Defence Industry
The first steps for the establishment of the South Korean defence industry, started during the 1960 from the President Chung-hee, who pursued a self-reliant defence posture, due to the escalating threat from North Korea and the Nixon Doctrine, which raised concerns about the U.S security commitment to the Korean peninsula.
Most of the South Korean defense industries are private owned with much of the market commanded by “chaebols” (large industrial conglomerate that is run and controlled by an owner or family) and chaebol-affiliated firms. The main industrial partner of the RoK is U.S, since Washington provided to the South Korean defence industries the license and co-production agreements to locally produce U.S defence systems and because the Armed Forces of RoK actively prefer U.S origin weapon systems to those produced indigenously. The industrial relationship benefited both countries, because U.S defence industries were able to receive from the RoK huge defence contracts to co-produce aircraft and other defence systems.
Although the governments of the RoK and the private owned defence industries have spent a lot of resources and effort to develop indigenous defence systems, South Korea still remains relatively dependent on foreign suppliers of core technologies, since many of the advanced weapons systems of the South Korean Armed Forces are based on technologies developed outside the country and predominantly in the United States. The South Korean defence industry and the government of the RoK throughout the last decades spent more on R&D as a percentage of the national GDP, than any other country in the world except of Israel.
The country concentrated its invested in the technological development of source/core technologies between private defence industries and the Armed Forces. Many of the R&D activities carried out the last decade by the state of the RoK, are increasingly being outsourced to the private owned defence industries. This policy not only reflects the ongoing structural changes in South Korea’s defence acquisition process, but also relates to an ambition of the state to promote the industrial R&D sector.
South Korea seeks to engage into joint cooperation with foreign governments and defence contractors, in order to gain access to and develop more advanced defence technologies. It is mainly for this reason that South Korean defence acquisition authority DAPA (Defence Acquisition Program Administration), favors joint cooperation as a means to develop and produce weapons systems rather than directly procuring equivalent materiel from foreign contractors.
South Korea wish to strengthen its domestic defence technology industrial base by actively accessing attractive foreign defence technology and introducing it into its domestic defence industry, not only through direct military offset arrangements and bilateral defence technology collaboration.
The South Korean defence industrial sector is no longer viewed merely as support function to the national security, but rather as an economic asset which could contribute to the overall growth of South Korea’s economy by developing to an export oriented supplier of defence material.
Almost 20 years since the establishment of the South Korean defence industry, the local companies were able to manufacture military equipment such as, the Hyunmu surface-to-surface missile, self-propelled howitzers equipped with 155mm guns, destroyers, frigates, fast attack missiles boats, and assemble Hughes 500MD light attack helicopters and later KF-16 fighter jets.
In 2007, the President of the RoK Lee Myung-bak sought to transform Korea’s defense industry into “an engine of growth” that would employ 50,000 people and achieve annual average exports of $4 billion by 2020. Making use the industrial licenses that U.S companies had given to South Korean defence industries RoK managed to produce big part of the weapon systems that its Armed Forces use. In 2005 RoK implemented the legislation of the “Defence Reform Plan 2020” which covers a period of 15 years, in order to reduce its military into a balance digitized standing force with independent surveillance reconnaissance platforms an integrated C4I system and long-range precision strike capabilities.
The new plan aimed to secure the capabilities of the Armed Forces to be able to conduct network-centric and joint operations warfare. The most important fact about the “Defence Reform Plan 2020” was the emphasis on the development of a strong local defence industry that can offer self-reliance by increasing indigenous capabilities and defence R&D. Part of the new plan was the establishment of DAPA (Defence Acquisition Program Administration) on January the 1st of 2006 in Seoul. DAPA is an executive branch of the government of RoK and it is under the auspices of the Ministry of National Defence.
The purpose of DAPA is the administration of improvement projects of the defence capabilities, to coordinate major policies, management of financial resources and other purposes for the promotion of defence acquisition programs, and the fostering of defence industries.
Procurements for the improvement of defence capabilities are carried out through the following procedures:
- requests from each armed force;
- decision of the joint chiefs of staff;
- prior research;
- establishment of project strategy;
- adjustment to reflect the Mid-Term National Defence Plan;
- budgeting;
- bidding announcement; and
- contract conclusion.
DAPA consolidated eight organizations related to procurement and technology development that were dispersed in the country’s Defence Ministry, Army, Navy and Air Force.
Among the R&D defence programs that DAPA was responsible for the management are:
- KAI KUH-1 Surion transport utility helicopter
- KAI T-50 Golden Eagle family of supersonic aircraft/advanced trainer, TA-50 lead-in fighter trainer and light attack aircraft, FA-50 multirole fighter jet, T-50B acrobatic aircraft
- K2 Black Panther main battle tank
- K9 Thunder self-propelled 155mm/52 howitzer
- Sejong the Great-class KD-III guided missile destroyer
- S&T Daewoo K11 DAW assault rifle
The organization responsible for the national research and development in defence technology is ADD (Agency for Defense Development). ADD was established in August 1970 and is funded by DAPA. Its purpose is contributing to enforcing the national defence, to improving the national R&D capacity, and to fostering the domestic defense industry.
The most recent Defence reform was announced in July 2018 by President Moon Jae-in. The core objective of the “Defense Reform 2.0” is the enhancement of the local defence industry. President Moon Jae-in desired to create a slimmer, more efficient South Korean Armed Forces, with a greater focus on exporting power of the defense sector. The growth of the local defence industry could not only bring benefits for the South Korean economy, but also could help to establish a more independent South Korean military that is less reliant on foreign mostly American defense technology.
Throughout the last six decades at least 18 defence and shipbuilding industries were established and dominate the local industry.
These are:
- Korea Aerospace Industries (KAI)
- Hanwha Techwin
- Hanwha Corporation
- Hyundai Heavy Industries (HHI)
- Daewoo Ship Building & Marine Engineering (DSME)
- Huneed Technologies
- STX Engine
- S&T Dynamics
- Poongsan Corporation
- Samsung Thales
- LIG NEX1
- Doosan DST
- Lockheed Martin Korea
- Hyundai Rotem
- S & T Mativ
- Hanjin Heavy Industries
- Samsung Heavy Industries
- Korea Shipbuilding & Offshore Engineering
According to reports, the government of the RoK decided in April 2020 to spend 45 Billion Won (US$36.39 Million) over the next five years, in order to establish the “Defence Industry Innovation Cluster” in the Changwon-Gyeongnam region.
The purpose of the new Cluster is to develop advanced technologies for defence systems through close cooperation between defence industries government and academics. The new organization will employ 1,000 people and will lead to production worth of 83.4 Billion Won over the next five years. As it has been mentioned earlier, the new defense industry policy of the governments of the RoK aims not only to equip the Armed Forces of the country, but also to achieve exports and bring revenues to the economy.
According to the data of SIPRI (Stockholm International Peace Research Institute), in 2006 the exports of the South Korean defence industry were only US$250 million. Four years later, in 2010 South Korea’s defence industry exports were about US$1.19 Billion and four years later, in 2014 they reached US$3.61 Billion, marking an increase of 143% during this period. Three years later in 2017, South Korea’s defence industry exports reached about US$3.13 Billion, more than triple the export value in 2010. South Korea exported to 83 countries in 2017 with 132 exporting companies.
According to the SIPRI, South Korean arms makers increased their sales by a record of 20.6% from 2015 to 2016, to total US$8.4 Billion and the country entered the list of the world’s top 10 largest arms exporters
The best seller of the South Korean defence industry are:
- FA-50 Light combat aircraft
- T-50 advanced trainer
- K-9 Thunder self-propelled howitzer
- The Improved Jang Bogo-class submarine
- Military vehicles
South Korean defence industry has managed to sell its products not only in Asia but also in Europe and South America
Following are the list of major defense exports of South Korea from 2013 - 2019:
- 6 patrol corvettes to Malaysia (US$1.2 billion)
- 12 FA-50 (Light combat aircraft) to Philippines (US$420 million);
- 16 T-50s (advanced trainer) to Indonesia (US$4 billion);
- 12 T-50s to Thailand (US$110 million)
- Military vehicles to Philippines (US$345 million)
- 6 Improved Jang Bogo-class submarines to Indonesia (US$2.1 Billion)
- K-9 Thunder (self-propelled howitzer) to India (100), Turkey (280), Finland (48), Norway (24), and Poland (120 chassis), Estonia (12), Australia (30)
- K-30 Biho, (self-propelled short-range anti-aircraft gun) to India (104)
The south Korean defence industry seems to have gained with its products the confidence of several countries and has succeeded to win important contracts against European competitors. SIPRI’s study covering the period of 2013 - 2017, classified South Korea as the 12th-largest arms exporter in the world, accounting for about 1.2% of all global arms sales. The country ranked even higher at 6th place in 2018, accounting for 3.8%.
According to a South Korean defence industry expert, the local industry must look toward niche markets such as armored equipment and short- to mid-range missiles, stressing the price competitiveness of the South Korean defence systems. On the other hand, South Korean defence industry should avoid markets like high performance aircraft, which are already dominated by the leading foreign aerospace industries. Finally, in the future the South Korean defence industry will have to compete not only European or Russian defence industries, but it will inevitably come into fierce competition with China.