Concerns over delays to Japanese warship program at Henderson after South Korean investment approval

Concerns are emerging over complications and possible delays to a Japanese warship construction program at Henderson after a South Korean company was given permission to double its stake in West Australian shipbuilder Austal.

Tokyo is closely studying the impacts of a decision by Treasurer Jim Chalmers to approve a bid by defence giant Hanwha to increase its shareholding in the strategic shipbuilder which is slated to build Japanese designed Mogami frigates next decade.

Privately, sources in Japan have expressed disappointment and say Australia did not advise Tokyo of Friday’s decision ahead of the public announcement, which is likely to allow its North Asian strategic and commercial rival to gain a seat on the Austal board.

The Sunday Times can reveal that Hanwha and Austal were not informed of the Australian government’s decision to approve the South Korean company’s bid to increase its stake from 9.9 per cent to 19.9 per cent, before it was announced.

In August the Albanese government announced Japan’s Mitsubishi Heavy Industries had been selected to supply Mogami frigates to the Navy under Project SEA3000, with the first three warships to be build overseas, before construction moves to Henderson.

“I am sure this Foreign Investment Review Board decision makes things difficult for the SEA3000 onshore phase and is going to possibly cause delays for the onshore construction by Austal”, a Japanese figure told The Sunday Times.

“It will mean lots of added procedures will need to be added to ensure intellectual property protection for MHI and the Japanese Ministry of Defence,” the Tokyo source said, speaking on the condition of anonymity so they could discuss sensitive matters.

“The (Australian) side can give guarantees that such incidents will not occur, however IP leaks may still happen if someone who knows the system well and its defects acts maliciously. We may not be able to completely prevent such malicious actions.”

“The South Koreans have done similar things to valuable Japanese intellectual property in the past, such as information regarding agricultural products”.

When announcing his long-awaited decision last week, Dr Chalmers insisted he had incorporated advice from relevant departments including Defence, Home Affairs, Foreign Affairs and national security agencies.

Dr Chalmers said several “strict conditions relating to governance, and data information and security” would also be imposed including limits on Hanwha’s access to sensitive information, and limits on the storage of sensitive information.

So far the West Australian government has not commented on the Albanese government’s decision but the Acquisition, Technology and Logistics Agency (ATLA) within Japan’s Ministry of Defence issued a brief statement acknowledging the move.

“The Japanese and Australian governments have been maintaining close communication regarding the importance of protecting Japan’s technical information and intellectual property, and we will firmly take the necessary measures for the joint development and production of Australia’s next-generation general-purpose frigate,” it said.

The Sunday Times last month revealed ATLA had twice written to the Australian Department of Defence expressing concerns about Hanwha’s proposal to increase its ownership of Austal, given the Perth-based shipbuilder’s role in constructing Mogami warships.