SYDNEY – Australia’s new $50 billion submarine fleet
should be built entirely within Australia, ThyssenKrupp AG’s shipbuilding unit
said, making the German firm the first bidder to publicly endorse domestic construction
as the best option.

Germany is up against Japan and France for one of the
world’s most lucrative defence contracts. Each was required under the terms to
provide three proposals for construction – entirely overseas, entirely in Australia
and a hybrid of the two.

A decision on the politically sensitive contract is
expected within months, ahead of an Australian national election in which the
deal and the jobs it will create are expected to be a key issue for the
conservative government.

“An all-Australian build is the best option for
Australia as it offers the most efficient and lowest-cost approach,” TKMS
Chairman Hans Atzpodien said in an address in Canberra.

“It has become quite clear to us that Australia has
the local engineering and technical skills as well as capacity to help build
the new submarine fleet.”

Competition for the deal has been narrowing to a race
between Japan and France, sources have told Reuters, with Tokyo playing up its
strategic support from Washington and Paris emphasising how its proposal would
help Australia’s slowing economy.

This week, France sent executives from French corporate
giants Airbus, BNP Paribas, Thales and dozens more to Canberra to talk up the
economic benefits of its bid.

TKMS is proposing to scale up its 2,000-tonne Type 214
class submarine, while Japan is offering a variant of its 4,000-tonne Soryu
boats made by Mitsubishi Heavy Industries and Kawasaki Heavy Industries.

France’s state-controlled naval contractor DCNS has
proposed a diesel-electric version of its 5,000-tonne Barracuda nuclear-powered
submarine.

Tokyo was initially seen as the frontrunner, due to
close ties between Japanese Prime Minister Shinzo Abe and former Australian
Prime Minister Tony Abbott, who was ousted in a party coup by Malcolm Turnbull
last September, and perceived support from Washington to build closer ties
between two key Asian allies.

Australia announced in a long-awaited White Paper
released last month that it would increase defence spending by nearly $30
billion over the next 10 years in order to protect its strategic and trade
interests in the Asia-Pacific region.

– Reuters