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Japanese officials visit Adelaide, fuelling debate over future of submarine industry -

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ELEANOR HALL: A delegation of Japanese government and business officials is visiting Adelaide, fuelling the debate about where Australia's next fleet of submarines will be built.

The group is touring local facilities as it prepares its bid to build the Australian fleet.

But the Federal Industry Minister says he'd like to see at least some of the manufacturing take place in Australia.

In Adelaide, Natalie Whiting reports.

NATALIE WHITING: The Federal Government has long moved away from the pre-election promise of former defence minister David Johnston that the next fleet of submarines would be built in Adelaide.

Now what it calls a "competitive evaluation process" is being held between Japan, Germany and France to award the contract.

But the Industry Minister Ian Macfarlane says that doesn't mean Adelaide will miss out.

IAN MACFARLANE: It may not build the first few, but let's not rule out, you know, there are a lot of submarines to be built and there's a lot of work to be done.

Producing components or putting components together is very much the modern face of manufacturing; you don't just build everything in the one spot.

NATALIE WHITING: He told RN Breakfast that the process is proving very competitive and nothing can be ruled out, but there is still speculation that Japan is the preferred option.

A former Japanese naval chief, retired vice admiral Yoji Koda, told a submarines conference in Adelaide earlier this year that it would make sense for some of vessels to be built in Australia.

But he believes the first submarine would need to be built in Japan.

YOJI KODA: The first one is the risk associated.

One of the ways to manage the risk is to build the first one in Japan.

NATALIE WHITING: A delegation of Japanese business and government officials are visiting Adelaide today and tomorrow.

South Australia's Acting Defence Minister Susan Close says it's a good opportunity to showcase the local industry's ability.

SUSAN CLOSE: Having them come and look at the kind of skills and expertise, and also the facilities that we have, can only help us to work more closely together in the future.

NATALIE WHITING: I know the Federal Industry Minister has indicated this morning that perhaps they will look at a hybrid build - is that something that South Australia would be happy with or do you want an exclusive build here?

SUSAN CLOSE: The ultimate aim would be for us to be building the submarine's here.

We have the capability to do it and that would create the most jobs.

NATALIE WHITING: The state has also been hosting delegations from France and Germany.

SUSAN CLOSE: As I understand it, they're required to offer three options - a build exclusively in their own country, a build exclusively in Australia, and then a hybrid option where elements will be built in both countries.

NATALIE WHITING: Defence analyst Mark Thomson says it is common for the first of class to be built in the home country and the rest in the purchasing country, but he warns that could be more expensive.

MARK THOMSON: The infrastructure's already there, they've got economies of scale.

If you want to reproduce that production line in Australia, the taxpayer's going to be paying a premium for doing so.

NATALIE WHITING: Are there benefits associated with that though in terms of maintenance and Australia being able to have some level of control?

MARK THOMSON: The level of control I think is a separate issue about intellectual property release.

In terms of being able to maintain the vessels, we've certainly maintained submarines and surface vessels that have been built in overseas yards successfully in Australia before.

NATALIE WHITING: There were issues with obtaining intellectual property rights from the Swedish company involved in the last fleet of submarines, the Collins Class.

Mr Thomson says the Government needs to resolve those issues during the contracting this time around.

MARK THOMSON: That gives you the ability to adapt and change things as you go through without being beholden to the original designer.

NATALIE WHITING: With growing tension between China and Japan, and China and the United States, there are also concerns about how a deal between Australia and Japan would be received.

MARK THOMSON: I think there is potential sensitivity from China if we were to be importing submarines from Japan, but at the end of the day, this is a sovereign decision for the Australian Government and we shouldn't be beholden to the sensitivities of third parties.

NATALIE WHITING: If Japan is the successful bidder it would be the first time it exports military technology, but its parliament has been moving to support the process in recent weeks.

ELEANOR HALL: Natalie Whiting in Adelaide.