Sovereignty is the key to defence industry policy
21 Jun 2018|

Sovereignty is now the buzzword of defence industry policy, applied liberally to whatever project is under discussion. The idea has been further entrenched in the defence lexicon following publication of the long-awaited Defence Industrial Capability Plan (DICP), as well as the announcement of Australia’s sovereign industry capability priorities (SICP) and accompanying capability assessment framework. The DICP may be an improvement on past defence industrial policies but it’s a stretch to describe it as a plan.

There are six observations worth making about the new DICP. The first is that defence industry is now defined. It’s not a very good definition, but it’s a definite improvement on the one in the Defence Export Strategy that said an Australian Business Number was all that was required. It also recognises the reality that local defence industry is dominated by overseas players.

Australia’s new DICP would have done better by adopting a definition used in a 2005 UK Defence Industrial Strategy document: defence industry should be defined ‘in terms of where the technology is created, where the skills and the intellectual property reside, where jobs are created and sustained, and where the investment is made’.

The Australian definition doesn’t specifically require the local generation or retention of intellectual property, and it doesn’t require any commercial control, although it does advocate for ‘board presence’ and ‘Australian leadership influence’.

Second, it seems the sovereign industrial capability assessment framework is trying to have it both ways. It makes a clear link to operational criticality. But the framework then loses all coherence in linking sovereignty to the Integrated Investment Program (IIP) and hence to short-termism. The document also includes a catch-all statement that SICP may be determined due to a need for dedicated monitoring, industrial complexity or government priority. Basically, anything goes if a case can be made for it.

The framework is therefore at odds with its own definition of sovereign industrial capability, namely:

[W]hen Australia assesses it is strategically critical, and must therefore have access to, or control over, the essential skills, technology, intellectual property, financial resources and infrastructure as and when required.

No mention of the IIP in this statement, and I’m not sure about the financial resources. Maybe we’re looking for international lines of credit to fund the defence effort.

The words ‘access to, or control over,’ are also interesting in that access and control are two separate things The DICP is ambiguous in that it cannot be determined whether access is being guaranteed through control, or whether access and control are two separate actions and either will do. For sovereignty, control is the defining factor.

Third there’s the concept of sovereignty, which is based on defined territory and the rights of the sovereign (now the state) with respect to security within that territory. Sovereignty and national security are therefore inextricably linked. States, however, don’t exist in splendid isolation from other states: competition abounds, uncertainty develops, and threats to states and their interests arise and need to be addressed.

This is the raison d’etre for the development and maintenance of a defence force. Defence industry is therefore an enabler in strategic risk management. The DICP recognises this point but then conflates defence policy with general industry policy, and loses focus in doing so.

Fourth, to paraphrase George Orwell, ‘all capabilities are created equal, but some capabilities are created more equal than others’. This means that some capabilities are more important when addressing strategic risk. The DICP also recognises this fact, but again loses focus in the list of SICPs presented as a mix of technology-orientated, platform-orientated and activity-orientated items.

A more consistent approach would have been to address the SICP from an industrial activity perspective, fitting the critical technology to the activity, and then fitting the capability/platform to the technology. For example, from a strategic risk perspective (which is what this is all about), the sovereign ability to innovate and upgrade (the activity) a data management system (the technology) in a submarine (the platform) is strategically more important than the same activity/technology mix in a land reconnaissance vehicle.

This alternative approach would avoid the situation where research, design, development and manufacture are seemingly important for munitions and small arms but not for anything else, complex systems integration is similarly only a concern for surveillance and intelligence, and deep maintenance is only relevant for aerospace platforms.

This raises a fifth observation: sovereignty costs. Operational sovereignty, and particularly the sovereign ability to upgrade systems, requires a commitment to ongoing research and development, the sustainment of industrial capabilities, the development of relevant skills, and the availability of in-country expertise, production facilities and intellectual property.

Money can only be spent once, so it makes sense to commit resources into those areas that are most critical from a risk management perspective. The DICP attempts to do this, but the ‘every child gets a prize’ approach will spread the money thinly. ASPI’s recent The Cost of Defence report also called for clear guidance on prioritisation.

Finally, sovereignty means more than just ‘doing stuff’ in Australia. Given the unambiguous link to national security, sovereignty needs to be focused on addressing strategic interests and the mitigation of strategic risk. While ‘doing stuff’ is important for industrial activities in general, for employment and for economic development, these activities shouldn’t be dressed up as sovereignty unless the principal benefit is in the mitigation of strategic risk. The DICP fails in this respect.

The current government has done a pretty decent job in advocating for, and supporting, the local defence industry with a broad view of how this enhanced activity plays into the national story. Contemporary geopolitical developments, however, suggest that local capability developments and defence industrial sovereignty will become more important with time.

We need to ensure that money is spent in the areas that matter most. We need an environment where local developments, improvements and modifications are valued. Most importantly, we need to be able to independently make the improvements and modifications that we need to make.

Otherwise there’s no sovereignty.