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Australia can become a mid-level defence industry player

Posted By on September 8, 2021 @ 06:00

The late United States senator and navy secretary John Warner once said: ‘The very heart of being a sovereign nation is providing security of one’s borders, of one’s internal situation, and security against anyone attacking one’s nation.’ While concepts like sovereign industrial capability weren’t articulated as part of the defence outlook during Warner’s lifetime, a strong sovereign defence industry has historically been essential to ensuring a country’s national security. Unfortunately, Australia is still playing catch-up.

The Covid-19 pandemic has made it glaringly obvious that access to global supply chains can’t be taken for granted. In the early months of the pandemic, countries across the world jostled for masks and other personal protective equipment, then ventilators and vaccines. The pandemic has demonstrated that when crises hit, we can’t assume other nations will provide for us at their own expense.

If supply chains for critical health products needed for survival can be switched off like a tap, are we comfortable leaving our defence procurement subject to the same volatility? That is particularly crucial as we face an increasingly unstable Indo-Pacific region, as well as rapid advancements in technological capabilities for warfighting that provide every potential adversary agility and unpredictability.

The government has recognised the risks inherent in global defence supply chains and, encouragingly, sovereign industrial capability features at the forefront of the Australian Defence Force’s capability strategy and force structure planning for the next decade. However, to claim that it is a reality in Australia today is premature at best. And our continued overreliance on foreign defence ‘primes’ is a major strategic oversight. It is long past time we rectified this.

Australia will never be on a par with the likes of the major defence industrial players such as America and Britain. And it would be unrealistic to think we can replace long-established and highly efficient international primes entirely with domestic small and medium-sized enterprises (SMEs). However, it’s possible that, with the right planning, investment and cooperation among government, the ADF, industry and international partners, Australia can achieve excellence as a middle-weight player in the international defence industry.

In commencing this pivot, I believe there are three clear steps.

We must first clearly articulate what having a sovereign defence industry means and entails, and what requirements and support for industry are needed to get us there. Surprisingly, no such definition exists and there’s widespread confusion over how to define it.

Three core standards must be met for Australia’s industrial capabilities to be considered truly sovereign—ownership, operations and capability, or ‘OOC’. Defence industrial capabilities we develop must be truly Australian owned. Organisations should also be headquartered entirely in Australia and be supported by the means, workforce, technology and materials to deliver outcomes that secure Australia’s national interest.

The second step is to adopt the best practice already instituted by equivalent middle-player nations. We do not need to reinvent the wheel. Sweden is a good example. Facing a significant capability deficit through the Cold War and a precarious strategic context, Sweden adopted an ambitious plan, underpinned by sustained investment, to bolster its sovereign industrial base. Today, Sweden boasts a self-sufficient and thriving defence industry, complete with a capability development pipeline servicing both the needs of its defence forces and its defence export market.

There’s no reason Australia can’t emulate the success of the Swedish model, or the Israeli model, which is also based on a determination to be self-reliant throughout the entire development pipeline. Australia could learn key lessons from the successes of others.

Australia’s defence industry must be supported by real and enduring investment in research and development. Cutting-edge military capabilities take time to come to fruition, but sustained investment partnerships between government and the private sector lay the foundations for competitiveness of industry.

We must establish efficient procurement processes and a relationship between government and industry that’s based on cooperation and trust. And bureaucrats must have the right skillset to hold industry accountable.

Defence industry hubs should be distributed evenly across the country, rather than within a small number of urban centres. This will allow more communities to share in the benefits of industry development through increased jobs and technical skills and will build a greater sense of contribution to the industry nationally.

A system of international cooperation is needed that benefits multinational primes and local SMEs equally. The share of the market offered to Australian SMEs must be equal to that offered to the primes, especially as defence expenditure increases.

The third step is for Australian firms to prioritise developing capabilities to meet ADF requirements and for the government to commit to purchasing these capabilities. Too often this is not the case, and our forces end up with kit that’s not fit for purpose.

If our local firms are to export capabilities, it’s essential that they be tried and tested by our own military.

Our defence industry is up to the task, and there are numerous examples of what our firms can deliver when given the chance to compete.

The Bushmaster protected mobility vehicle was developed and manufactured jointly by the formerly government-owned Australian Defence Industries and Thales. It was used very successfully by our soldiers in Iraq and Afghanistan and it’s now in service with six countries across four continents.

C4 EDGE, a mobile tactical communications system developed by a consortium of Australian-owned and -run companies led by EOS Defence Systems for the Australian Army, is another good example.

With the defence budget on track to grow well beyond 2% of GDP, the government has taken major steps to boost the capabilities of Australia’s defence industry. Through the Defence Innovation Hub, SMEs now have a channel to receive funding and to showcase their competitiveness against larger, more established primes. And the ongoing review of the Defence Department’s global supply chain program reinforces the government’s commitment to bolster our domestic industrial capabilities. However, as funding is allocated, we still see Australian SMEs relegated to the sidelines with smaller workstreams and only marginal roles on major acquisition projects.

The current government approach of awarding contracts on a case-by-case basis will not deliver the capabilities our forces need. Nor will it create the foundation for Australia to become the middle player in the international defence market that our SMEs, working in equitable partnership with the primes, can support. It’s time to take meaningful action to build a truly sovereign defence industry that safeguards our national security, supports our ADF, and builds a sustainable and self-sufficient domestic defence industry.

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