Australia Embarking on Defense Industrial Strategy
On November 24, 2006, The Hon. Dr Brendan Nelson, Australia’s Minister for Defence, delivered a speech to the Australian-British Chamber of Commerce. His subject was “Future Directions in Industry Policy,” which touched on past reviews of defense force structure, the current Defence Capability Plan 2006-2016, procurement reviews and reforms, and the effects of an aging population before getting to its key passage:
“Around 20,000 Australians are employed directly in defence industry. About A$ 2.1 billion [DID: about $1.6 billion] of that money that we spend on defence industry – the A$ 8.7 billion [DID: about $6.8 billion] that comes from the DMO(Australia’s Defence Materiel Organization) – about A$ 2.1 billion finds it way, one way or another, into the 300 or so SMEs that are in defence industry in Australia. At the moment – of the 20,000 that are employed – we’ve got about 5,200 that are in regional parts of Australia.
In going forward, back in May, I called together a representative group of policy analysts – CEOs from the primes and also representatives of Australia’s SMEs in defence industry – to canvass the issues that might surround the development of defence industry policy…”
DID readers will recall that Britain has its own defense industrial policy. The Minister’s efforts in Australia will have 7 areas of focus:
“I’m not today releasing the actual defence industry paper, but I am going to tell you some of the things that will be in it. Personally, I think there’s a little bit more work I’d like to see done on it and for that reason, I would expect to release it well within the next fortnight.
It will be a draft paper. They are draft proposals, but as I said back in May, it is important that industry, prime and SMEs have an opportunity to consider what I am thinking about proposing to the government before it goes any further. I recognise it will be impossible to achieve consensus on all issues within the paper, but I think it’s important that we don’t have significant opposition to key elements of it.
It’ll basically focus on seven areas.”
# Priority Industry Capability for Australia. Includes the defense self-reliance imperatives, to be reviewed every 2 years.
# Value for money. Including the aspect of competition and sole-sourcing, now up to 37% over the past 4 years.
# Improving Participation by Defence Industry. Especially in projects over A$ 50 million.
# Cooperation between the Defence Materiel Organisation and Defence Industry. They’re also looking at publishing a defence industry participation manual on an annual basis, beginning in 2007.
# Small to medium enterprises (SMEs) and their involvement in the supply chain.
# Skills. There’s already an A$ 215 million program called Skilling Australia’s Defence Industry, but the current Defence Capability Plan would grow Australia’s defence industry by about 12,000 FTE employees. The Minister adds: “One of the priorities I have for defence recruitment and retention is to get back to a situation where parents are saying to their children who are uncertain about their careers, why don’t you join the army and get a trade.”
# Innovation, Research and Development, including ‘clustering’ research and development and investment in it among related areas.
Read the entire speech here. DID will continue to update this article as new information comes in.
UPDATE: A DID reader adds:
“Its probably worth noting to your readers that under the procurement provisions of the US-Australia Free Trade Agreement, US firms have almost the same rights as Aussie firms to compete for contracts. The only barrier are those wonderful folks at the US State Department’s Directorate of Defense Trade Controls who continue to require US firms to play mother-may-I, replete with application forms and rituals that would have been awkward in the early 20th Century, let alone the 21st.”