CHRISTCHURCH, New Zealand — Travis Reddy wants to buy a Brazilian weapons manufacturer.

As the CEO of DefendTex, an Australian firm specializing in precision-guided weapons, rockets and loitering munitions, he’s encouraged by a government-run program aimed at growing the domestic industry’s capability to build long-range weaponry. The problem, though, is he can’t get the financial backing expected from the Australian government’s Guided Weapons and Explosive Ordnance Enterprise program.

Instead, large defense contractors, especially those hailing from overseas, are receiving preferential treatment, according to a local analyst.

“There’s a tendency by government to default to the primes. Everything must go through Lockheed Martin, Boeing, Thales or whatever. Let’s see what SMEs [small and medium enterprises] can do in terms of things like long-range missiles,” said Malcolm Davis, an expert in capability development and military technology at the Australian Strategic Policy Institute. “Give them a chance to actually demonstrate their capabilities.”

For months, DefendTex has been asking Export Finance Australia — the government’s export credit agency — for a yearlong AU$70 million (U.S. $46 million) loan to acquire cash-strapped Avibras in Brazil. Reddy said he’s depending on the government to assist, noting that domestic banks have refused to provide him a loan as a weapons manufacturer.

DefendTex’s exclusive negotiation period with Avibras has reportedly expired, as the timetable was to last until the end of June. Already the Chinese defense industry giant NORINCO is taking steps to buy the business. To sweeten the deal, NORINCO has expressed a willingness to manufacture Chinese weapons in Brazil.

But Reddy said Australia could benefit from Avibras’ extensive experience with guided weapons, gain intellectual property and quickly replicate manufacturing facilities on Australian soil. “We know that within 24 months we’d achieve full-rate production in Australia: the full IP suite, the seeker, propulsion system, the whole box and dice.”

Referring to mounting geopolitical tensions in the Asia-Pacific region, Davis highlighted the government’s slow response time with endeavors like the Guided Weapons and Explosive Ordnance (GWEO) Enterprise.

“At the moment it seems to be moving very much at a snail’s pace on a small scale, a very hesitant approach on the part of government, which I don’t understand given the very adverse strategic outlook we’re facing,” he said.

Backup plan?

The GWEO Enterprise program is the government’s official vehicle to develop a sovereign capability for producing long-range strike weapons. It currently boasts about 900 personnel and was formally created in May 2023 when Air Marshal Leon Phillips was appointed its inaugural chief.

“The GWEO group was established to accelerate the development of a guided weapons and explosive ordnance manufacturing industry in Australia,” Phillips told Defense News.

He outlined the enterprise’s two main functions: to establish a manufacturing industry, and to manage the acquisition, sustainment and support of weapons. According to the Defence Department’s website, the government is spending $4.1 billion to increasingly buy long-range strike systems and locally manufacture longer-range munitions.

However, Reddy said the program’s lean toward American defense companies is hindering plans like his.

Indeed, the government has appointed the Australian arms of the American firms RTX and Lockheed Martin as GWEO’s strategic partners.

“The strategic partners and their U.S. parent companies are working with [the Department of] Defence to explore opportunities for greater partnerships and, to this end, are developing detailed, costed plans for manufacturing guided weapons and their components in Australia,” Phillips said.

The department has said it will consider those “costed plans” in the second quarter of 2024.

“Support and assistance from the U.S. is critical to the success of the GWEO Enterprise. At the Australia-U.S. Ministerial Consultations in July 2023, the principals agreed to deepen cooperation on Australia’s GWEO Enterprise by collaborating on a flexible guided-weapons production capability in Australia. This cooperation is underway, and an initial batch of GMLRS [Guided Multiple Launch Rocket System] missiles will be manufactured in Australia by 2025,” Phillips added, referring to a AU$37.4 million contract for Lockheed Martin Australia, announced in January 2024.

James Heading, the director of programs at the Strategic Capabilities Office within Lockheed Martin Australia’s missiles and fire control division, said further developing industry is critical and that GMLRS is a good starting point for the country. International demand for GMLRS is growing, especially in Ukraine amid its war with Russia.

“That doesn’t necessarily mean everything’s manufactured in Australia,” Heading added. For example, he noted, it might be five to 10 years before Australian industry can unilaterally build missile seekers for the GMLRS.

Tenders for GMLRS production-related requirements in Australia close around the June-July time frame this year, which will lead to the assembly of GMLRS kits starting next year at the munitions storage base Defence Establishment Orchard Hills in Sydney. What will follow is the gradual introduction of domestically assembled components, before ramping up quantities, Heading said.

To be clear, Reddy said, he doesn’t take issue with the Lockheed deal, but does think the government needs a backup plan.

“I’m not saying don’t do GMLRS, don’t do HIMARS [High Mobility Artillery Rocket System]. Do all of that and preserve 5% of your budget [for] a plan B,” he said, referring to government funding to support domestic industry acquisitions. “That would be the pragmatic approach to ensuring we get the best of both worlds. So if the world goes to hell in a handbasket tomorrow, we’ve got something we can respond with.”

He argued that the purchase of Avibras would be a “very cheap” insurance policy that does not detract from any long-term plans dependent on American firms.

Davis agreed that there isn’t a clear path from the Lockheed deal that would lead to more locally made, sophisticated capabilities. “I think it’s taken an inordinately long time to actually make any progress, and we’re only talking about assembling GMLRS components here in Australia in 2025.”

He said the government should encourage industry to pursue the local production of longer-range weapons like the Long Range Anti-Ship Missile, the extended-range variant of the Joint Air-to-Surface Standoff Missile, and the Tomahawk cruise missile — all of which are made by American businesses.

But the GWEO Enterprise isn’t just about American-made weapons. For example, the Spike missile by Israel’s Rafael Advanced Defense Systems and the Naval Strike Missile by Norway’s Kongsberg are both candidates for domestic production.

“GWEO is really about giving industry the opportunity to participate,” Heading said, noting gaps in Australia’s defense industry are due to capacity rather than ability.

To overcome these issues, Davis suggested the government further prioritize the GWEO program as well as incorporate lessons from the Russia-Ukraine war.

“We should actually be looking at how can we, ourselves, develop the long-range strike capabilities that can support the needs of the ADF [Australian Defence Force], the needs of our allies and partners, and offer us an export capability as well,” he urged. “Once again, there seems to be this lack of boldness and vision on the part of the government just to even think beyond the most minimalist application of GWEO in the near term.

“I don’t understand why their perception of GWEO is so constrained and so limited.”

Preparing for war

Part of the problem is Australia’s peacetime mindset, Davis said.

“We assume that nothing bad will happen in this decade, and that we’ve got 10 years to wait. Ironically, we’ve said in past defense whitepapers that we no longer have 10 years of strategic warning, but that mindset of 10-year strategic warning time is still pervasive in the defense organization and within government,” he explained.

“There needs to be recognition that we might have two, maybe three years to prepare for a major war,” he added. “So what can we do in the next two to three years in terms of mass production of capabilities? That’s going to take some risks, it’s going to take a bit of vision.

“My concern is that those decisions won’t be made and we’ll end up going into a next war in 2027 or 2028 with what we’ve got — and not much to show for GWEO.”

To be sure, the program hasn’t been idle, Philips said, noting several major achievements to date, including upgrades to infrastructure and technology at the government-owned Mulwala and Benalla munitions factories operated by Thales Australia; remediation of the Port Wilson wharf to enable large-scale imports and exports of weapons; commissioned construction of additional storage and distribution infrastructure; and domestic production of 500-pound BLU-111 bombs.

In addition to the GMLRS contract, Phillips also pointed to accelerated acquisitions of Tomahawks, JASSM-ERs, Naval Strike Missiles and sea mines from overseas.

But these foreign purchases by the government don’t help with situations like Reddy’s.

“They’re not taking any steps to develop a domestic, sovereign alternative to the kind of weapons they need,” he said. “In the event of high-intensity conflict, will Australia as a nation have the ability to manufacture the ordnance that it needs to keep the Australian Defence Force capable of conducting its mission? The overwhelming answer is no.”

Gordon Arthur is an Asia correspondent for Defense News. After a 20-year stint working in Hong Kong, he now resides in New Zealand. He has attended military exercises and defense exhibitions in about 20 countries around the Asia-Pacific region.