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Japan May Return to Centralized Procurement

Jul. 5, 2014 - 03:45AM   |  
Technology Agreement: Australian Defence Minister David Johnston, left, next to Foreign Minister Julie Bishop, join hands with Japanese Defense Minister Itsunori Onodera, right, and Foreign Minister Fumio Kishida. The two sides agreed to look at joint development of Japan's air-independent propulsion system technology.
Technology Agreement: Australian Defence Minister David Johnston, left, next to Foreign Minister Julie Bishop, join hands with Japanese Defense Minister Itsunori Onodera, right, and Foreign Minister Fumio Kishida. The two sides agreed to look at joint development of Japan's air-independent propulsion system technology. (TORU YAMANAKA/AFP)
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TOKYO — Japanís Ministry of Defense has hinted it may try to re-establish a centralized procurement agency to streamline purchasing and concentrate talent and resources so Japan can participate in the global arms trade.

An MoD report also suggests the government should begin to subsidize arms development and the MoD be directly involved in the nationís basic science and technology research.

In addition to making suggestions about reforming Japanís pricey and uncompetitive domestic arms industry, the MoDís 26-page ďDefense Production and Technology Infrastructure StrategyĒ calls for procurement practices to be restructured and recentralized, which strongly hints at establishing a procurement agency, according to Satoshi Tsuzukibashi, director of the Office of Defense Production Committee at Nippon Keidanren, Japanís most powerful business lobby.

Historically, the former Japan Defense Agency procured arms through its powerful but increasingly scandal-prone Central Procurement Office (CPO). Following a long series of corruption cases, the CPO was successively reformed, abolished, and then replaced by a series of smaller, weaker organizations resulting in todayís Equipment Procurement and Construction Office.

The report argues that a more powerful centralized agency with specialized staff is needed for the MoD to better deal with procurement and research-and-development cooperation with highly complex weapons. The report specifies Japanís procurement of the F-35 joint strike fighter and its joint development of the SM3-Block IIA missile as examples.

ďWhile the report does not say it directly, it does suggest a reorganization and concentration of resources is needed. Itís been suggested somewhere that the organization could have as many as 2,000 personnel, although whether the MoD can do this or not, after the collapse of the old CPO, nobody knows,Ē Tsuzukibashi said.

The report also suggests the MoD reform its single-year, fixed-price, small-lot purchases that drive up costs and embed inefficiencies in production and procurement, and introduce long-term, incentivized and, when necessary, no-bid contracts, practices that are particularly welcomed by Keidanren, he said.

ďCompetition is important, but itís a fact that the only Japanese company that can make a main battle tank is Mitsubishi Heavy Industries (MHI). Why should it be put through bidding with other companies for something only it can make,Ē Tsuzukibashi said.

In Japan, arms procurement is dominated by a handful of electronics and industrial machinery companies for which weapons remain a small subset, averaging only about 4 percent of total sales, increasing costs and making Japanís defense industry unable to compete globally.

This goes back to a 1970 decision by Yasuhiro Nakasone, then-Japan Defense Agency defense director general and later prime minister, that Japan develop and procure its own weapon technologies, the so-called kokusanka policy.

Toru Hotchi, director of the MoDís Equipment Policy Division, said the latest strategy is the MoDís answer to a directive issued by Japanís first National Security Strategy in December, which urged the country to strengthen its defense industrial base and, following Aprilís relaxation of restrictions on arms exports, also promote participation in global research, development and production alliances.

ď[T]he document is a kind of summary of what JMOD has been trying to do and does not have a clear strategy about,Ē said Yuzo Maruyama, an expert on Japanís defense production industry from Japanís Doshisha University.

The report comes at a time when Japanís industry seeks to spread its wings. Just a few weeks before the report was released, Japanese Defense Minister Itsunori Onodera, Foreign Minister Fumio Kishida and their Australian counterparts, David Johnston and Julie Bishop, signed a deal to look at joint development of Japanís highly advanced submarine air-independent propulsion systems.

That agreement came on top of a series of other announcements including a UK-Japan defense technology agreement and deals announced or upcoming to sell equipment to India, the Philippines, Turkey, and southeast Asian and Middle Eastern countries.

This June, for the first time, 13 Japanese firms, led by MHI and including major brands such as Fujitsu, Toshiba and NEC ó hitherto known mainly for their consumer electronics brands ó set up stalls at the Eurosatory exhibition in France to sell a range of equipment including missile and radar technologies and tank engines.

Maruyama, who has advocated radical measures to shake up the Japanese defense industry, was disappointed over the lack of concrete proposals in the report.

ďI wanted to see clear global strategy of JMOD regarding the production and technology base. In this regard, Iíve got an impression that JMOD is still on the side of kokusanka rather than the clear commitment to the global market,Ē he said.

Keidanrenís Tsuzukibashi agreed that the strategy was vague but praised the MoD for attempting to put all the issues and proposed solutions into a single report.

He also downplayed the importance of the recommendation that the government directly subsidize weapon research and development, saying the available money would likely be marginal.

ďThe MoD has made a framework and they made a good job. The most important thing now is to hurry up and implement the recommendations,Ē he said.

Narushige Michishita, director of the Security and International Studies Program at the National Graduate Institute for Policy Studies, said the reportís recommendation that the MoD be involved in national technology research-and-development programs was a crucial change for a country that has developed an array of dual-use technologies without a strategic plan to weaponize them.

ďWhile people have been focused on Japanís defense policy, for example collective defense, the relaxation of the arms export principles and global arms sales is strategically a much more important change,Ē he said.

Last week, Japan announced the right to assert collective defense, which means coming to the aid of allies under attack if certain conditions are met. ■


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