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Joint Standing Committee on Foreign Affairs, Defence and Trade - 13/02/2015 - Defence industry exports

ARMSTRONG, Mr Bruce, Chief Executive Officer, Aspen Medical

[14:56]

CHAIR: I welcome the representative from Aspen Medical to today's hearing. These are public proceedings, although the committee may agree to a request to have evidence heard in camera or, in fact, we may determine to hear certain evidence in camera. I remind you that in giving evidence to the committee you are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and any such action may be treated by the Senate or House of Representatives as a contempt. It is also a contempt to give false or misleading evidence to the committee. If you object to answering a question you should state the grounds of the objection and the committee will determine whether to insist on an answer. If we determine to insist on an answer, you may request that the evidence be given in camera.

Thank you for your submission. Before I invite you to make an opening statement, would you like to make any amendments or additions to your submission?

Mr Armstrong : No, thank you.

CHAIR: I invite you to make an opening statement before we proceed to questions.

Mr Armstrong : Thank you very much. Good afternoon. I acknowledge the chair of the Joint Standing Committee on Foreign Affairs, Defence and Trade and I thank the chair of the Defence Subcommittee and other members of the committee for giving me this opportunity to speak to you today.

Aspen Medical is deeply proud of the role that we play in maintaining the health and wellbeing of the Australian Defence Force service men and women not only in Australia but around the world. Our capability in delivering defence health services is underpinned by substantial experience, intellectual property, processes, procedures and financial discipline—and it is this capability that we are seeking to export around the world. In turn, every export project that we win and deliver strengthens the experience, the intellectual property and the processes and financial discipline that we are able to return back to not only the Department of Defence but also other Australian government departments. We therefore consider that the support of defence exports for Australian companies is in the national interest. It not only returns dollars back to the Australian market but also returns knowledge, capital and capabilities built in international markets for use back here.

Today I would like to present to you three areas for your consideration. First, I would like to provide a bit of context by giving you a very brief overview of Aspen Medical's contribution to Australian defence exports; second, I would like to provide a positive example of the kind of support that government has provided to us; and, third, I would like to highlight areas where we believe that government can facilitate exports further. Firstly, Aspen Medical is an Australian owned multi-award winning global provider of guaranteed and innovative healthcare solutions across a diverse range of sectors and clients, including defence, mining and resources, oil and gas, government and humanitarian. Our genesis was in a lounge room, literally: the two founders sat around the kitchen table and had a good idea. That good idea was to deliver innovative healthcare solutions that provided a better value proposition to the customers.

Our first contract, and you might think 'strangely', was with the United Kingdom National Health Service. We followed soon after that with health support to the ADF and AFP in the Solomon Islands. In just over a decade—we were founded in 2003—we had become a world leader in the delivery of healthcare solutions. We operate in any setting, particularly those that are remote, challenging or under resourced. We offer our clients a tailored and flexible service wherever it is needed, and this goes for everything from a single paramedic to a single nurse or a doctor or to a full spectrum primary healthcare solution; we go all the way up to aeromedical evacuation and to full surgical capability. We believe that our competitive advantage lies in our superior project management and our focus on outcomes and the quality of the service delivery our teams provide. We really do pride ourselves on a customer centric approach and a can-do attitude. Today Aspen Medical operates across 10 countries over four continents and employs in excess of 2,000 dedicated, experienced and highly trained professionals.

I request the subcommittee note that we currently derive less than 20 per cent of our total revenue from international markets. Our strategic goal is to increase our total revenue from international markets to greater than 50 per cent of our revenue over the next five years. In 2013 we were awarded the ACT exporter of the year across all categories, and subsequently judged the 2013 Australian winner of the health and biotechnology category at the Prime Minister's Australian Export Awards. In 2014 we were again awarded the ACT exporter of the year for the health and biotechnology category.

I would now like to turn to an example of what is working when it comes to government facilitation and support for defence exports. In late December 2012 Aspen was notified that it had been shortlisted as one of three potential suppliers to provide primary health care in Qatar, the others being a Canadian company and a US consortium. This opportunity arose from a decision by the Qatari government to outsource some primary healthcare activities. The body responsible for primary health care in Qatar is the Primary Health Care Corporation—PHCC—which sits under the Supreme Council of Health. The PHCC controlled 24 primary healthcare clinics and, as a trial, the management of the largest three, with a combined staff of 350, had been put out to tender. The opportunity to provide a compliant bid was dependent on a positive outcome from a reference site visit. We nominated an Australian Defence Force site for that visit. Confirmation of the planned visit by the senior group from PHCC only occurred, as it often does, during the ADF's Christmas stand-down period, with the proposed visit to occur in mid-January. The key criterion was to visit a primary healthcare service that resembled the potential services to be delivered in Qatar.

Aspen identified that the most appropriate ADF site was a medical facility at Duntroon. Recognising that permission would be required to enter the base, Aspen approached the Defence Export Unit for assistance. I refer to the Defence Export Unit as the DEU. The DEU personnel involved were extremely helpful and instrumental in obtaining access to that base. They helped in two key areas for us: they obtained approval at headquarters and at local level for the visit, and they obtained access clearance for foreign nationals to that ADF base. Without this practical support, the reference site visit would not have progressed. This site visit was enormously successful and demonstrated to the delegation the successful health services delivered by Aspen Medical to the Australian Defence Force. The delegation openly admitted during the visit that what they saw far exceeded their expectation. This site visit, together with our tender response and other visits and customer relationships, secured Aspen Medical as the preferred provider for the primary healthcare services for the government of Qatar.

I would now like to provide for your consideration some specific areas that we believe could improve the facilitation of defence exports. The first relates to advocacy by senior government officials. Written references often carry substantial weighting in the selection process for international contracts. Despite positive verbal feedback and instances of acknowledgement of outstanding service by Aspen Medical, more often than not it is difficult to secure a written reference from senior ADF or government representatives. It would assist Australian companies' efforts to win export contracts if there were a process whereby senior ADF or government representatives were able to provide written references.

The second area relates to ADF trade missions. Just as senior ministers invite business delegates and undertake trade programs during their international travel, where appropriate Aspen Medical would like to see CDF or other service chiefs or other similar senior Defence personnel also include a trade component during their visits to other countries in support of Australian defence exports. A successful export might start with a recommendation or introduction by a senior ADF member and enable the exporter to then more easily engage with the supply chain in a foreign country. We note and welcome DEU's program to promote the collective Australian defence industry sector overseas under the banner of 'Team Australia'.

The third area relates to introductions in Australia. When foreign defence related dignitaries visit Australia, DEU might be able to confirm whether any appropriate foreign defence supply chain executives are in that delegation. Once again, if appropriate, and where defence supply executives are identified, DEU might then proactively coordinate an event where Australian defence exporters can present their services or products locally.

I turn now to recommendations. In summary, Aspen offers the subcommittee the following three recommendations for your consideration. The first is that DEU develop and promote a program whereby senior ADF or government representatives are able to provide written references to support Australian export bids where appropriate. The second is that senior defence representatives such as the CDF—once again, where appropriate—include a trade component during their visits to other countries. The third is that DEU proactively coordinate events where Australian defence exporters can introduce their services or products to visiting foreign delegations.

In conclusion, Aspen Medical is deeply proud of the part that we are able to play in maintaining the health and wellbeing of our service men and women, not only in Australia but also overseas. Our capability in delivering Defence health services is now being exported around the world. We acknowledge that the Australian government, through the DEU, has facilitated exports by Aspen Medical, but we believe that this support can be enhanced further. Finally, we welcome this inquiry to explore other ways the government can better facilitate export of Australian defence products and services, and we commit to provide any additional support for this initiative.

CHAIR: Thank you very much for that. Broadly, the three recommendations appear sensible and we are happy to look into those.

In terms of your services, you have said that 20 per cent of your revenue comes from export. How many services does that equate to? What is the scope of those services?

Mr Armstrong : Predominantly, overseas, we are delivering primary health care in our contracts over there. To give you an example, we support primary health care in the United Arab Emirates through our national ambulance company. We also provide primary healthcare services in West Africa through the delivery of clinics on the ground.

In terms of defence exports, something that we are working closely on with the United Arab Emirates at the moment is looking at where we can support their training further. We are currently delivering on a contract there to provide health training to their military. As I said, we are looking to expand that further. In answer to your question, we are predominantly providing primary healthcare services and behind that I would say health training services.

CHAIR: Can I ask you about IP. Much of the discussion we have had with the defence industry has been around products as opposed to services, and the issue of IP—the control of IP, releasability, transfer, DECO et cetera—has come into that. Clearly, part of your value proposition is around your systems and processes.

Mr Armstrong : That is right.

CHAIR: And in some cases, I assume, things like your deployable surgical capability. Does IP play a role at all in terms of what you export? Are you ever contracted to export the IP to help someone else set up their own management?

Mr Armstrong : No, I would say the difference for me is whether it is registered IP. What we are more doing is exporting the knowledge capital that we own. Some products would have IP associated with that. That is less the case in what we provide in our services. They are not IP registered as such, but I would say to you that they are commercial-in-confidence knowledge capital. We apply appropriate confidentiality et cetera to make sure that that is all protected when we are providing those services. You think about what we provide in primary health care. Often we have knowledge capital about how we deliver those services but, in the end, there is no IP around that.

CHAIR: In some earlier interaction with Aspen the concern was raised that a lot of the defence industry policy focus has been on products and that services have not been well covered. Have you had an engagement with the current white paper process and Mike Kalms, who has been running that on behalf of the government, around policy relating to services as part of industry?

Mr Armstrong : I have no knowledge of anyone in the company having engagement around that white paper process.

CHAIR: When you are interacting with Defence do you ever find hurdles to them engaging or supporting you because it is a service-based export as opposed to a product-based one?

Mr Armstrong : I could not compare it to products because I have not had that experience. I can only refer back to the difficulty we have found, and that is, just getting that support. They will give us verbal support but to provide that written support is the challenge that I have found. I could not compare that to products as we do not deal in those products.

CHAIR: Do you get any feedback from diplomatic posts, so defence attaches or indeed DFAT staff, in regions that an opportunity may be opening up, or is the majority of that intelligence coming through your own networks?

Mr Armstrong : The majority of it is coming through our own networks, but I think there is a responsibility on us to also communicate and make sure that we are aware. So I would not put all the onus back onto DFAT and high commission and embassy staff to come looking for us. I think there is an onus on the company to make people aware that you have an interest in a region and what that value proposition is. Then I would have an expectation there might be some exchange of information and support. I think that does go on in some of the regions. In particular, the Middle East is a region where we are looking to focus a fair amount of our expansion effort.

Ms GAMBARO: Thank you very much for your presentation today; it is very practical. You mentioned that your first contract was in the United Kingdom and that was a domestic department there, national health. What were you doing there?

Mr Armstrong : Over there we provided a consultancy to get their wait list down for orthopaedic surgery. We provided the consultancy and then we actually contributed to the solution of that problem. As credible as it seems, that was the first one.

Ms GAMBARO: Very impressive.

Mr Armstrong : That really defined Aspen Medical. If I could just go on about that a little more, because it is the strength of the company now: they have the agility and the ability to quite quickly meet a diverse range of our clients' requirements.

Ms GAMBARO: When you are overseas in places like the UAE, are there requirements for you to have a certain percentage of locally engaged people as part of the contract process? And when you have been preparing contracts, where have the financial costs been the highest for where you have had to tender?

Mr Armstrong : I would say that places like the UAE have very challenging environments for an importer to do business in. They have what I would describe as quite complex licensing arrangements around a company's ability to deliver the services that we deliver, such as health services and health training. You have to spend quite a bit of money on navigating those arrangements. You have a choice to either go it alone and effectively become a branch over there, which is quite detailed and complex to do, or have a joint venture. You have a company on the ground, but it comes with a percentage—you having 49 per cent, as they have to have the majority share. So you have to combine with a local company. There is quite a large cost in becoming established in a country like the UAE.

Ms GAMBARO: I have one last question. The Australian defence trade cooperation treaty legislation now has three government departments—Customs, Defence and DFAT—administering the legislation. Do you experience any bottlenecks when you are trying to work overseas and are navigating through any of those departments in terms of medical products that may be deemed a security risk? Have you ever had to work your way through any of those minefields, so to speak?

Mr Armstrong : From my point of view, I think we enjoy a very productive and good working relationship with both Defence and, more recently, the Department of Foreign Affairs and Trade in our work in west Africa. Prior to that, we had done some work with them, but I think this has probably taken it to another level. So I could not raise any—

Ms GAMBARO: There have been no products that you have had to take overseas that have had export controls on them in terms of your being denied taking them overseas?

Mr Armstrong : Not that I am aware of.

Mr EWEN JONES: Just on a related thing concerning your work with the Department of Foreign Affairs and Trade: are you participating in Andrew Robb's trade missions to China, Korea, Japan or India?

Mr Armstrong : We wrote to the minister's office last year because we thought he might have been going to the US. So the answer is that we would definitely take part in those trade missions if they were going to regions where we want to develop our export markets. We made the decision that we would not take part in those ones, because they were not a priority at that stage. The US was certainly a priority, but there have been no visits there. We will take part in those missions when they go into regions that we are putting resource into.

Senator IAN MACDONALD: You would be aware that there is one proposed for the Middle East. With your involvement in Qatar, it might be of interest to you. Thank you for your submission, and thank you for what you do. The work that you guys do is certainly fabulous. I take your three recommendations, and Ewen has just mentioned one of them. They all seem fairly simple and fairly easy for the government to do. By your recommending that that should happen, is it perhaps the case that that is not quite happening at the moment?

Mr Armstrong : I would accept that maybe this is going on. We feel like we have got a pretty good relationship there. Maybe we have not navigated it well enough or it has not been communicated to us. I would not say that is not going on. We would say we would like to see more of it. In particular the senior Defence delegations, when they go overseas, clearly they are going to have first and foremost their own Defence objectives but we would like to see in the national interest that there be economic objectives perhaps around the promotion of Defence exports included with that. They may be going on but we have not been aware of them or involved.

Senator IAN MACDONALD: I have seen a couple of these. One was in the Solomons years ago. I remember the diplomatic staff there were over themselves to make sure the parliamentary committee saw what you were doing. I think anyone else who came within cooee of the place would take them around to your facility, which was fabulous I remember. Thanks for the suggestion. Our report will collect in its recommendations a lot of those thoughts.

Mr GRIFFIN: So you have not been approached, you are not aware of that activity going on and you certainly see it as being something that Aspen would be involved in if the opportunity presented itself?

Mr Armstrong : Which one was that?

Mr GRIFFIN: With respect to overseas delegations and so on.

Mr Armstrong : Oh yes, most certainly.

Mr GRIFFIN: I want to follow up on the UAE example you gave before. I take it that you have actually maintained yourselves as a separate company rather than doing a joint venture in terms of the UAE. Is that correct?

Mr Armstrong : Even though we are over there and delivering services, we are looking at both at the moment. So we are probably going to what is called a branch and that will be financially run from here under Aspen Medical but we need to go through all the licencing for that. We are also exploring at the moment an option for a joint venture.

Mr GRIFFIN: On that question about setting up over there as an entity independent of a local business, I take it from what you are saying there is a range of licencing costs et cetera?

Mr Armstrong : That is right.

Mr GRIFFIN: I could not imagine it would be a situation of ensuring you have got locally employed staff, considering there are virtually no locals?

Mr Armstrong : We have had different direction on the composition of our staff and some of that has been around nationality. I will not go into details of what we have been directed or what nationals but, as you might imagine, they have got a view on what foreign nationals they will accept.

Mr GRIFFIN: Do they actually get down to the level of saying who you can employ from a nationality perspective?

Mr Armstrong : We have received direction on that.

Mr GRIFFIN: That is interesting.

CHAIR: Have you interacted with EFIC and Austrade? If so, what is your impression? Are there improvements that can be made there to support service companies export?

Mr Armstrong : We have had some engagement with EFIC. I did not lead on that but my understanding was that that was a positive engagement and they certainly responded to the requests and requirements that we had. I cannot give you the detail on that because I did not lead on it. I would say my experience with Austrade has been it is another case of the onus is on our company to go to them and make them aware of what our requirements are and how they can support them. I personally attend events with Austrade. They will facilitate and tell you what to do. So from that point of view, that has been positive as well. I am personally not aware of how much we have tested the actual practical, 'can you help us do that?' Certainly it would seem to me that they are standing by to help where they can.

CHAIR: Thank you for your submission and for your evidence today. I echo the sentiments on behalf of the committee. Thank you for the work that Aspen is doing for the ADF as well as the Indigenous population here in Australia. It is much appreciated. You have been asked to provide some additional material. However, if there is any additional information you would like to provide to the committee, please contact the secretariat and they will advise you of a response date. You will be sent a copy of the transcript of your evidence and if there are errors that you notice you are welcome to suggest corrections for those.

Mr Armstrong : Thank you very much for the opportunity.