Japan sets up international defense trade agency to boost US-2i India sale

A Japanese US-2 aircraft | Photo: ShinMaywa

The Government of Japan has set up an agency to manage the sale of defense equipment, in its latest moves to promote its entry into the international defense trade.

Australian Experience

This move comes after the Japanese offer for the sale of a development of the Soryu-class submarines was rejected by Australia in favor of a conventionally-powered variant of the French DCNS Barracuda submarine, last April. If the Japanese bid had been accepted, it would have been the first international sale of defense equipment by Japan since the end of the Second World War. Many observers had said that part of the reason for why the Japanese lost out was the lack of familiarity of Japanese industry with the international defense trade.
 
Australian defense journalist, Nigel Pittaway, observed to StratPost, “Although ultimately unsuccessful, Japan’s participation in the Australian Future Submarine project provided both the government and the local defense industry with valuable experience, in terms of arms export.”
 
“Because Japan had very little experience with the sale of defense equipment to foreign countries at the time the competition was run, the Australian government provided assistance to an industry consortium led by Mitsubishi Heavy Industries (MHI). The two other competitors, DCNS of France and Germany’s TKMS dealt directly with the Australian Capability and Sustainment Group (CASG),” added Pittaway.

New Agency

But now, the Japanese defense ministry has set up an agency to manage the government-to-government sale of defense equipment. The top bureaucrat in the Japanese defense ministry, Administrative Vice Minister Tetsuro Kuroe, wrote to the Indian defense secretary G. Mohan Kumar earlier this month informing him of the role to be played by the Acquisition Technology and Logistics Agency (ATLA) under the Japanese defense ministry in the discussions. The agency’s Aircraft Division, Project Management Department will represent the Japanese government in the talks to facilitate the sale of 12 Japanese ShinMaywa US-2i amphibious aircraft to the Indian Navy, which has been under discussion since 2011.
 
The agency was set up last year, but its role and functions have only recently been outlined, after the Australian decision on their submarine order was declared.

Bureaucratic Hurdles

Many of the hurdles to the purchase have been bureaucratic because of the absence of complementary Japanese government and bureaucratic structures and processes to match those of the Indian procurement process.
 
But in New Delhi, the case for the procurement of the aircraft has been stuck at the Services Capital Acquisition Plan Categorization Higher Committee (SCAPCHC) stage after clearing the Services Capital Acquisition Plan Categorization Committee (SCAPCC) in January because the Chief of Integrated Defense Staff to the Chiefs of Staff Committee (CISC) retired at the end of last February. The acting CISC does not have the financial authority to clear the case to the next level, which is the Defense Acquisitions Council (DAC). A new CISC is expected to be appointed next month.
 
The DAC will approve the Acceptance of Necessity (AoN), following which the process under the Inter Governmental Agreement signed during the visit of Prime Minister Shinzo Abe to India last December will commence.
 
Although the new Indian Defense Procurement Procedure (DPP) kicked into play in March, there are not expected to be any substantial changes required to be made by the Indian Navy in the procurement case.

Lowering Cost

The Japanese government has also commissioned manufacturer ShinMaywa to conduct a study to bring down the cost of the aircraft for Japan as well as the international market. The Japanese government will pay for the study.
 
But once the DAC issues the Request For Proposal (RFP), the Japanese National Security Council (NSC) will process the case under their Three Principles on Transfer of Defense Equipment and Technology.  

Chinese Amphibious Aircraft Roll-Out

Also noteworthy is the roll-out last week of the Chinese AG600 amphibious aircraft, said to be the around the size of the Boeing 737, at a time when tensions have been simmering over territorial disputes in the South China Sea, especially after the Permanent Court of Arbitration ruling denying China a historic claim over the islands in those waters, two weeks back.