Japan Ready to Build Submarines in Australia

Japan is ready to match European rivals and build a fleet of submarines for Canberra entirely at Australian shipyards, a senior Japanese official said on Tuesday, after stumbling in its effort to win the A$50 billion ($34.76 billion) contract.

Tokyo was willing to train hundreds of Australian engineers in Japan's submarine-manufacturing hub of Kobe as well as in Australia as part of its offer for one of the world's biggest defense contracts, Masaaki Ishikawa, director general for Acquisition Reform at the Ministry of Defense, said.

His comments are the first from an official directly involved in the bid that Japan is willing to build the stealth submarines entirely in Australia, where jobs are a hot button political issue. Canberra is expected to order between eight to 12 vessels.

"Whatever option Australia chooses we are ready to provide the necessary technology transfers and skills," Ishikawa said in an interview. "We will optimize the role of Australian industry."

Japan had been the frontrunner to replace Australia's ageing Collins-class submarines with a modified off-the-shelf version of its 4,000-tonne Soryu-class vessel until then Prime Minister Tony Abbott opened up the bidding in February under pressure from opposition and ruling party lawmakers.

While Japan sought to stress the capabilities of its submarines, Germany's ThyssenKrupp Marine Systems (TKMS) and France's state-controlled naval contractor DCNS both said they would make a full build in Australia part of their offers.

The European firms have also courted the Australian defense industry and politicians for months, while Japan's efforts to do likewise have fallen flat.

Abbott's ouster earlier this month was a further blow to Tokyo given his close relationship with Japanese Prime Minister Shinzo Abe, sources have said.

Ishikawa said Japan would submit three options requested by Canberra: a full build in Australia, a hybrid option that would see the first vessels built in Japan and then the rest in Australia, as well as a complete overseas build.

It was up to Canberra to assess the risk and cost of each option, he added.

An expert advisory panel is expected to deliver its recommendation on the bids to the Australian government in November. The contract also includes a decades-long maintenance program for the submarines.

BID DEAL FOR ABE

Japan is offering a variant of its 4,000-tonne diesel-electric Soryu submarine built by Mitsubishi Heavy Industries and Kawasaki Heavy Industries.

"We already have an ocean-going submarine of the right size that is operating today at sea," Ishikawa said.

TKMS, which is proposing to scale up its 2,000-tonne Type 214 class vessel, has said it would turn a naval shipyard in South Australia into a submarine construction and maintenance hub for Asia.

DCNS has said it would share for the first time its stealth technology with the Australian government and is also planning a package of economic incentives.

Abe has a lot riding on the tender after lifting a decades-old ban on weapons exports in April last year as part of his more muscular security agenda.

Japan has yet to secure a major overseas arms deal since then, with its inexperience in the rough and tumble of global defense markets showing.

Ishikawa and other Japanese government and industry officials who travelled to the South Australian capital Adelaide last month to promote the Soryu submarines were stung by criticism over their unwillingness to commit to building all the boats in Australia.

That team, Ishikawa said, would deliver a clearer message next month in Sydney in a bid to regain lost ground.

There they plan a second presentation for potential suppliers and partners at the Pacific 2015 International Maritime Exposition, a biennial expo and conference that begins on October 6. A third presentation will be held in Melbourne on October 9.

In addition to highlighting the technical merits of Tokyo's bid, Ishikawa said the team would note Japan's investment in Australia, point to past industrial collaboration and talk up the benefit of building security ties with a fellow U.S. ally in Asia rather than buying vessels from distant Europe. ($1 = 1.4384 Australian dollars)