There may be a few reasons for the conversion being overseas.
E.g., the contractor may share some of the cost of doing it so they can re-market it to other customers (like Sea Eagle). In this case, the PN gets to split the cost with someone else instead of taking it alone.
The other factor may be that working with a company in Germany or UK could make it easier to get Embraer's help. Some bilateral deal with Embraer and PAC or NRDI could be a lot tougher to pass through some countries. So if the US knocks on Germany's door about the Lineage LRMPA, Germany can say, "well our company's doing it, and it's our business, so tough."
Finally, we also just lack the capacity to do it properly at home. You still need an established design and controls testing (
@JamD) regime to carry out the work indigenously.
I think the complexity of a full-fledged LRMPA is much more than an AEW&C or ECM aircraft because you have to integrate (and test) hard points and maybe cut an internal bay. There aren't a lot of countries that can do it, and we really only have one other serviceable example of this type in the world -- the P-8. The Lineage LRMPA would be the second one if it succeeds.
. 
