Analysts: There are many development bottlenecks, South Korea sprints to become the fourth largest arms exporter
According to a Yonhap News Agency report on April 17, South Korea plans to invest 400 billion won within the year to develop advanced materials and components for defense products to enhance the competitiveness of its military industry. Since the South Korean Ministry of National Defense proposed the goal of building South Korea into the fourth largest arms exporter by 2027 in November 2022, South Korean President Yin Xiyue has reiterated and detailed this goal on multiple occasions. Can South Korea's military industry and arms exports maintain the rapid growth momentum in recent years?
According to data from Sweden's Stockholm International Peace Research Institute, South Korea's total arms exports ranked ninth in the world from 2018 to 2022, and set a new arms export record of US$17.3 billion in 2022. In the past five years, although South Korea only accounted for 2.4% of the global arms export market share, it increased by 74% year-on-year compared with the previous five years, which is the highest growth rate among the top ten arms exporting countries in the world. From an almost zero starting point more than 40 years ago to now making a lot of money in the international arms market, the development of South Korea's military industry deserves attention.
In the 1970s, relying on its increasingly solid economic and industrial foundation, South Korea began to implement an "independent national defense" policy. In August 1970, the National Defense Science Research Institute, affiliated to the Ministry of National Defense of South Korea, was established. It was South Korea's first full-time military research institution and played a prominent role in the development of South Korea's military industry. Since then, South Korea's military industry has made a multi-step jump from scratch, from imitation to self-made: in the 1970s, it achieved the localization of most light weapons and began to export arms; in the 1980s and 1990s, it was able to assemble and even develop heavy equipment by itself; after entering the 21st century, Dokdo-class amphibious assault ships, KDX series destroyers, etc. have been equipped with troops one after another, and K2 series main battle tanks, K9 self-propelled howitzers, etc. have gained a foothold in the international arms market. In 2022, South Korea's new-generation "Aegis" destroyer "King Jeongjo" was launched, and the new KF-21 stealth fighter also completed its test flight.
At present, the systematization of South Korea's military industry has reached a certain level, with a relatively complete range of categories. It can produce aircraft, ships, armored vehicles, missiles, heavy artillery, light weapons and ammunition and other equipment. It is basically self-sufficient in conventional weapons and has the market competitiveness for batch exports. Large companies such as Samsung and Hyundai are deeply involved in the military industry. Hanwha Group, formed after a series of sales, mergers and acquisitions and reorganizations, is a representative of South Korean military industrial enterprises and is regarded as the Korean version of Lockheed Martin.
Recently, the South Korean government and military industry companies have made intensive noises in the field of arms sales. In April, South Korea's Minister of Industry Ahn Ahn-Kan visited the headquarters of Korea Aerospace Industries Corporation and expressed that he "hopes that the defense industry will become a new important export field." In November 2023, Kim Seung-won, executive vice president of Hanwha Aerospace, said in an interview with the media that he was fully confident in achieving the government’s set goals. In December of the same year, Yin Xiyue inspected the headquarters of Hanwha Group and attended the defense export strategy meeting attended by the government, military and private enterprises. He left a message saying that he supported the bold challenge of the Korean defense industry.
Analysts pointed out that the rapid growth of South Korea's arms exports is mainly due to four major advantages: fast delivery; strong manufacturing capabilities; strong government support willingness; low unit costs and selling prices, which can meet customers' large-scale military needs. The so-called "Ukraine effect" also plays an important role: in the face of the Russia-Ukraine conflict, many European NATO countries are eager to replenish their military positions due to security pressures. Traditional Western military industrial powers have experienced significant shrinkage in production capacity due to industrial upgrading, changes in social concepts and other reasons. South Korean military products that adopt Western standards and can be supplied in large quantities quickly can fill this gap as a "substitute".
Against this background, in December 2023, Hanwha Group and Poland signed an arms sales agreement worth more than US$2.6 billion, and will export 152 K9 self-propelled howitzers to Poland by 2027. This agreement is only part of another larger agreement, which involves a total amount of up to 22 billion U.S. dollars. The content is to export up to 672 K9 self-propelled howitzers and 288 K239 multiple rocket launchers to multiple European countries. This is South Korea’s largest arms export contract in history.
Previously, the Polish government claimed to build "the strongest army in Europe" and expressed its intention to purchase 980 K2 series main battle tanks, 648 K9 self-propelled howitzers and 48 F/A-50 light fighter jets. As long as the above-mentioned large orders are implemented, coupled with new orders from Saudi Arabia and other Middle Eastern countries, a considerable part of South Korea's arms exports will be "safe and secure."
The South Korean government is hyping up the expansion of arms trade, as well as stimulating the economy and boosting support for the right-wing ruling party. However, it is not easy for South Korea to become the fourth largest arms exporter.
Analysts believe that the so-called four major advantages of South Korea's military industry are actually only two that are truly reliable: "sufficient quantity, fast delivery" and "Western military standards, Eastern selling prices." Although the South Korean government spares no effort to support military industrial enterprises, it is limited by loan quotas. British Reuters commented that South Korean weapons can open up the market of some "strong-willing but cash-strapped" countries, and a key factor is to provide huge loans to these buyers. However, according to current Korean law, a single loan from the Export-Import Bank of Korea to any borrower must not exceed 40% of its total equity, or approximately 6 trillion won.
However, the orders and intention orders signed by South Korea and European countries, especially Poland, are worth tens of billions of dollars. Moreover, South Korea has provided approximately 6 trillion won in loans during the implementation of the first-phase agreement with Poland, leaving almost no room for additional loans. Even if an exception is made rashly and the "green light" is given, it will put heavy pressure on the Bank of Korea and inevitably trigger boycotts from all walks of life in South Korea.
As for manufacturing strength, it cannot cover up the shortcoming of South Korea's own insufficient military research capabilities. In the fields of aerospace and other fields, South Korea still lacks advanced technologies with independent intellectual property rights. Many weapons and equipment are still "assembled products" to a large extent, and their comprehensive performance needs to be tested. Moreover, core components are highly dependent on imports, and equipment production and export licenses are limited. Subject to others. Therefore, in recent years, although South Korea has focused on military aircraft sales, its arms exports are still mainly land combat equipment. As the United States and other traditional military industrial powers revitalize their production capacity, South Korea may return to its secondary role of "filling in the gaps" for the United States and Europe in the international arms market.
