Your browser version is outdated. We recommend that you update your browser to the latest version.

Browse by category...

Hikvision

SIGN UP to Defsec  eNewsletters

Fields marked with * are required.

DEFSECmedia

DEFSEC Media is New Zealand's defence, security and fire B2B/B2G publishing group. Our leading magazines, Line of DefenceNZ Security and Fire NZ are read by key business, government and military decision makers and influencers. This website is the online home of cutting-edge content from each of our titles.

Itron

C-27J Spartan

Australia’s defence export strategy: a solid centre wrapped in hyperbole

Line of Defence Magazine, Autumn 2018

10 refitted Australian Bushmaster PMVs were sold to the Republic of Fiji Military Forces in 2017. Note: For the purposes of the Strategy, the ‘Australian Defence Industry’ does not include New Zealand suppliers. Image courtesy Australian Government.10 refitted Australian Bushmaster PMVs were sold to the Republic of Fiji Military Forces in 2017. Note: For the purposes of the Strategy, the ‘Australian Defence Industry’ does not include New Zealand suppliers. Image courtesy Australian Government.

 

Nicholas Dynon writes that Australia’s recently released Defence Export Strategy is a bold statement of intent to lift the productive capabilities of an industry of critical national importance.

 

According to new data published on 12 March by the Stockholm International Peace Research Institute (SIPRI), the volume of international transfers of major weapons in 2013-17 was 10 percent higher than in 2008-12, continuing the upward trend that began in the early 2000s in the wake of 9/11 and the Global War on Terror.

The five biggest exporters—the United States, Russia, France, Germany and China—together accounted for 74 percent of all arms exports.

Up from 20th place in the previous 2012-16 report, Australia was ranked the world’s 19th largest exporter of major arms with 0.3 percent market share, placing them between Belarus in 18th place and the Czech Republic in 20th. By comparison, five eyes partner US claimed first place, UK 6th place, and Canada 16th, with New Zealand falling somewhere outside the top 25 exporters listed.

According to the Australian Department of Defence (ADoD), Australia currently achieves in the order of AUD 1.5 billion to AUD 2.5 billion per year in defence exports, although it spends considerably more on defence – AUD 24.6 billion annually.

As an importer of major arms, SIPRI ranks Australia 6th, behind India, Saudi Arabia, Egypt, UAE and China, and just ahead of Algeria, Iraq, Pakistan and Indonesia. It had ranked 7th in the 2012-16 report. By comparison, five eyes partner US was in 14th place, UK was in 18th place, and Canada in 66th, with New Zealand outside the top 40 importers listed.

Of the five eyes partners on the SIPRI list, Australia is the only one whose major arms import rank (6th) is higher than its major arms export rank (19th) – a glaring statistic that shows up the underdevelopment of Australia’s defence industry relative to its closest allies.

 

Australia’s defence export strategy

Released on 29 January, Australia’s Defence Export Strategy identifies several new initiatives aimed at transforming the country into a major defence exporter. These include a new Australian Defence Export Office to work hand-in-hand with Austrade and the Centre for Defence Industry Capability, and a new Australian Defence Export Advocate to provide high-level advocacy for defence exports and work across industry and government.

An AUD 3.8 billion Defence Export Facility administered by Efic, Australia’s export credit agency, is aimed at ensuring Australian companies get finance for exports. The idea is that the Defence industry will have greater confidence to identify and pursue new export opportunities if they know Efic’s support is available when other sources of finance are not.

AUD 20 million per year is also being made available to implement the strategy, including AUD 6.35m to develop and implement strategic multi-year export campaigns, an additional AUD 3.2m to enhance and expand the Global Supply Chain program, and an additional AUD 4.1m for grants to help build the capability of SMEs to compete internationally.

 

Enjoying this article? Consider a subscription to the print edition of Line of Defence.

 

A fool’s errand?

A common criticism of the export strategy is that it is overly ambitious and based on an overblown assessment of Australia’s local production. An obvious target is the strategy’s rather lofty ambition to make Australia a top-ten global defence exporter within the next decade.

Writing in The Conversation, Professor Greg Austin of the Australian Centre for Cyber Security at UNSW, points out that in the previous SIPRI report (2012 to 2016), “countries near the bottom of the list of top 10 exporters (Spain, Italy, Ukraine and Israel) each had eight times more defence exports by value than Australia.” A top-ten finish will require a more than eightfold growth within a decade – a most unlikely result by any stretch.

Former ADoD deputy secretary Fred Bennett in a February letter to The Australian pointed to Australian manufacturing’s lack of international competitiveness as a fundamental stumbling block. “To believe that Australian companies can succeed in this market in the face of the decline of our manufacturing sector under the pressure of relatively high energy and labour costs, a strong currency and adversarial industrial relations is to believe a fairy tale,” he wrote.

Australian Strategic Policy Institute (ASPI) director of defence strategy Andrew Davies commented in The Guardian that a top 10 rank for Australia was unlikely “because the things it was good at producing – component parts for foreign assembly lines; niche sales of intellectual property, and services (training, consultancy, and acquisition) – were not big money makers.” It’s the big platforms that make the big bucks.

Writing in The Interpreter, SIPRI researcher Dr Nan Tian comments that sales to Australia’s biggest defence customer the US are dominated by Expeditionary Fast Transports (EPF) manufactured almost entirely by Australian company Austal’s US subsidiary, while Indonesia’s purchases include second-hand C-130s bought new by Australia from Lockheed Martin. “Both examples,” writes Dr Tian, “suggest the majority of Australian arms exports are not based on local production capabilities, but rather on foreign countries’.”

A chorus of criticism has also targeted Australia’s record in relation to arms export destinations. According to the SIPRI report, Australia’s second and third biggest customers are Indonesia (28 percent) and Oman (8.5 percent). Both countries have dubious human rights records, as have several approved buyers of Australian arms in recent decades.

 

A worthy endeavour?

Criticisms over the audacity of the strategy’s top-ten target and the optics around many of Australia’s arms customers are not out of place. Merely chasing numbers – and doing so with low likelihood of success and at potential cost to the nation’s reputation – seems an unlikely path to success.

According to the critiques, Australia’s defence manufacturers will be unable to match it with cheaper international competitors, they are focused on producing the wrong things, and many of the things they have been credited as making or exporting are more correctly attributable to foreign manufacturers anyway.

But that’s sort of the point. The strategy presents an opportunity to identify areas of comparative advantage and future growth, and to focus the development of export capabilities on these.

Quite apart from the numeric goals, there is a deeper, more compelling objective underpinning the strategy, and it’s about ensuring the sustainability of an industry that is critical to Australia’s national security within an era of increasing strategic complexity and risk – including potential risks to trade and supply chains.

“The Government recognises that Australian industry cannot sustain itself on the needs of the Australian Defence Force alone,” states the strategy. “New markets and opportunities to diversify are required to help unlock the full potential of Australian defence industry to grow, innovate, and support Defence’s future needs.”

It’s a point not lost on Raytheon Australia’s Managing Director Michael Ward. In a media release, Mr Ward commended Canberra’s willingness to identify new ways for the defence industry to handle the peaks and troughs of local demand. “By encouraging new export markets, the industry will be strengthened and made more competitive,” he said.

Austal CEO, David Singleton, agrees, saying “the Australian defence industry cannot rely on domestic orders alone; to grow we must be competitive in the international market.”

NSW Minister for Trade and Industry Niall Blair also welcomed the strategy. “Defence manufacturers, like any successful companies, need their ambitions to be global,” he stated in a media release.

If exports are seen as a hedge against the uncertainties of domestic demand in the Australian context where government spends AUD 24.6 billion annually, then there are perhaps some takeaways for New Zealand here.

As Opposition Spokesperson for Defence Mark Mitchell pointed out in the Summer 2017/18 issue of Line of Defence, “New Zealand companies make a big investment and carry a bit of risk to support our defence forces. I want to see our defence industry grow not just in terms of servicing our local defence forces but looking offshore for opportunities as well.”

“There would need to be initially a government-led initiative working with industry to bring everyone together to look at what opportunities exist – it’s about a $1.7 trillion pipeline – and to come up with a strategy to bid for and win some of this work,” Mr Mitchell added.

In terms of a government-led initiative, Canberra has stepped up to the plate with its Defence Export Strategy. While Minister Pyne’s grand designs for a top ten exporter ranking may be somewhat far-fetched, the motivators behind the hyperbole are solid and – importantly – in the national interest.

 

Back to Defence

Share on Social Media

Follow us

f

Contact us

Phone: 022 366 3691

Email: nick@defsecmedia.co.nz   

© 2015. Defsec Media Limited. All Rights Reserved.

OUR PARTNERS

Advertise     

Subscribe 

Contribute

OUR MAGAZINES

Line of Defence     

Fire NZ     

NZ Security

OUR COMMUNITY

Linkedin

Twitter

Facebook