Speech to the Defence Industry Association Luncheon Meeting; Sea Cadet Headquarters, Evans Bay, Wellington

Association Chairman Mike Wardlaw, ladies and gentlemen. Thank you for inviting me to address your meeting today. This is the first of many interactions that we will have as part of my Defence portfolio duties. I am looking forward to visiting and familiarising myself with your businesses and exploring ways in which we can work together.

While not wishing to appear as though I pick favourites, I have - on becoming a Minister - lamented the need to transfer to the non-active Reserve of the Army. A field engineer with nothing to blow up is not a happy Sapper so, if any of you have companies that conduct demolitions, please leave your contact details with one of my staff.

I am very pleased to have Defence Industry as part of my responsibilities. When discussions commenced on portfolio delegations, I requested a brief on the scope of your industry and was amazed at the breadth.

From inception in 1993 to encourage companies to co-operate in bidding for the ANZAC ship building project, you now work effectively in the broader promotion of New Zealand Defence opportunities - not just through the MOD and NZDF, but also through NZ Trade and Enterprise.

With over 40 commercial members and an annual industry turnover estimated to be rapidly approaching $1billion you are, by any measure, a substantial element of the New Zealand economy.

There is a perception amongst many that defence suppliers just make tanks, guns, warships and bombers. Of course, the truth is very different. Your company activities include aviation, electronics, communications, fabrication, facilities management, OSH, information technology, consumables, marine, mechanical, project management, simulation and training.

For most of you, Defence is a market segment - rather than a reason for your existence. A product, such as a piece of instructional software, might have equal or greater relevance to the education sector as it does for Defence.

I intend to do my bit to improve public and political understanding of this important fact and I believe that your annual Industry Forum and awards is one of the ways we can work together on better awareness and understanding of your contribution to the economy.

All this activity takes much time and skill and I wish to record my thanks to your Chairman and Committee members for giving up their time to help - not only the industry but - the whole of New Zealand.

Exactly how does a military-industrial complex work? There are many approaches but, unlike Australia and other countries, New Zealand doesn’t have a whole-of-Government policy relating to Defence Industry. In fact, current law specifically prohibits an acquisition option other than ‘best and fairest’. It also prohibits seeking counter-trade for Defence acquisitions offshore.

By comparison, Australia aggressively negotiates for rights to build military platforms or access to other markets as part of its Defence acquisition process.

I understand that Australia has, in the past, factored New Zealand Defence requirements into its calculations for tooling up production. This is not necessarily a bad thing - shared construction projects like RNZN ships are just one positive example of CER and CDR at work.

You will be aware that the Government is about to commence a Defence Review. It is unfortunate that, after waiting 12 years since the last full review, we find ourselves undertaking this vital exercise beneath the clouds of economic uncertainty.

While the current downturn brings extra challenges to the process that is not a reason for us to under-pitch the review. We may have to delay action on some choices, but better times will enable well-thought out research to be implemented.
While I am not at liberty to speak in any detail yet - as the Terms of Reference are before Cabinet - it goes without saying that the effectiveness of acquisitions and operational support will feature in the process.

I’m aware that there are many different models - ranging from the New Zealand buyer/provider split, to the Australian Defence Materiel Organisation model - for acquiring military platforms and systems. Each has its merits. The Government has signalled its interest in more PPPs (Public-Private Partnerships) and BOOT (Build, Own, Operate, Transfer) projects and this clearly has relevance for your industry.

You may not all be running your companies at the end of the Defence Review period of 2035 but, I’m sure, you will have spent some time contemplating the future. To set the scene for our shared challenges, I’d like you to contemplate a few of the questions we are grappling with in the political scene.

* What will the demographics and GDP of New Zealand then?

* What will a 19 year-old Kiwi be like then?

* What technologies will be pre-eminent then (society and military)?

* What will the world’s governance, management and legal systems look like by 2035 i.e. UN, international courts, nation vs non-nation state actors etc?

* The world population and GDP spread, based on current trends then?

* What wealth will we be seeking to defend?

Then consider what your companies will look like. What will your products be and to whom will you be selling them?

In the near future, the involvement of all of society, known as Fifth Generation Warfare (5GW), will be the norm. The reason for this is that warfare reflects society and there are strong political, economic, social and technological trends that are shaping our security environment. Examples of these include:

1) Pressure on the relevance of the nation state.

2) Rapid appearance of smaller economic entities.

3) Increasing loyalty to a cause rather than the nation.

4) The Internet and advances in bio-technology and nano-technology.

Just as in science, the rate of change of our security requirements is exponential rather than linear. The electro-magnetic spectrum, referred to as the cyber battle-space domain is gaining increasing relevance and this is one area where New Zealand can rapidly boost our international relevance without great cost. For your industries, all these factors represent opportunities rather than threats.

Thank you for your attention, and for taking the time from running your own companies to share your knowledge and experience with your colleagues and with me. I look forward to visiting your companies in the coming months. In the meantime, I wish you the very best of luck with your business and families.