Japan wooing Australia over submarine contract

Japan wooing Australia over submarine contract

Reuters

A Japanese consortium eyeing one of the world’s most lucrative defense contracts, a U.S. $35.60 billion project to build submarines for Australia, has launched a public charm offensive to address local concerns over its bid.

The consortium of Mitsubishi Heavy Industries and Kawasaki Heavy Industries has been hesitant to publicly state its willingness to build the submarines in the city of Adelaide, the hub of Australia’s defense shipbuilding industry.

Rivals ThyssenKrupp Marine Systems of Germany and France’s state-controlled naval contractor DCNS have said they would build entirely in Australia, targeting members of the Australian government with the economic and political benefits of their proposals.

Executives from the Japanese companies and defense officials from Tokyo kicked off meetings with defense contractors, local officials and labor unions in August 2015 in Adelaide, capital of South Australia state.

Prime Minister Tony Abbott is under pressure from within his conservative Liberal Party, state officials and labor unions to ensure the stealth submarines are built domestically.

South Australian state government officials are insisting on at least 70 percent local worker participation in the project.

“The state government, local defense industry and workers are committed to protecting Australia by building a strong defense industry, which supports the workers in our shipyards,” state Defense Minister Martin Hamilton-Smith said. “There is still time to provide industry with the certainty it needs and rule out a hybrid or overseas submarine build.”

The Japanese team is in talks with Britain’s Babcock International Group and BAE Systems, which have manufacturing operations in Australia, in response to pressure to have as much domestic participation in the project as possible.

Australia’s manufacturing industry is still reeling from the decisions by Ford, Toyota and General Motors to halt local production in 2016.

Liberal Sen. Sean Edwards — chairman of the economics committee in the upper house of Australia’s Parliament — said he had repeatedly conveyed to Japanese officials the political importance of pledging to build in Australia.

Abbott has described Japan as his country’s “closest friend in Asia.” The United States is also keen to spur friendlier ties between its two key allies in Asia.

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