National

Japan stumbles in effort to woo Australia over submarine contract

by Matt Siegel

Reuters

Japan’s effort to charm Australian politicians and the public over its bid for a 50 billion Australian dollars (¥426 billion) submarine project appeared to stumble Wednesday, with officials from Tokyo resisting pressure to commit to building the vessels in Australia.

Japanese defense officials and executives from Mitsubishi Heavy Industries and Kawasaki Heavy Industries made their first major pitch to build 12 stealth submarines for Australia’s navy during public briefings for defense contractors and the media in Adelaide, a ship-building hub.

Once seen as the front-runner to win the contract, the Japanese bid has since come under scrutiny because of Tokyo’s unwillingness to commit to building any submarines in Australia, where manufacturing jobs are a hot-button political issue.

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

Both European firms have also courted the Australian defense industry and media in key cities.

Two sources present at separate meetings between the Japanese delegation and Australian officials said the Japanese did not seem to have much understanding of the political sensitivities and appeared to have lost ground to the rival bidders.

They said the delegation gave few details about the Japanese proposal beyond reassurances they would adhere strictly to the rules of the process.

“It seems like the (Australian) federal government just told them that they had to come down here and talk to us,” one source said on condition of anonymity because he was not authorized to speak to the media.

“I think they’re really struggling to connect to the public. It’s just not in their DNA to speak publicly about defense issues.”

A defense industry source in Tokyo said the German bid was shaping up as the one to beat.

“There is some concern in the Japanese government,” said another industry source in Tokyo familiar with the proposals.

Both sources said Japanese defense ministry officials had informally asked U.S. contractors with close ties to Japanese industry, including Raytheon Co. and Lockheed Martin Corp., to advise Mitsubishi Heavy on managing its first-ever bid to sell military equipment to an overseas government.

Australian media have reported that Australian Prime Minister Tony Abbott and Prime Minister Shinzo Abe privately agreed last year that Japan would get the contract. Both sides have denied the existence of such a deal.

“We are not the ones to be blamed for others speculating that there may be a secret deal. So the current situation has us a little bit perplexed and confused why such speculation is still being voiced,” Masaki Ishikawa, director general for acquisition reform at the Defense Ministry, told reporters.

Ishikawa and other Japanese officials also declined to be drawn on whether Japan would build the vessels 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 the two countries.

Officials in Adelaide, capital of South Australia state, on Wednesday insisted 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,” Australian state trade minister Martin Hamilton-Smith said in a statement.

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.

“They get it,” he said in an interview Tuesday.

Each of the bidders has been asked to provide three estimates: one for construction overseas, one for a partial assembly in Australia and one for a full build in an Australian shipyard.

An expert advisory council is expected to deliver its recommendation in November.

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