PODCAST: Mining boom to defence boom – Minister Paul Papalia, WA’s Defence Issues Minister

PODCAST: Mining boom to defence boom – Minister Paul Papalia, WA’s Defence Issues Minister

Western Australia’s strong contribution to Australias defence capabilities is set to advance even more in the coming years with the plethora of incoming projects under the 2016 Defence White Paper.

WAs Defence Issues Minister Paul Papalia joined Defence Connect to discuss the once-in-a-generation opportunity the state has to cement itself as a defence industry leader, nationally and internationally in the Indian Ocean region.

The former navy diver also discusses his time in the Royal Australian Navy, his drive to serve WA’s defence industry, the state’s transition from the mining and construction boom, the capabilities of the existing workforce and the future of shipbuilding in WA.

Enjoy the podcast,

The Defence Connect team.

 

Listen to previous episodes of the Defence Connect podcast:

Episode 57: PODCAST: Fostering the future of defence industry, Margot Forster, Defence Teaming Centre CEO
Episode 56: PODCAST: Propelling Defence through advanced automation – Andrew Seal, Siemens head of defence and marine solutions
Episode 55: PODCAST: Exports key to the future of Australia’s defence industry, Richard Marles, opposition spokesman for defence
Episode 53: PODCAST: Gearing Victoria for growth, Greg Combet, Victoria’s defence industry advocate
Episode 52: PODCAST: Championing Australian defence exports, David Singleton, CEO, Austal
Episode 51: Pacific 2017: Future Submarine Supply Chain Briefing
Episode 50: Pacific 2017: RN officers on ASW and why they chose the Type 26
Episode 49: Pacific 2017: Raydon Gates, Margaret Staib & Mark Skidmore, QinetiQ Australia
Episode 48: Pacific 2017: Dale Bennett & Vince Di Pietro, Lockheed Martin
Episode 47: Pacific 2017: Michael Lenton, Leonardo

Announcer: Welcome to the Defence Connect podcast with your host, Phil Tarrant.

Phil Tarrant: Good day everyone, it's Phil Tarrant here. I'm the host of the Defence Connect podcast. Thanks for joining me today. I'm down at Pacific 17, and it's been a good couple of days. We're in day two right now, been fortunate to run across a number of different people, but we've set up quite a lot of podcasts over these three days, and one of the ones I've been looking forward to most is with Paul Papalia, who is the member of the legislative assembly in WA. He proudly flies the flag for Western Australia. He's the Minister of Tourism, Racing and Gaming, Small Business, Defence Issues, Citizenship and Multicultural Interests. There's a lot things on your plate. How you going Paul?

Paul Papalia: Good day, Phil. I'm going well.

Phil Tarrant: Thanks for coming in, mate.

Paul Papalia: Thank you.

Phil Tarrant: Before we get on the Pacific stuff, Paul, I guess contextually, we're at the Pacific, it's a big naval show, we're talking about naval capabilities in the years ahead and what the government's going to do to equip our war fighters, both at home and abroad. But a lot of people might not know that you've actually got a navy background. You were in the RAN for a while.

Paul Papalia: Yeah. The navy's capabilities and equipping the navy well is close to my heart. I was a navy diver. I spent about, all up about 26 years in the navy. The last couple of years were various lengths of tenure as a reserve and full-time service. But, yeah, it's of a deep interest to me, not just from a political or professional point of view. I just have a lot of friends still serving in the navy and I have a keen interest in making sure they're well equipped and well supported.

Phil Tarrant: In terms of the defence industry and the role it plays, is the fundamental capability, which has been a big milestone that the industry has met, but you actually get the idea of having the best stuff to do the job that you need to do.

Paul Papalia: Yeah, the other thing I've experienced with the army as well, I served in Special Air Service Regimen in the days when clearance divers would go there and serve in a counter terrorist quadrant, and so many of my friends in that world rely upon our defence industry to equip and support them. I think generally, anyone who's served in the military is always going to have retained a desire to support those who serve currently, to the best of their abilities, and to the best possible level, so yes. I'm driven by that, I'm obviously motivated by supporting Western Australian defence industry. I'm a little parochial in that respect, but I can always do that in the context of doing what's best for the nation as well, and that's what I endeavour to do.

Phil Tarrant: On a holistic view, how would you describe Western Australia's engagement with the defence industry in Australia? Do you feel like you're a little bit left out?

Paul Papalia: Yeah. Western Australians, you will often hear and…We get accused regularly, well no, that's the Liberal party, I'm in the sane ones. We believe in the federation. Look, Western Australians will often be accused, probably with some reasonable evidence to suggest it's a valid accusation, that they complain a bit about being left out, but by I think, just by virtue of geography and spread of the population, demographics, we do often get overlooked to some extent.

What I would say now, it's an exciting time for defence but it's also an exciting time for Western Australia. We are on the Indian Ocean. We're the only state that looks to, when we look out to sea I say to the Indian navy people I meet and Indian diplomats that I meet on occasion, that when we look out to the sea, we look over the same ocean as the subcontinent, as many people in Africa and right across the Asian archipelago to the north. We are very much more engaged and aware of the Indian Ocean and that part of the world and geopolitical implications of that part of the world than, just by necessity, by virtue of where we are and also by virtue of decades of engagement through trade. We are deeply embedded in that part of the world.

I often have a little snipe at my colleagues over here on this part of the continent and say, "Just because you put indo- in front of Asia-Pacific it doesn't mean you're actually talking about the Indian Ocean and all the deep implications of strategy in that part of the world." It's very important to us that we get people to think about where our defence force is operating, about what areas of operations they might in the future be operating, how we can engage with another whole part of the globe, and how important it is for us to engage, and the opportunities that we have also to leverage off our already deep engagement through commodities. We've been trading with Africa. Western Australians, Africa is not a strange place. Many of our companies-

Phil Tarrant: Just across the beach really.

Paul Papalia: Well, many of our companies operate mining operations or mining services in Africa. Every year in Perth we have a conference called Africa Down Under. 3,000 African delegates come to Perth every single year. When I took office and got this role and one of my roles is citizenship and multicultural interests, I was meeting the honorary consuls and the consuls and I learned a little more about this particular conference, and it occurred to me and partly because I've got all these diverse portfolios, there was a lot of opportunity to use that deep engagement that we already have in one particular field of endeavour to engage in others. I would look at this and say, "Well, why aren't we talking to the same people or the same governments or the same businesses about other opportunities, other fields that we might be able to provide support or equipment or training or services?" Clearly defence industry is one of those. There's no reasons why we shouldn't be talking to those people about that subject as well as mining services.

Similarly the subcontinent, Middle East, Asia, we already, Western Australia is the place where most of the iron ore goes to Japan and China from. Most of the LNG goes from Western Australia. By roughly late next year or early the year thereafter, Australia will be the biggest LNG exporter in the world and more than half of that LNG reserves will be resident in Western Australia. We have the opportunity to use that fact in the endeavours, our endeavours with respect to the defence industry as well. Even beyond that, China, for example, they get their own oil, they're about to go to LNG, they're about to raise their domestic energy production to I think LNG's going to become, I think their target is to grow to 10% of their energy production from LNG in coming years. Western Australia I think about a quarter of our grain goes to China and we're the biggest grain exporter in the country. There are a lot of connections already. We should be using that to engage with our region, to grow opportunities in other fields of endeavour and defence is certainly one of those.

Phil Tarrant: What do you think needs to happen, it's a fair call to say that defence industry is very east coast-centric and it feels that WA is also vocal voices including yourself who are trying to champion growth within defence industry, within this, so the capability to actually start building some of these assets that are coming online as part of the 2016Y paper, massive defence spending coming up. What is it about WA you think that's going to allow you to sort of compete toe to toe with the states out east to get involved in some of these programmes?

Paul Papalia: To all of my friends out there, I don't want to sound like a whinger. I think part of the problem for Western Australia has been our own failure to advocate. We committed as a new government, we were elected in March this year. We committed to really ramping up that advocacy and people will have noticed that we appointed Raydon Gates, a wonderful advocate for us, really to be our eyes, ears, and voice in Canberra more than anything else. I'm the minister, the Premier appointed me as the first defence issues minister for Western Australia and we've created a Defence West office, and we'll have a much bigger role in advocating. We see that as our responsibility. It's not a criticism so much, although I'm happy to criticise the people on this side of the country occasionally, it's not that. We see that as a need for us to sell ourselves and tell people what we can offer.

Now, what I would say maybe is misunderstood is the extent of the capability that resides in Western Australia. People know there was a boom in the west-

Phil Tarrant: Mining boom.

Paul Papalia: They generally refer to it as a mining boom, but what they probably don't know over here is that was actually a construction boom. What was happening probably five, six years ago was the biggest construction, mining construction boom in the history probably of the world, really. There were huge projects. Multibillion dollar projects that really dwarf what's being spent in defence even though that's exciting and people are, it gets people's attention. We at one stage in Western Australia the State Development department had something like $300 billion worth of projects on the books.

There were things like Gorgon where there's now an operation, but when it was being constructed there was something like 15,000 workers, the vast majority of whom were skilled workers, working on building that project, on Barrow Island. As an indication of the impact on the state when these things came to fruition, when the construction ended and they went into production, Gorgon as I said, had around 15,000 skilled workers mostly working on that island building things. When it opened, there were 550 operating it. There's two implications of that. One clearly big impact on Western Australia for employment, because this wasn't the only project. There were multiple versions of these mega projects going on. They're now all coming to completion and they're shifting to production phase. We have tens of thousands of skilled employees, skilled workers out there either unemployed or underemployed. That's the first implication. That's very important, intense issue for us in Western Australia. Government's very focused on trying to address that.

What that means, though, on the flip side for the nation is that we have huge capacity, because these people have skillsets that in many respects are very readily transferable to the defence sector. The companies that employed them were compelled by a hugely demanding industry and tough environment, offshore oil and gas, mining in remote areas thousands of kilometres from population centres, these guys have developed capability, they are agile, they're innovative, and they're ready to respond to a really challenging environment that is in many respects very similar to what defence confronts. A lot of the challenges that they confronted are almost identical to those that we're trying to address in defence.

We've got all of these companies, SMEs, the primes as well, and thousands of skilled workers that can be easily set to work addressing the needs of defence, not just in shipbuilding, but also in a whole range, a huge spectrum of activities that could potentially look at the problems confronting our defence operators, work with our universities, because that's the other thing that happened. All of our universities became very focused on rapid research and development in response to these challenges in working with SMEs and primes to fix the problem. We can do that same thing for defence, for our defence force personnel. We can identify their problems, apply all these skills and knowledge and experience that have been accrued during the most demanding mining boom in the history of the world and bring it to defence. That's something people don't appreciate. I don't think they understand… we've got capacity to build things.

Phil Tarrant: If you have to crystallise the brief you've been given by your boss into a sentence, in regards to defence, the defence industry, what would it be?

Paul Papalia: Well, everything about Western Australia and the Western Australian state government is trying to grow jobs. It is a significant challenge that we confront. Everyone knows and you would have heard that we confront some pretty tough financial circumstances, not about this government's making, but we've inherited it, so we're dealing with it. A lot of it revolves around the solution, revolves around creating jobs, getting the economy going in a much more diverse range of activity. If you're talking about what the task is, it's to grow jobs, but in respect of defence it's to diversify the economy by making our defence industry a much more significant player. They're big anyway, and people don't appreciate that.

If you draw an arc from around Fremantle you can extend it up to places like Malaga in Perth or just north of Perth and out to the east to Jandakot down to Rockingham and Garden Island, if you draw an arc around that area, we have literally hundreds if not thousands of SMEs that are either deeply engaged in defence or partly or have the capacity to be engaged in defence. They're clustered around some of the biggest primes in the world, providing services already to defence, but with the capacity to do a lot more. That is something that I think is either very underappreciated or not appreciated at all, mostly on the east coast. It's not a criticism of people-

Phil Tarrant: It's a criticism of the media.

Paul Papalia: ... they just haven't been there.

Phil Tarrant: Is the media not putting enough emphasis on this?

Paul Papalia: I wouldn't criticise the media either. It's our job. My job is to communicate and yeah, we provide leadership and communications, and we're going to assist our defence industry by advocating on their behalf, educating people, communicating to the rest of the nation and the media, they're part of the audience, the real deep capacity that Western Australia holds and our ability to assist in a greater way and participate.

That's the other part of our defence sector that I, the other characteristic that I'd like to emphasise. Our guys aren't totally relying on defence, but so they have the capacity to participate in other activities, predominately in offshore oil and gas and the mining world, but we would also as a priority, this is something my boss has assigned to me as well, as a priority we want to grow export capability. Wherever we're doing things generally we will be looking towards, yes we meet the requirements of the Australian defence force, yes we meet the requirements of the Australia government, and any contractual obligations that we get to build something for them, but we'll be looking to develop either intellectual property or capabilities in the form of equipment that we hope would then be applicable to a much greater export opportunity.

Phil Tarrant: The government's only been in place for a little while now and you've set yourself-

Paul Papalia: Just over six months.

Phil Tarrant: Yeah, some ambitious targets firmly around job growth. Job growth is a-

Paul Papalia: I know that's a…

Phil Tarrant: ... a great driver for economic recovery and reform and-

Paul Papalia: It is, yeah.

Phil Tarrant: If you look at the property prices out there, I don't want to get into that, but it's reflective of the wider economic situation in WA, so obviously defence can be a driver for defence jobs. How are you going to know whether or not you're doing it well? If you look sort of one year, two years, five years into the future, how are you going to measure the success? Is it going to be how many more people are employed or they're not underemployed, they're actually at the skill level that they suit?

Paul Papalia: I think that's our primary objective, yeah. We want to reduce unemployment and underemployment. That's the other thing. We got around, I don't know, between 90,000 and 100,000 people unemployed, but beyond that there's another 150,000 or so-

Phil Tarrant: Skilled workers, yeah.

Paul Papalia: ... who are underemployed, and that is very concerning, because it can be as little as two hours a week. Obviously, clearly the primary objective is growing jobs and getting people back into work, but with respect to the measurement of success I'll be looking towards firstly, yes we are focused on trying to attract more of the Australia defence spend to Western Australia, so that's a clear objective. If we can get more than we've currently got, obviously then we will have succeeded to some extent, but we are trying to foster and support our industry in growing export opportunities, so that's a big objective too, and if we get to the point where we are known and recognised as an exporter in this field of endeavour, then we would have succeeded.

Phil Tarrant: I'd like to get your views Paul on, or your read on dynamics with the shipbuilding programmes, which are going to be underway in South Australia and potentially capability gaps that everyone's talking about right now. As it sits right now, number one, does South Australia have the skillset to be able to deal with these major campaigns moving forward, and there must be a level of frustration with WA seeing that you've got all these people there ready to roll who you can plug into major shipbuilding programmes or major defence programmes, but they're probably not going to move these guys, right? They're going to stay in WA. What's your read on all this?

Paul Papalia: One of the good things about this event has been the opportunity to catch up again with colleagues from other states and with shared sort of fields of responsibility. I've met with Martin Hamilton-Smith of South Australia. I probably have in the past made statements that have drawn a little attention, may have-

Phil Tarrant: You've been trading off some of your remarks for a little while now, which is a ...

Paul Papalia: ... may have been upsetting, yeah. But what I would say now, and I think this opportunity of meeting in this environment and getting together with people from different states and federal ministers and shadows, there is an opportunity I think, and there's a real need to, we should refine this whole process around shipbuilding, but also beyond that, just general defence spend. I agree and I fully embrace and support the objective of creating a sovereign defence industry capability, but that extends beyond shipbuilding. What is happening at the moment is I think there's been unnecessary conflict and competition as a consequence of the nature of how this process is rolled out.

I think there's an opportunity right now for, at federal levels, from real leadership, people to look at where the, instead of everyone scrambling around for opportunities as they come along in a highly competitive and not necessarily structured fashion, perhaps there's an opportunity for each state and territory to look at compiling and composing a proposal or a list of what their skillsets are, their capabilities, capacity and probably their competitive advantage, where they see their competitive advantage is, and then getting in a much more collegiate way discussing how we might instead of everyone applying for every opportunity and pursuing every possible contract, how we might apply our energies in a more refined way and a more focused way on where our capacities and where particularly our competitive advantages reside.

The alternative is we all spend a lot of energy and resources and tax payers money, quite frankly, on competing when there's probably more than enough opportunity for everybody.

Phil Tarrant: You got to know what battles to fight, right?

Paul Papalia: That's right… As I indicated we, in Western Australia offshore oil and gas and the mining sector in very remote locations in highly challenging environments. We have accrued some incredible capability sets in our universities and in our SMEs and also our primes, in some fields of endeavour. If that were recognised, it would be probably unparalleled in many respects, in some fields. Frankly, I can tell you, we would not in Western Australia as a government be pursuing something like some of the, I don't know, some of the army's projects for vehicles, for instance because we don't historically have that capability. It's not to say there isn't some small SMEs in WA who might contribute componentry or design or-

Phil Tarrant: Which they can do.

Paul Papalia: ... capabilities to that sort of a project, but we wouldn't be pursuing it as a state, as the objective of getting that-

Phil Tarrant: Tracking the programmes, yeah.

Paul Papalia: ... level of contract because that would be a pointless exercise, I think.

Phil Tarrant: I’s not successful.

Paul Papalia: I think there has been a bit of that going on where states and territories are pursuing every opportunity and regardless of whether or not they've necessarily got a deep capacity in that field, and so I'm not proposing that we exclude any state or territory from pursuing any objective, but there might be an opportunity whereby there's a lot more collaboration. One good thing that's happened I think is I understand today we might be hearing that the last state that doesn't yet have a defence advocate will be appointing one or a number. If that's the case that's great. Every state and territory now has a minister, either directly with a portfolio responsible for defence industry matters, and what that represents is an opportunity for everyone to, in a much more collegiate manner, address the challenges it confronts.

Phil Tarrant: What you've got there makes a lot of sense as a taxpayer but also someone within defence industry where a little bit more structure to, rather than everyone competing for everything, that you actually work out which programmes most suit. To be fair, South Australia's been exceptional at doing this. It's been doing that for quite some time. New South Wales only really had a rethink of its defence policy and has outlined exactly where it's going. That was in the wilderness for a little while.

Paul Papalia: Look, I am very happy to repeat my assertion that I made from opposition that South Australia represented the gold standard for defence industry advocacy. Regardless of whether you think they may have been a little more bold than they needed to be or whatever, they have been incredibly successful. The model that they established has to varying degrees been replicated everywhere, and so anyone who criticised, they were doing it really I think from a mean-spirited point of view, because ultimately what they did was they looked at it logically. They established a portfolio, they sought out professional advice, experience and knowledge to be able to guide their political leaders in conducting advocacy on behalf of the state and they did it in a collaborative manner that magnified any impact they had in Canberra.

Everyone needs to see, we've all watched that and we've all seen how successful it was and how necessary it was in many respects. That's a great thing and I commend them for it. All I'd say is that clearly they have been successful because everyone's been saying it.

Phil Tarrant: Well, there's a lot you could be emulating. You don't need to reinvent the wheel either, but you've only been on the job for six months now so still quite some way ahead.

Paul Papalia: We probably won't go down the path, we've got a minister, we've got an advocate, we probably won't go down the path of having an entire board in the same way as South Australia has. We've got a Defence West office like they've got a Defence SA. We might source specific knowledge on a needs basis, so as we require advice or support for a particular submission or project or advocacy we might seek out somebody with the skillsets that we need-

Phil Tarrant: Very pragmatic way to go about doing it.

Paul Papalia: Well, there's tough times in WA right now as far as funding goes.

Phil Tarrant: Just on that note Paul, and I've got to wind up, but how would you describe the morale of WA residents? I was out there a little while ago and you could just pick it, it's, you know, confidence just isn't there like what it used to be.

Paul Papalia: Look, what I would say is I think it's all up from here. It is confronting. It's challenging. The extent and the rapidity of the decline was rapid as far as employment goes and then the flow-on impact on property values and the economy generally, that was massive and really sharp. It hit and hurt. There's a lot of people still hurting in Western Australia, but I think we've got optimism that things have bottomed out and they're heading up. We are absolutely as a new state government focused on diversifying the economy. It's not just defence. I'm also the tourism minister with big opportunities in tourism.

Phil Tarrant: Qantas is flying through there now, which is pretty handy.

Paul Papalia: Early in March they'll be doing the direct flights to London. That'll be a big thing, but there's a lot of other opportunities in tourism because we've been underperforming there and we're applying new strategies there. We'll be focusing on international education. We've got a lot of knowledge and capability in agriculture and lot of other sectors, health services and the like and because of our geographical location we are well-positioned as I said to leverage off our other engagement in commodities to grow. Things are looking up. I think there is a degree of optimism. One thing, we got an overwhelming level of support at the last election I think because people wanted us to focus in a positive way on the future. They're not saying, "Keep focusing on the bad things." They're saying, "Fix it." That's a definite message, and now most people I think are supportive of us trying to grow things and it is positive.

Phil Tarrant: You enjoying the job?

Paul Papalia: Absolutely. It's incredibly exciting. It's wonderful to be here in the defence issues portfolio and looking around seeing so many of my former colleagues and mates doing so well in the military, those that remained, and as I said, I worked with the army as well, so I think I've got three of my very good mates from decades ago are now generals. I've got more admiral mates than you could poke a stick at, and all ranks in between from the non-commissioned all the way up to the very top. It's exciting to think that I can support them and we as a state can support them in getting the best possible equipment and having the best possible support on operations.

Phil Tarrant: Great way to finish it. Paul, really appreciate your time. Thank you.

Paul Papalia: Thank you.

Phil Tarrant: Remember to check out defenceconnect.com.au. If you're not subscribing to our daily morning market news intelligence, please do, defenceconnect.com.au/subscribe. I will be back again soon. Until then, bye bye.

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