Australia Revisiting Defence Industrial Policy
In the wake of its 2006-2007 defense budget proposal “To Defend Australia” [PDF], the Australian government announced that it would begin a comprehensive review of the country’s defense industrial policy. This is not uncommon in an industry that’s a domestic oligopoly by nature, but has some global export potential. In late 2005, Britain also undertook a review of its defense industrial policy, leading to wide-ranging recommendations and a new blueprint.
Australia’s road has been slower. Initial steps were taken under a Liberal Party government in 2006, and have continued under the current Labor Party government. In June 2010, an initial blueprint was released:
Updates & Key Events
June 25/10: After over 2 years of work, Australia’s Labor party government releases a new Defence Industry Policy Statement. “Building Defence Capability: A Policy For a Smarter and More Agile Defence Industry Base.” The government will begin a number of related programs under this umbrella, totaling A$ 445 million from 2010-2019. They include A$ 104.8 million announced in the Defence White Paper 2009, and announced initiatives include:
A$ 292.8 million to build skills, innovation and productivity in the Australian defence industry. This includes the Skilling Australia and Industry Skilling Program Enhancement initiatives, the Capability and Technology Demonstrator program and extensions, the Defence Industry Innovation Centre aimed at small-to-medium enterprises. Overall, the current Government expects to create 7,500 training opportunities, and 3,500 school students in defence industry pathway programs between 2009 – 2015.
The Defence Industry Innovation Board is meant to help coordinate the innovation programs that are available to industry. This board will oversee the Priority Industry Capability (PIC) Innovation Program. A senior defence industry executive will chair the Board, which will include members from prime contractors; small to medium enterprises; DoD; the Department of Innovation, Industry, Science and Research; industry associations; and unions.
The new A$ 44.9 million PIC Innovation Program will encourage companies to submit technical innovation proposals relating to designated PICs. DoD is developing a set of guidelines for the program, with the first annual funding round to occur in late 2010. PIC choices will be reviewed through the annual classified Defence Planning Guidance process.
The A$ 59.9 million Global Supply Chain (GSC) Program is designed to help Australian firms become partners and sub-contractors to large global defense firms. It’s part of a A$ 102.5 million set, which also includes A$ 34 million in funding for the Australian Defence Export Unit, launched in 2008.
The Australian Industry Capability (AIC) Implementation Unit will work on implementation of AIC policy within Australia’s DoD, and audit System Project Offices to ensure AIC plans in contracts are delivered.
No industrial offsets:
“…the Government will not use offsets or local content quotas to help protect Australian defence industry from overseas competition. Previous experience has shown that this approach is not in the best interests of Government, industry or Defence… offset policies do not work. They do not drive policy outcomes that place the industry on a sustainable footing… I remember reading about one country being offered a vacuum cleaner factory in return for purchasing a certain type of jet fighter… This Government firmly believes that unless Australian industry wins work based on the quality and competitiveness of the product, the industry will not be placed on a sustainable footing.”
Note that the totals announced amount to $502.4 million, which suggests double-counting in some categories. The government issues a flurry of releases on the subject, just as Prime Minister Rudd lost his post due to a backbencher revolt. Deputy PM Julia Gillard is now leader of the Australian Labor Party, and hence Prime Minister. Main release | Minister Combet’s speech | Defence Industrial Policy since 2007 | PIC program | Global business efforts | Skills. ELP Defence has a less positive review.
May 18/06: Australian Minister for Defence Dr. Brendan Nelson says that:
“Today’s discussions primarily allowed us to capture industry’s views. They will inform a Discussion Paper to be released later in June 2006. Further consultations undertaken by my colleague the Hon Bruce Billson MP, the Minister Assisting the Minister for Defence, assisted by Mr Kerry Clarke, Dr Henry Ergas and Dr Mark Thomson will take place around Australia. These will inform the key issues, including sustaining key strategic industry capabilities in Australia needed to supply and support the Australian Defence Force… Following these consultations, the Government will determine the need for a new Statement on Defence Industry Policy.”
- Business Victoria – Defence Industry Roadmap. These are state government efforts. Victoria is the southeastern state that includes Melbourne.
- New South Wales Government (June 4/10) – NSW invests $75 million to support defence industry. NSW is the eastern state that includes Sydney.
- Security Challenges (July 2006) – Defence Industry Policy and Defence Accountability [PDF]