Andrew Greene: Why Austral stake sell-off to South Korean firm is ringing alarm bells in Tokyo

Austal is scheduled to start building Japanese designed warships for the Navy at its Henderson shipyard south of Perth next decade.

However, a decision by Treasurer Jim Chalmers to allow South Korean company Hanwha to increase its ownership of Austal from 9.9 percent to 19.9 percent has caused shockwaves in Japan, a longtime strategic rival in north Asia.

Back in August the Albanese Government announced Japan’s Mitsubishi Heavy Industries had been selected for the $10 billion project to build Australia’s future fleet of lethal General Purpose Frigates with its cutting edge Mogami design.

At the same time the Government confirmed it had entered a “strategic shipbuilding agreement” with Austal to form a new subsidiary, Austal Defence Australia, which would be expected to eventually build Mogami warships, subject to performance on other projects.

Well before MHI had clinched the lucrative prize, alarm bells were already ringing in Tokyo about South Korea’s intentions in WA as Hanwha fought to secure a bigger stake in Austal, which was long expected to build the new frigates.

Last month, The West Australian revealed Tokyo’s Ministry of Defence had on at least two occasions written to the Defence Department in Canberra detailing its unease with the bid made by Seoul based weapons company.

On Friday Tokyo’s worst fears were realised when the Treasurer confirmed he had accepted the advice of Australia’s Foreign Investment Review Board to allow the increased South Korean ownership of Austal, with “strict conditions”.

“What is the point of having national security criteria in the FIRB process if it just ignores them, and what does ‘sovereign’ shipbuilder mean any more” one figure connected with Japan’s MHI told The West.

“I’m not sure how Austal can credibly say they are Australian now. Hanwha’s share is now bigger than that of Andrew Forrest’s (whose investment vehicle Tattarang currently holds a 19.3 per cent shareholding).”

Dr Chalmers insists his approval of Hanwha’s increased stake will include limits on access to sensitive intellectual property held by Austal and “stringent criteria” on any nominee appointed to the Austal board.

The assurances have done little to calm nerves in Tokyo which views Hanwha’s takeover bid with deep suspicion given South Korea is considered both a strategic and commercial rival.

However late on Friday, Japan’s Defence Department issued a brief statement acknowledging the Australian Government’s decision and signalling it’s concern about South Korea’s potential access to its sensitive military technology.

“The Japanese and Australian governments have been maintaining close communication regarding the importance of protecting Japan’s technical information and intellectual property, and we will firmly take the necessary measures for the joint development and production of Australia’s next-generation general-purpose frigate.”