Page 26 - Australian Defence Magazine April-May 2021

26 DEFENCE BUSINESS CONGRESS
APRIL-MAY 2021 | WWW.AUSTRALIANDEFENCE.COM.AU
Stewart described the Rheinmetall-Nioa Munitions man- ufacturing facility now under construction in Maryborough as the first of its kind to be built as a greenfield artillery munitions factory anywhere in the world since WWII.
Construction was due to finish in March, with manufac- ture of the first shell from the world’s most modern artillery forging line expected in March 2022. Remarkably, 50 per cent of product was already committed to European cus- tomers, Stewart disclosed.
Discussing Defence budgets, ASPI Senior Analyst Mar- cus Hellyer pointed out that the government had deliv- ered on funding commitments made in the 2016 Defence White Paper.
In the recent budget these fixed line undertakings, not linked to any percentage of GDP, had been extended for a further four years, with 2020-21 expenditure of $42.7 bil- lion rising to $72.7 billion in 2029-30 – a nominal growth of 88 per cent.
Between acquisition and sustainment, Australia’s de- fence industry would need to deliver around $25 billion in capability per year, Hellyer noted.
Dr Karen Stanton, owner of Brisbane-based thermal pro- cessing specialists HTA Group, shared her experience of the three years involved in the group establishing a US opera- tion in Los Angeles – “definitely longer and harder than ex- pected”. Patience was required – “everything is a process”.
Vital factors included relationships and trust, close atten- tion to compliance, and funding for setup and expansion. Op- portunities were significant for those companies that could meet demand. This took in market size, expansion opportuni- ties, the relative value of each customer, the ability to special- ise, and access to expertise, skills, critical supplies and essen- tial services – “take your trusted suppliers on your journey”.
Also vital was working with a local champion with exist- ing connections and relationships,
ABOVE LEFT: Major General Simon Stuart presented on behalf of Chief of Army about the challenges facing the organisation.
ABOVE RIGHT:: Chief Defence Scientist Professor Tanya Monro updated delegates on DST Group’s STaR Shots and more.
“Working remotely from Australia is just too hard. Amer- icans want to talk to you face to face, to get to know you – so having someone on the ground from the beginning is important,” Dr Stanton commented.
Not all Australian defence industry needed to be sover- eign, Dr Ben Greene, Group Chief Executive of EOS, stated in discussing sovereign defence industry as a fundamental input to capability.
“There is a long-term, valued and respected role for lo- cal subsidiaries of foreign entities, controlled from foreign countries and even staff by foreign employers,” he said. “We are evolving a definition of ‘sovereign’ which embraces any entity, including any foreign-owned entity, which we are certain will be in the trenches with us when needed.”
Key requirements for a sovereign enterprise involved Australian corporate management and control independent of foreign influence; business profit and loss reporting lo- cally, independent of a foreign parent; intellectual property owned, licensed and managed locally; and no obligations to support any parent entity defence offsets outside Australia.
The ability of the $270 billion Australian defence indus- try to deliver resilient jobs and capability was still some way off and deft engagement by government was required to ad- dress the threats to sustainability, Dr Greene stated.
Global supply chains were sometimes arrangements allow- ing some primes to avoid local suppliers. The lack of a formal offset requirement in Australia meant that strong embedded bias towards suppliers in offset-demanding countries was naturally rife, and local supply chains were essential.
Intellectual Property (IP) was an indirect control mecha- nism limiting local growth, even when the IP was developed in Australia. An array of larger SMEs and sovereign primes was needed to establish a balanced industry ecosystem.
“Any Australian SME which can grow towards the $2-3 billion value of a prime will likely have a growth rate which will trigger acquisition by an existing prime,” Dr Greene commented.
The Australian market could not support a global- ly-competitive defence company with technology and products aligned to current ADF requirements. This re- quired an administratively-transparent export licensing
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