Japanese officials seek to woo Australia over submarine contract

Thursday, Aug 27, 2015

A Japanese consortium eyeing one of the world's most lucrative defence contracts, a A$50 billion ($35.60 billion) project to build submarines for Australia, on Wednesday 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 defence ship-building industry.

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.

Executives from the Japanese companies and defence officials from Tokyo kicked off meetings with defence contractors, local officials and labour unions on Wednesday in Adelaide, capital of South Australia state.

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

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

"The state government, local defence industry and workers are committed to protecting Australia, by building a strong defence industry, which supports the workers in our shipyards," state defence minister Martin Hamilton-Smith said in a statement.

"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, Reuters has reported.

Australia's manufacturing industry is still reeling from the decision by Ford Motor Co, Toyota Motor Corp and General Motors Co to halt local production in 2016.

Liberal Senator 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 told Reuters in an interview on Tuesday.

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.

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. A recommendation is likely in November.

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