAP's secretary-general Lim Guan Eng.

For instance, he said the United States had previously sought to help police the Malacca Strait against possible terrorist attacks on shipping while the Indonesian navy was showing its might in a disputed oil-rich maritime area off Borneo island.

There has also been a spate of pirate raids on ships in the Malacca Strait since February, sparking fears that the ease with which ships have been boarded may tempt terrorists to stage a seaborne attack.

Malaysia announced it will place armed and uniformed police officers on board tugboats and barges plying the waterway, which carries a quarter of world trade and half its oil supplies. But it rejected suggestions that the US or other foreign navies be allowed to help patrol the Strait.

"We call for a royal commission of inquiry to be set up to look into the problems of building and delivering the OPVs because it is an issue of public interest involving the country's finance and integrity," Lim added.

The country's navy chief Mohamad Anwar Mohamad Nor in February said there were technical flaws in the OPV's command system and that the training package for officers and personnel was outdated. He said the vessel delivery originally scheduled for last September has been delayed till July.

The Asian Wall Street Journal last month reported the government was looking for ways to unwind the contract as it was increasingly sceptical that PSC could deliver.

The 10-year contract, signed in 1998, also gave PSC control of the government's main naval shipyard and the exclusive rights to service the entire navy fleet, a move aimed as a springboard for Malaysia to create its own marine-engineering industry, it said.

PSC was building the first two vessels with its foreign partners, led by Germany's ThyssenKrupp AG.

The Edge business newspaper recently quoted sources as saying that Malaysia's military investment fund has taken over the privately held dockyard company, and demoted PSC chief Amin Shah Omar Shah to deputy chairman.

The military's Lembaga Tabung Angkatan Tentera fund is a shareholder in PSC, which the government has final authority over.

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