Meagre funding and a lack of clarity over the direction of the advanced technologies component of AUKUS is threatening the success of the all-important ‘Pillar II’ initiative, according to the nation’s top industry group.
In a new report on Monday, the Australian Industry Group detailed concerns from more than 100 defence industry stakeholders that AUKUS Pillar II “remains under-developed”, and called for the program to evolve.
“Our research shows that while there is strong political backing for AUKUS Pillar II, the initiative must be given clear capability and acquisition pathways and specific, designated funding,” Ai Group chief executive Innes Willox said.
The Ai Group’s call to address confusion that is “hampering industry engagement and investment decisions” comes just months after similar calls from industry groups in the United Kingdom.
Announced as part of the trilateral security pact in 2021, AUKUS Pillar II is focused on developing and sharing emerging technology among Australia, the United States and United Kingdom.
It is focused on six advanced capabilities: underseas capabilities, quantum science, artificial intelligence and autonomy, advanced cyber, hypersonics and counter-hypersonics and electronic warfare.
But despite a handful of successful projects and changes to defence trade controls, the report said “perception of a lack of meaningful progress” persist, and that “avenues for industry engagement are unclear”.
“Many in industry remain unclear as to the expected scope of desired Pillar 2 capabilities. Beyond the six broadly defined advanced capabilities, there is a lack of clarity which specific capabilities and technologies within those should be pursued,” it said.
“Briefings from Defence have provided a degree of further information, but this is still not sufficiently detailed for industry to plan and undertake investments in specific capability development programs.”
Confusion also lingers over which Defence projects fall within scope, with “several pre-existing projects… labelled ‘AUKUS Pillar 2’ ex post facto without clear criteria or guidance for that designation”.
Many of those projects, such as the innovation challenges pursued by the Australian Strategic Capabilities Accelerator (ASCA) , have also been “competitive rather than collaborative”, and have done little to encourage technology sharing.
Another major concern is “considerable uncertainty regarding the scale and timeline of funding availability for Pillar II projects”, despite Defence’s assurances that funding will be made available, as well as poor communication from government working groups.
“Defence has indicated that it intends for Pillar II to send a market signal to industry to catalyse additional investment… However, industry reports that the information provided thus far is insufficient to function as a market signal,” the report said.
“The communication of desired capabilities is too high level to plan investment, funding embedded within the Integrated Investment Program [IIP] is difficult to identify, and near-term acquisitions spending is insufficient.”
“Senior industry stakeholders report that these uncertainties mean there are limited market signals for investment, and without greater detail and clarity it is challenging for industry to develop the business case for investment in new capabilities…”
The Ai Group has called for the government to develop a clear national strategy to assist industry to position itself to support Pillar II and move it “from a perceived policy-oriented initiative to a capability-focused program”.
Mr Willox that this would allow progress to accelerate after what he described as almost four years of “groundwork”, boosting “defence innovation and – most importantly – delivering advanced capabilities to the Australian Defence Force”.
The strategy would contain a detailed plan explaining the purpose of Pillar II and any projects, funding and timelines, and be accompanied with regular briefings at the unclassified and classified levels.
New “capability-focused funding lines“ should also be stood up to support near-term delivery horizons, while reforms to harmonise procurement pathways and intellectual property policies could also be considered, the report said.
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