Japan’s entry into the international arms export market has been a steep learning curve for the country
When it comes to Japan’s bid to build Australia’s new submarines, anticipation mounts. Australia’s selection of its Collins-Class submarines replacement is entering a critical phase, as the current end-November deadline for finalising the bid for the Competitive Evaluation Process for its SEA 100 program draws near.
Japan’s participation in the tender has attracted a great deal of attention inside as well as outside the country. It is Japan’s first-ever attempt to export defence equipment since the Japanese government revised its arms export policy to open the door for the Japanese defence industry to compete overseas.
Indeed, the Japanese government under Prime Minister Shinzo Abe moved rather quickly to encourage the Japanese defence industry’s active participation in the global market. Particularly noteworthy is the establishment of the Acquisition, Technology and Logistics Agency (ATLA)—Bouei Soubi-cho in Japanese – on 1 October 2015. It is the most recent effort by the Japanese Ministry of Defense (JMOD) to streamline policy- and decision-making processes on defence acquisition and industrial policy. The ATLA integrates the organisations and offices that previously were spread across the JMOD, such as Technical Research and Development Institute (TRDI) and Equipment Procurement and Construction Office (EPCO).
ATLA’s establishment was driven by, firstly, a growing sense of awareness within Japan’s defence establishment that robust international defence industrial cooperation can benefit Japan’s strategic relationship with the United States and other partners. This was discussed in detail in the report issued by a MOD advisory group on defence technology and equipment transfer on September 30. The second driver was a sense of acquiescence that Japan’s defence spending will not see considerable growth in the foreseeable future, as acknowledged in the latest National Defence Program Guidelines.
ATLA has been given five core missions: to manage JMOD’s acquisition programs more efficiently, to enhance international cooperation in the area of defence equipment, to conduct cost-effective and timely research and development (R&D), to maintain and strengthen its indigenous defence technological base, and finally, to pursue greater cost-saving measures.
The ongoing bid for the Australian submarine program is testing ATLA’s capacity to balance two of these core missions; that is, to successfully pursue the opportunities for international defence equipment cooperation while sustaining an indigenous defence technological base. The process has already taught ATLA (and the Japanese government writ large) some important lessons for the future.
The first lesson is, do not underestimate the desire for “workshare” in the host country.
Given their own history of insisting on indigenous development, licence production, and/or workshare for Japanese companies for its defence acquisition programs, this should have been a no-brainer. Still, Japan was extremely reluctant to transfer technology and offer workshare arrangements with Australian shipbuilding companies—so much so that it became critical disadvantage for Japan, especially when rival bidders Germany and France are aggressively presenting their plans for investing and creating jobs in Adelaide, Australia, as part of their packages.
Japan finally began to express its willingness to do so when a government-industrial team visited Australia for the Pacific Maritime Symposium 2015, and visited major cities to meet with local firms. But whether their change of position came in time to sway the bid in their favour remains unclear. Moving forward, if ATLA (and the Japanese government more broadly) is serious about pursuing an international market for its defence equipment, it has to have institutional processes in place to classify different types of defence technologies, so that there will be a clearer understanding of what Japan can transfer to the United States and other important security partners, and what Japan wants to retain to gain and a keep competitive edge in its defence industry.
The second lesson is that better public-private coordination is a must.
There was divergence between government and industry’s level of enthusiasm for the bid until very recently. While the Japanese government was enthusiastic in pushing the submarine bid forward, the industry itself was not. This was due to concerns whether their state-of-the-art submarine technology could be properly protected should it be transferred to Australia.
Some even pointed out that a close personal relationship between Japanese Prime Minister Shinzo Abe, and Australia’s former Prime Minister Tony Abbott, made Japan complacent, and it has not put in the level of effort required to win a bid of this size. Thus, Abbott’s departure in mid-September was widely speculated to negatively impact Japan’s position in the bid. When Japan lost its bid for high-speed rail in Indonesia, analysts in Japan called for a better co-ordinated public-private strategy in foreign bids for highly political and nationally important projects.
There are parallels between the circumstances under which Japan lost the bid in Indonesia and the SEA 1000 project in Australia. Regardless of the bid result in Australia, these experiences should serve as a stark reminder for Japan that winning such important contracts abroad requires a team effort between the government and the industry.
In early 2016, Japan will know whether it has survived the Competitive Evaluation Process. Regardless of the results, it is essential that Japanese government conducts a thorough review of its performance in the process if it is serious about encouraging its defence sector to compete internationally.
This piece originally ran in Asia & The Pacific Policy Society, November, 2015