Former Minister for Defence Christopher Pyne released the Defence Export Strategy in January 2018, which aims to make Australia one of the top ten global defence exporters within the next decade. News in the past month that Australia has dropped in Defence exports rankings since that announcement needs some context.
New figures from the Stockholm International Peace Research Institute (SIPRI), the world’s leading authority on global military spending, show that Australia has become the world’s second largest weapons importer but has dropped to 25th in the export rankings.
Australia previously ranked as the fourth-largest importer and 18th largest exporter. It now imports more military equipment than any other country bar Saudi Arabia and exports less than Belarus, the Czech Republic and Norway.
The shift up in imports, however, is reportedly due to significant payments for the F-35 and for the Future Submarine programs rather than a wider general increase.
The government has expressed doubts over how the figures are calculated, however, with Ministers Payne, Pyne and Reynolds all raising concerns about the methodology of SIPRI over the years.
With this in mind, ADM asked the Defence Department how the figures around export licences are performing in the wake of the ANAO announcement that they will be reporting on the issue, due in August 2020. Submissions to this report opened this week and will close in February 2020.
“Defence received 1,995 export applications between 1 January and 30 June 2019,” a statement from Defence said. “Of these, 1,739 were successful and four were unsuccessful. The remaining applications were withdrawn, made inactive, lapsed, required no further action, or are under assessment.”
Anecdotally there is strong dissatisfaction with the process. While compliant with the relevant national and international legislation, it is lagging behind industry expectations in terms of timeliness. Some exporters advise that customers with reasonable delivery timeframes are not pursued due to the uncertainty of timely export approvals.
“The assessment time for non-complex applications is up to 15 working days, commencing from the date a complete application is received,” the Defence statement said. “For complex applications the assessment time is up to 35 working days. Between 1 January and 30 June 2019, the average time for assessing a non-complex application was 14 days, and the average time for assessing a complex application was 32 days.
“During the same period, two per cent of applications were received from universities and 16 per cent of applications were from Defence primes. The remaining applications are from other entities, including small to medium enterprises and individuals.”
While Defence does not publish detailed analysis of the applications received (for example the number of joint applications between industry and academia), high-level data can be accessed to get a high level overview of the data. These figures clearly show that 89 per cent of the applications that Defence receives are not complex. The remaining 11 per cent therefore are complex, and so take up much more time, not unlike complex programs in the acquisition/sustainment space.
It is noteworthy that where a foreign license is also required – for example where products are dual US and Australian technology – Defence will not commence processing the Australian permit until they are in receipt of the US permit. As US ITAR approvals are also onerous, complex and lengthy, this can effectively double the processing time and the sovereign risk to Australian companies. There are many contracts available on the international market that require a tighter turn around for licences than Defence can currently provide. This effectively removes market share from Australian companies and national economic benefit.
ADM understands there is also a fairly common practice of industry going to the minister to fast track applications for complex systems or situations where the technology is ‘overtly offensive’ rather than a defensive system. ADM has spoken to an SME who had huge troubles securing a mortgage for his house because the big four banks would not lend to a company/person so intimately involved in the arms trade.
Where complex applications are concerned, one of the criticisms is the lack of transparency within the processing. Applicants have no way of tracking the status of their applications and are dissatisfied with having to await responses from a generic email account. In contrast, US ITAR applicants are able to communicate with identified case officers and access the ELISA database to track the progress of the application.
ADM Comment: It is much easier for an Australian company to export cables or circuit boards than it is a complex weapons system like a radar (defensive) or sniper rifle (offensive), particularly to parts of the world where Australia may not have the same world view as the end customer.
There are many Australians that are unhappy, or at least uncomfortable, with the Defence Export Strategy in any context. The push to become a Top 10 arms exporter does not sit well with many voters despite the economic gains that such a campaign might bring.
The fact that Australia currently sits only a single place behind Saudi Arabia as the number two importer of arms globally is also not a factoid that plays well with the public.
It is also telling that not one company ADM approached was willing to go on the record in regard to their experiences with DEC, fearing that biting the hand that feeds them would be counterproductive to future efforts.
ADM will watch with interest as to how the ANAO report on the matter comes together, with the report open to submissions shortly.