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Home Features Australia’s defence industry and the rise of Asia – what will the future look like?

Australia’s defence industry and the rise of Asia – what will the future look like?

By The Mandarin

June 2, 2015

Japanese tank. (Bigstock)
Japanese tank. (Bigstock)

The lingua franca of Australia’s defence industry has been the language of Lockheed Martin, Boeing, BAE Systems, Northrop Grumman and Raytheon. UK or US English, with a hint of French and a smattering of Spanish. But in this Asian century, the lexicon is changing and we can now articulate what a truly Asian-Australian defence industry will look like.

Right now, we are seeing the locus of global geostrategic competition shift to Asia, driven by regional economic growth, China’s rise and the USA’s realignment to increase focus on these emerging markets.

Unprecedented gross domestic product growth has created a consumerist middle class in Asia, whose needs can only be satisfied through access to resources. Attempts to secure resources may see an increase in confrontations over territory and sovereignty with the increased potential for miscalculation. Disputes also have significant (and hard to predict) spin-off effects, such as the Japanese legislative changes that are relaxing the policies that previously constrained the nation’s export of defence technology and material.

As the national budgets of Asian nations expand, our neighbours are also spending more on defence, with a preference for self-reliance through domestic production.

Mitsubishi, Kawasaki, Hyundai, Samsung and Daewoo are all household brands in Australia, familiar suppliers of white goods, electronic equipment and vehicles. What is less well known is that these companies are part of Asia’s robust defence industry and significant producers of submarines, destroyers, aircraft, tanks and artillery.

Recently we have seen contracts to provide vessels for the Royal Australian Navy spark the interest of Korean shipyards and an armoured vehicle program entice Singaporean interest. Moreover, there is much public chatter around the very real potential of Australia sourcing submarines from Japan. When Australia and several other Asian air forces take delivery of the F-35 Joint Strike Fighter in 2020, it is expected that all these fighter jets will be repaired and maintained from a common facility within the region, including Australia.

A tooled-up Asian military industry will be increasingly vying for export and co-production opportunities in external markets, including that of Australia. Given the example of the automotive sector since the 1970s, this is likely to see the arrival of new defence industry suppliers with a reputation for delivering quality goods at a competitive price.

While Asian defence companies are set to impact Australian business, they may be just as disruptive to the normal patterns of defence agency procurement. Today, strong governmental diplomatic and defence engagement lines exist, but the robust business to defence links we see in Europe and North America are yet to fully develop.

Time to invest in building them? Such relationships would seem even more important in Asia.

Mike Kalms is KPMG Lead Partner – Defence Industry.

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Tuesday June 2, 2015
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