More than two centuries ago, one of America’s founding fathers, Benjamin Franklin, famously said: ‘An investment in knowledge pays the best interest.’

At that time, he was talking about the need for more universal education at a basic level. Today, as the Indo-Pacific faces its toughest security environment in decades, the same principle should be applied for advanced research and development for defence and national security initiatives.

The US, Japan and Australia have long enjoyed close and cooperative defence relationships founded on shared interests, values and security concerns. These relationships are seen as critical to promoting regional stability and prosperity and have been strengthened in recent years through a series of initiatives. The three countries’ commitment to an increased tempo of training and exercising, cooperation on new long-range strike capabilities and a focus on better integration of forces will foster deeper and more sophisticated defence ties.

In addition to traditional security threats, all three countries face so-called hybrid challenges such as cyberattacks, including ransomware and hacks of critical infrastructure; threats to economic security stemming from coercion; vulnerable supply chains; thefts of technology and other intellectual property; disinformation and misinformation campaigns; and challenges surrounding critical and emerging technologies.

All of these threats will need to be mitigated through significant investment in defence and security capabilities over decades. For Australia, the defence and technology initiatives under the AUKUS pact and other national security capabilities will cost hundreds of billions of dollars.

As noted ^[1] by the US Studies Centre’s John Kunkel and Hayley Channer earlier this year, ‘Leveraging “non-traditional” forms of national security financing is a mindset shift for the Australian defence and security establishment, as is adopting new approaches that draw together government, industry, the technological research community and finance sector.’

The same applies for both the US and Japan. Traditional siloed funding approaches are not going to enable the various regional security mechanisms (such as the Quad and the US–Australia–Japan trilateral strategic dialogue) to fund all the initiatives required to ensure a free and open Indo-Pacific.

One suggestion put forward by the Pentagon to meet this challenge is to establish an ‘other transaction authority’, or OTA, that includes allied nations for the first time—a proposal that could be squarely aimed at Australia and Japan as the trilateral security relationship matures.

OTAs are contracting mechanisms that allow for rapid development of technology prototypes and their supporting efforts. The US Department of Defense maintains multiple OTAs, each focusing on a specific technology area, like automotive developments or chemical and biological defence innovations. They allow the government to negotiate agreements directly with non-traditional defence contractors, such as start-ups and small businesses, which are not typically equipped to navigate the complicated regulatory requirements of traditional contracting.

As Bernice Glenn Kissinger, vice president of the Pacific Impact Zone, notes: ‘Capability collaboration across allied nations has been ignited in response to China and Russia threats. AUKUS, the Quad, and Japan as a defence partner doubling its spending and securing counter-strike capabilities while dismantling its export barriers are all accelerating partnerships.’

Missing—until now—are rapid-acquisition vehicles for allied nations to collaborate on developing and delivering the right solution to the warfighter at the right place and the right time. ‘OTAs can deliver much more value to the government than they have in the past, particularly across vetted allied-nation teams not only for prototyping to programs of record, but also for purchasing materials, securing sustainable soft-power benefits and strengthening the US and allied nations,’ Kissinger says.

OTAs have attracted some criticism, primarily due to a potential lack of transparency and accountability in the contracting process. However, the greater flexibility and speed an OTA provides is crucial in times of heightened strategic competition—or indeed war—such as we are currently experiencing in the Indo-Pacific. This is particularly relevant for Australia’s defence capability acquisition program and will be highlighted soon in the much-anticipated AUKUS and defence strategic review announcements.

The Japanese government has recognised the value of OTAs. The Ministry of Economy, Trade and Industry is preparing to fund a program to train Japanese companies on how to apply for an OTA and other rapid innovation funding. The program will also help them to better understand how the complex defence procurement system works and how to execute partnerships.

To help navigate this complex web, Japan’s Ministry of Defense is partnering with a range of private-sector and non-for-profit organisations. The International Security Industry Council of Japan is one of these partners and will lead a range of information sessions for business and government in the margins of DESI Japan defence industry conference later this month in Tokyo.

ISIC Japan’s president, James Angelus, has highlighted the Japanese government’s interest in exploring new methods such as OTAs to help aspiring Japanese small and medium sized businesses enter the defence innovation field. However, he says, ‘there’s work to be done to overcome cultural, language and bureaucratic differences between the relevant systems’.

Australia is in a similar situation and the opportunity to build this trilaterally makes sense.

In November last year, Australia’s Defence Minister Richard Marles said in an address ^[2] to the Sydney Institute: ‘In a more contested world, countries that are able to pool their resources and combine their strengths will have a competitive advantage, making them far less vulnerable to coercive statecraft.’

A logical first step would be to bring Australia’s nascent Advanced Strategic Research Agency ^[3] into a trilateral defence innovation program with Japan and the US. Similar to DARPA in the US, ASRA is being designed to fund research in breakthrough technologies that enhance national security, leverage private investment and increase Australia’s involvement in AUKUS innovation, R&D and technology sharing.

Money is tight for the Australia government, particularly with rising inflation, supply-chain shortages, social policy funding needs, and so on. By leveraging more private capital investment in defence innovation and engaging more flexible, faster procurement tools like OTAs, the Australian government could help offset the funding challenges for AUKUS and other defence projects—while at the same time adding practical depth to trilateral defence arrangements with the US and Japan.