Japan's advanced attack Soryu submarine carried out drills with Australia's navy Tuesday as a German company launched a campaign to advertise its expertise — part of a heated race for a 50 billion Australian dollar contract to build the country's next submarine fleet.
Industry sources told Reuters the Australian government is speeding up its decision on the contract — France is the other major bidder — with a winner now expected to be announced by the end of the month.
Australia intends to buy 12 new submarines, a centerpiece of its defense strategy unveiled in February, which called for an increase in military spending of nearly AU$30 billion over the next 10 years to protect strategic and trade interests in the Asia-Pacific.
Industry watchers had anticipated a decision for one of the world's most lucrative defense contracts to come later in the year, but Australian Prime Minister Malcolm Turnbull's recent gamble on an election slated for July 2 has sped up the process.
Nick Bisley, the executive director of La Trobe Asia at La Trobe University in Melbourne, Australia, said that while the election appeared all but certain, it can't be called until after the budget is handed down on May 3.
"Once an election is called the government goes into 'caretaker mode' which means no substantive issues of policy can be decided," Bisley said. "So they are aiming to bed down a number of things between now and May 3, one of which will be the sub decision.
The contract is politically sensitive as it will have an impact on thousands of jobs in the shipbuilding industry in South Australia state. Retaining votes in key electorates in that state will be critical for the government.
Two industry sources in Asia who are involved in the bid process told Reuters they were expecting an announcement as early as April 29. They declined to be identified because they are not authorized to talk to media.
Even if Turnbull's government is ousted, Bisley said, then its choice for the contract would be set in stone.
If another party takes power, "I think they will be stuck with the decision," Bisley said. "They'd find it very difficult to unpick a decision like that without badly damaging their credibility."
On Tuesday, the Soryu vessel, a variant of the submarine that Mitsubishi Heavy Industries and Kawasaki Heavy Industries are offering to build, began exercises in Sydney Harbor with Australia's navy.
Despite the presence of the Soryu submarine and a well-attended media tour, Japan has insisted the exercise was not a sales pitch.
"We do not have an ulterior motive in having this media conference," Rear Adm. Ryo Sakai told reporters.
As Japan showcased its submarine, Germany's ThyssenKrupp AG's launched an advertising campaign to illustrate its commitment to build the 12 submarines in South Australia.
"The German industry, backed by the German government felt it would be appropriate to explain to the Australian public the nature of the proposal being made," said John White, chairman of ThyssenKrupp Marine Systems Australia.
ThyssenKrupp is proposing to scale up its 2,000-ton Type 214-class submarine.
France's state-controlled naval contractor DCNS has proposed a diesel-electric version of its 5,000-ton Barracuda nuclear-powered submarine.
Still, according to Bisley, Japan appears to be the front-runner.
"The pro-Japan sentiment is pretty bipartisan at this stage and as long as there are jobs in Australia there's actually not much about the J-option" that the two major parties don't like, Bisley said.
America's Raytheon Co, which built the system for the Collins-class boats, is vying for a separate contract for a combat system for the submarine with Lockheed Martin Corp., which supplies combat systems to the U.S. Navy's submarine fleet.
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