Few countries have truly efficient defence industries.
Efficient countries usually need:
1. A
large domestic arms market (eg. the US, Russia and China) and
2. a
stable arms export market which owes much to the international political power
of the
exporter (especially the Soviets/Russia and the US, how otherwise could
the US have
continually forced the F-35 on Canada?) or
3. Mainly
a highly efficient and stable arms export market (eg. South Korea, Spain, to an
extent Sweden) or
4. Specialised
needs to meet constant national threats (eg. India and Israel in conventional
weapons and even more in their nuclear weapons.) but
5. For
other countries there are ongoing debates about clearly inefficient defence industries
(amounting to massive
central government subsidies) versus arguments of defence self-
reliance and "nation-building". Australia has not attempted to build the latest 4th or 5th
generation jetfighters, so why build the latest large warships?
Australia lacks points 1 to 4 but 5 fits it well, as the
following article illustrates.
ARTICLE
Andrew Robertson
for Australia’s ABC News, July 26, 2016, in part reports http://www.abc.net.au/news/2016-07-26/productivity-commission-on-south-australia-submarines-build/7662296
"Productivity Commission: Building submarines in SA is
'a return to bad old days of protectionism'
…the Productivity Commission has now said without a
better product to justify the extra cost of building submarines at home,
"productive resources (labour, capital and land) are diverted away from
more efficient uses".
In other words, the billions of extra dollars spent on
building submarines in Australia instead of buying them from Germany, Japan, or
France could be better spent on developing the industries of the future.
…South Australia, with its heavy reliance on old-world
industries, has long been a problem child for politicians of all persuasions.
With the Government having bitten the bullet and allowed
the heavily subsidised car industry to walk, the $50 million bailout
of Arrium to keep its Whyalla steelworks open shows the political reality
of keeping voters happy will trump painful structural change.
In its latest report on Trade and Industry Assistance, the
Productivity Commission said the 30 per cent cost premium to build submarines
in South Australia is "a major step back from the historical reduction in
using Government procurement preference as industry policy".
[30% is a vast underestimate – more like the build-in-Australia price
will be 100% higher than the build in France price!]
"It's hardly surprising that the state with the most
protectionism — South Australia — also has towards the highest unemployment
rate, some of the lowest growth and is a significant net recipient of
Government subsidy," said Simon Cowan, research manager at the Centre for
Independent Studies.
"It's literally just a small niche industry being
protected to the tune of billions of dollars a year. It just doesn't make sense
from any perspective other than how do we try to shore up votes in
Adelaide."
According to its research, the Productivity Commission
said the effective assistance being given to the companies who will build
Australia's next generation submarines is "higher than the peak historical
levels recorded for the automotive and textiles clothing and footwear
industries prior to the significant economic reforms of protection".
…However the Australian Industry Group, which represents
the manufacturing sector, said the submarine deal is not protectionism but nation building…” See WHOLE
ABC Article.
COMMENTS CONTINUED
New submarine selling countries find it is difficult to
break into the submarine export market. Submarines are high cost, specialised
products that frequently need to be tailor-made for each customer country.
A country usually needs an already proven reputation that it
can maintain subs as they age in terms of ongoing advice/expertise for overhaul
and ongoing spare parts availability. I understand that there were problems in the
ongoings for the Collins.
As with the Collins (Australia entertaining the notion of
selling 2 to New Zealand?) certain submarine building Australian Defence
Ministers will imply Australia can build and export Shortfin submarines or at least be a
regional hub for DCNS Scorpene parts.
- This is unrealistic because of licensing and
intellectual property restrictions and realities.
- Also Australia would be competing in Shortfin
selling against the Shortfin experts DCNS of
France.
- France would remain the main place where the original
submarine parts and spare parts are
manufactured
- Also Australia would be competing against the
world’s most successful submarine seller -
Germany's TKMS and against the TKMS designs that South Korea builds.
- Russia is also a low cost builder of repute, and
- China is becoming a serious low cost competitor.
Pete
7 comments:
Dear Pete,
At first I can't see a reason for excessive costs building submarines in Australia.
Excessive costs are not related to build the steel hull down under and fit the equipment in. The excessive costs are related to building Australian made (engineered) parts. I count the control and combat system as such a expensive nonsense.
Excessive costs can only occur in case the company building them is owned by Australia itself. Best case would be a foreign company building the submarine in Australia. Australia has not to bother about the companies loses in case of late delivery and related charges.
Exporting submarines? Start simple with cars or better bicycles.
Regards,
MHalblaub
Hi MHalblaub
One's observations can partly be based on the problems with the Collins of developing a first of class design at almost the same time as putting it in production.
Industrial mix of "too many cooks" has already become obvious with Australia's current major and comparable shipbuilding fiasco - the Hobart Class Air Warfare Destroyer - again being built in Adelaide again by ASC and others.
In addition to DCNS and ASC a French propulsion subcontractor will need to understand the major problems. Combat system will probably be won by Lock Mart but will still involve Raytheon and other major US and foreign partners. Federal Government, State Government all stirring the pot.
Sheltered workshop.
The insides of the Shortfin SSK will have many new innovations compared to the Barracuda insides - especially for the Shortfins whole propulsion system, fuel-water tanks, balance-buoyancy.
For the difficulty of attributing costs and subsidies see pages 36 and 37 of http://www.pc.gov.au/research/ongoing/trade-assistance/2014-15/trade-assistance-review-2014-15.pdf
For the complexity of goods and services inputs see page 38 of http://www.pc.gov.au/research/ongoing/trade-assistance/2014-15/trade-assistance-review-2014-15.pdf
Also I've read somewhere that it will cost Australia 300% more to gear up to to make the plate submarine steel in Australia than using the steel already being made for Barracudas in France.
And this is being positive :)
Pete
The submarines market : articles from France
1/ The Who's who (old article but not so bad) :
https://www.frstrategie.org/publications/defense-et-industries/marche-des-sous-marins-d-attaque-conventionnels-un-etat-des-lieux-des-competiteurs-2-5
2/ More and more blue water submarines
http://www.dsi-presse.com/?p=7757
3/ The AIP competition (not so old article)
http://meretmarine.com/fr/content/sous-marins-la-bataille-des-aip-est-engagee
4/ The next competition (very very important) is the norway competition, who'll be the winner ?
Article without pen but with a french flag :
http://www.latribune.fr/entreprises-finance/industrie/aeronautique-defense/megacontrat-en-norvege-quelles-sont-les-chances-de-dcns-562795.html
5/ Today, australia isn't a competitor, wait and see.
Today, australia need USNavy help to choose a submarine.
The next step is to launch the new australian submarine.
After all, why australia couldn't sale submarines in the future ?
Thankyou "Froggy" a la France, for those links.
I will read them and then report back to you.
Regards
Pete
Hi "Froggy"
I'm currently reading https://www.frstrategie.org/publications/defense-et-industries/marche-des-sous-marins-d-attaque-conventionnels-un-etat-des-lieux-des-competiteurs-2-5 (using right-click mouse, Translate to English)
It is a long and excellent analysis of the international (conventional attack SSK) submarine market. It also comes with a very good map (dated around 2014-15) on current attack submarine orders.
I'll discuss some major points from it after I finish.
Regards
Pete
Hi Pete,
One of the points made was needing a large arms market. I recall someone a little while ago mentioned diesel subs are a bit better in shallower waters than nuclear subs, and the US could do with some diesel subs which can be used closer to home, so the nuclear ones can be freed up for overseas deployment. Sorry I don't have the link. Was it your site?
Do you think there's any likelihood the US could be pursuaded to buy, say, ten subs(the more the better though), from their ally, Australia? Aussie subs would have the advantage of very long range, if nothing else. The subs won't start being built for many years, so there's time for the diplomats to work their magic.
Adrian
Hi Adrian
The US won't be buying small, conventional subs, because the US:
1. is developing SEAL Delivery vehicles (SDV) (effectively battery powered, very small subs) and UUVs that can operate from an SSN or SSGN 100km from shore, then move close to beaches
2. the limited fully underwater duration of conventional subs make them indiscrete - hence at a major disadvantage - especially against the US main opponents - which are the subs of the Russian and Chinese navies
3. If the US ever wanted to build conventional, diesel powered subs, it would build its own. TONNAGE wise the US still builds more subs than any other country (including China and Germany)
Australia has no economic advantages over other submarine building countries (especially Germany and France) so Australia selling subs to anyone is highly unlikely.
Regards
Pete
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