2013-11-16 By Sam Mayper

South Korea has emerged as a global competitor in the international arms market and remains to be one of the world’s largest importers of military commodities.

American defense firms have benefited from the industry’s growth because South Korea is the largest recipient of American defense exports.

Yet this is not simply a one-way street.

The United States has imported technologies from South Korea as well, notably in the ship building industry and will benefit from South Korean competencies as they join the F-35 global manufacturing enterprise as well.

http://sldinfo.wpstage.net/building-new-usn-ships-how-about-leveraging-us-asian-alliances/

As South Korean capabilities mature, it is natural that South Korea not only produces for itself, but has become a global exporter as well.

And as it does so, it will clearly pursue its own industrial, technological and political goals as well.

http://sldinfo.wpstage.net/south-koreas-evolving-defense-industry-shaping-21st-century-capabilities/

This means that for the United States to remain a key arms partner with South Korea, change is necessary in the American approach.

Co-production and re-export will need to become a larger part of the picture as has happened in the case of the production of the Surion helicopter. Eurocopter is a 20% provider to the new Surion, which is an 8.5 ton Puma, and is designed for export FROM South Korea as well.

http://sldinfo.wpstage.net/the-us-arms-exports-future-the-21st-century-is-not-the-late-20th/

During the 1960’s, South Korean President Chung-hee announced that he would pursue a self-reliant defense posture due to an escalating nuclear threat from North Korea and the Nixon Doctrine, which raised concerns about the waning American security commitment to the Korean peninsula.[1] Subsequently, the ROK’s defense budget nearly doubled from $461million in 1973 to $697 million in 1974.[2]

By the 1980s, the South Korean defense industry was producing a large variety of combat equipment, including: K2 rifle, the Hyunmu surface-to-surface missile, 155mm self-propelled howitzers, destroyers, fast attack patrol boats, the 500MD helicopters, and the F-SE fighter aircraft.[3] The development of South Korea’s defense industry was largely due to the strategic alliance between South Korea and the United States because the U.S. government was providing Korean defense firms with licensing and co-production agreements. [4]

Both nations were benefiting from the defense boom in South Korea because American corporate giants, such as Lockheed Martin, were being awarded huge defense contracts to co-produce aircraft and South Korea was developing a large self-reliant military force.

By the 1990’s, South Korea emerged as a third-tier arms supplier.

Initially, South Korea handled the procurement of small arms and ammunition, but the ROK’s contribution to the global defense market drastically changed as the government continued to plummet billions of dollars into domestic R&D efforts. [5] During 2001-2008, exports of military aircraft accounted for the largest percentage (32.1 %) of total military exports, followed by ammunition (22.3%), off-set based exports (18.3), and artillery and maneuver equipment (18 %). [6] In 2007, President Lee Myung-bak sought to transform Korea’s defense industry into “an engine of growth” that would average $4 billion of annual exports and employ 50,000 people by 2020.[7]

With help from American defense firms, South Korea now represents 60-70 percent of major countries in plane design/ test technologies, including a range of aircraft from F-16 fighters, K-1 trainers, and T-50 advanced trainers.[8]

However, South Korea still remains at the rudimentary level in core technologies, such as aviation electronics, flight/armament controls, stealth/composite materials, rotor design, and certification technology related to aviation. [9]

Therefore, South Korea is still not completely independent from foreign technology possessed by United States and other European nations.

Yet, South Korea has evolved from a third-tier arms supplier to a global competitor with some of world’s largest arms supplying countries.



In 2005, the Republic of Korea implemented the legislation of the Defense Reform Plan 2020 at an attempt to reduce its military into a balanced, digitized standing force with independent surveillance reconnaissance platforms, an integrated C41 (command, control, communications, computers, and intelligence) systems, and long-range precision strike capabilities. [10]

Most importantly, Korea’s Defense Reform 2020 legislation emphasizes a self-reliant defense posture by increasing indigenous capabilities and defense R&D. [11] Under the Defense Reform Plan, the ROK expects to stimulate defense R&D by raising the defense budget to 11.1 % annually through 2015 and 7.1% through 2020.[12] Recently, defense R&D expenditures have concentrated investment in the technological development of source/ core technologies between private ROK defense firms and the military.

Private defense R&D investment has increased from $132.2 billion in 2005 to $410.7 billion in 2008.[13]

Although South Korea has high aspirations for the Defense Reform 2020 plan, economic pressures have continued to be an obstacle for the legislation. Since the legislation was enacted, it has been amended multiple times and former President Lee reduced the annual defense budget increase to only 3.6% for 2010. [14]

In the past decade, South Korea defense firms have experienced tremendous growth because of two main factors:

1) export of big-ticket items (aircraft and naval vessels,

and

2) technological transfer of Korean defense articles. [15]

South Korea’s ability to transfer military technology to its buyers has really allowed ROK defense firms to become more viable suppliers than American defense firms due to the U.S. government’s reluctance to transfer certain military technology to foreign entities. In 2008, South Korea and Turkey signed an export deal worth $300 million solely based on the transfer of technological information on tank development.[16]

In addition, most foreign buyers are being dissuaded by the high prices offered from American defense companies and instead are buying more affordable and less-sophisticated weaponry.[17]

Obviously, there are buyers, like the Arab monarchs, who generally prefer sophistication to affordability and consistently purchase U.S. weapons system because they can afford it with their immense oil wealth.

However, it is clear the United States is missing out on huge defense contracts in other regions of the world and is being replaced with suppliers like, South Korea, who offer less sophistication yet affordability, and technological transfers. During the 1990s, the United States controlled 60 percent of the global weapons market; today it is only responsible for 30 percent.[18]

Meanwhile, South Korea has one of the largest markets for conventional weapons in the world and competes internationally in markets for armored vehicles, shipbuilding, and aerospace industries.[19]

The United States has been the dominant beneficiary in South Korea’s growing defenses market due to the nations’ strategic ties, joint military exercises, South Korea’s familiarity with US weaponry, and interoperability.

So, why is the United States suddenly losing its competitive edge in a prominent and growing market?

The problem focuses on the Foreign Military Sales program (FMS), which has frustrated ROK officials for decades because it allows the United States to become the ultimate broker in arms deals between South Korea and a potential client, which leaves the ROK in an uncomfortable position of being unable to dictate terms (price and technology transfer package) with a potential buyer/supplier.[20]

In addition, the transfer and leakage of U.S. military technology has always been a source of tension between the two nations.

Last year, the Central Intelligence Agency suggested South Korea dismantled the F-15K’s Tiger Eye Sensor and reverse engineered it to improve the KF-16’s Low Altitude Navigation and Targeting Infrared for Night (LANTIRN).[21]

Consequently, these accusations along with the ROK’s frustration of the FMS led to the South Korean Defense Acquisition Program Administration’s decision to reject the U.S. Department of Defense plan to sell four Global Hawks unmanned aerial vehicles worth $1.2 billion to South Korea and the ROK opened the contract up to a bid. [22]

Many perceived this to be a warning to the United States, which has caused the South Korean government to pay top dollar through FMS for military equipment with poor technology transfer and maintenance support.[23]

In addition, South Korean firms have been aggressively pursuing access to one of the fastest growing military aviation markets.[24]

Several companies have produced a number of local designs including: Korea Aerospace Industries Ltd. (KAI’s) KUS-11 and Night Intruder NI-11N, Korean Air Lines Aerospace Division is developing the KUS-9 MALE UAV, Microairrobot and Upcon Systems has developed multiple micro UAVs, and Korea Aerospace Research Institute (KARI) is in the process of completing the Smart UAV.[25]

European competitors hope to take advantage of this situation by offering the South Korean defense firms competitive prices with better technological transfer packages than their American counterparts. On June 19, 2013, the DAPA announced that it would side with the Taurus KEPD-350, a joint venture between European groups MBDA and Saab, over Lockheed Martin’s AGM-157 in the Joint Air to Surface Standoff missile project. [26]

Lockheed Martin’s defeat mainly stemmed from the U.S. government’s reluctance to sanction the deal due to its export restrictions on highly capable delivery systems outlined by the Missile Technology Control Regime (MTCR). [27]

(Editor’s Note: The Taurus is also a missile, which the South Koreans believed is better designed for the desired mission).

South Korea is currently in the process of upgrading its PAC-III units to PAC-III and on Thursday it requested detailed information on the U.S. Terminal High Altitude Area Defense (THAAD) systems from the Pentagon. [28] In terms of cost reduction, the United States would benefit from an integrated missile defense system with Japan and South Korea.[29]

However, South Korea remains reluctant to join the U.S. regional missile defense network.

In the past years, there have been some notable European successes in the South Korean defense market: SAM-X project that purchased the Bundeswehr’s MIM-104C patriot PAC-2, K-2 Black Panther Tank, Korea Aerospace Industries (KAI)’s Surion (helicopter) research and development contract with Eurocopter, and MBDA Missile System’s Mistral missiles. [30]

http://sldinfo.wpstage.net/shaping-a-european-contribution-to-asian-defense-and-security-the-eurocopter-role/

http://sldinfo.wpstage.net/asian-defense-and-security-the-european-contribution/

Recently, South Korean President Park Geun-hye held a summit with Polish President Bronislaw Komorowski to form a strategic alliance between the two nations.[31] The two signed a pact to enhance defense cooperation, which will be beneficial for both nations due to Poland’s growing demand to upgrade its trainer jets, submarines, patrol aircraft, and helicopters and the pact will ensure the ROK’s expectations to increase their annual armament exports.[32]

Israeli defense firms have already profited from South Korea’s defense industry in the last decade due to enhanced military cooperation. On August 27, 1995, Israel and South Korea signed the Memorandum of Understanding on Cooperation in Logistics and the Defense Industry, where the two nations would establish a committee that would meet on a regular basis to exchange information about military technology. [33] Between 2005 and 2010, Israel exported $187 million worth of defense commodities to South Korea.[34] On January 2011, the ROK awarded Israel’s Elisra Electronic Systems a $29 million contract to supply Airborne Electronic Warfare (AEW) Suites and missile warning systems for the ROK air force’s CN-235 aircraft.[35]

In addition, the ROK purchased Israel Aerospace Industries’ Harpy loitering anti radar UAV and its Green Pine phased array long radar. [36] If European defense firms could continue to make more appealing offers than their American counterparts and establish military cooperation, then the Europeans could seriously impede on America’s future trading prospects in South Korea.

It is also clear that Europe has in several cases comparable or better products than the United States, notably with the introduction of new systems such as the A400M and the A330 tanker.

South Korean officials have already recognized the potential business opportunities in Europe as evidenced with President Park Geun-hye’s sales diplomacy in Poland and hopes of expansion into a larger EU community. [37]

South Korea defense firms have ventured out to one of the world’s fastest growing defense markets, India.

Russia currently is the dominant supplier of India’s defense markets, representing nearly 70-80 percent of total armament trade.[38] But, the bilateral defense trade between the United States and India has been enhanced to $10 billion.[39] India’s navy has been purchasing Boeing’s B-8 patrol planes, while its air force flies Boeing C-17 and Lockheed C-130 aircraft[40]

In addition, its widely believed that the United States and India will co-develop the next generation of the Javelin anti-tank missile, built by Raytheon and Lockheed.[41]

But, the United States is not the only country developing serious inroads in a growing market as India and South Korea are set to sign a $1.2 billion military contract that will supply India with warships capable of countering water mines.[42] Under the proposed deal, South Korea’s Kangnam Corporation will construct 8 new battleships with minesweeping capability to India, which will replace India’s aging fleet of 12 Pondicherry and Karwar class minesweepers. [43] Under the offset agreements, two ships will built in Kangnam’s naval shipyard in Busan, South Korea and the remaining six will be manufactured by India’s Goa Shipyard after the transfer of technology of agreement is complete. [44]

The ROK defense industry has also expanded business in Southeast Asia largely due to China’s alarming and escalating military presence in the region. Nations such as the Philippines, Indonesia, and Malaysia have been replacing old military equipment with affordable upgrades through co-production agreements and technology transfers. Recently, South Korean President Park Geun-hye and Philippine President Benigno Acquino III signed a memorandum that calls for greater defense industry cooperation between the two nations.[45]

The agreement also called for enhanced exchanges in military technology, exchange of defense related experience and information, and more visits between military personnel and experts. [46]

Originally, President Benigno Acquino requested second hand F-16 Falcons from the United States, but many considered the request to be impractical due to high maintenance costs.[47] A couple of months ago, the Philippines announced that it would purchase 12 FA-50 trainer/fighter jets from South Korea, which will cost $443 million.[48]

The contract will be awarded to one of South Korea’s leading defense firms, Korea Aerospace Industries (KAI), which plans to sell about 1,000 FA-50 and T-50 Golden Eagle supersonic trainers over the next 30 years.[49]

This will be first FA-50 fighter deal with a foreign nation after the DAPA awarded KAI to replace 20 Northrop F-5 fighters with its new FA-50 product.[50]

The deal has not been finalized, but it seems that the Philippines will be a reliable trading partner for South Korea given Manila’s lack of fighter aircraft after retiring its fleet of F-5s in 2005 and its territorial disputes with China over the Spratly Islands and the West Philippine Sea or the South China Sea.[51]

http://www.youtube.com/watch?v=eb97PH-rNzw

Korea Aerospace Industries Lt (KAI) has also expanded its business in Indonesia, which has emerged as one of the largest arms trading partners of South Korea.[52] In response to the evolving dilemma over the South China Sea, Indonesia has followed the Philippines to upgrade its armed forces.

In 2011, Korea Aerospace Industries Lt (KAI) signed a $400 million contract with Indonesia for 16 KT-1 Woongbi basic trainers and Daewooo Shipbuilding &Marine Engineering sold three Type 209 submarines to Indonesia for $1.1 billion. [53] In addition, Indonesian President Susilo Bambang Yudhoyono announced that Indonesia would cover 20 percent of the joint development cost for the basic trainer jets to show his commitment to the deal.[54]

South Korean firm LIG Nex1 also plans to sell the latest antisubmarine technology to Indonesia, including the Blue Shark light-weight torpedo, which is an submarine torpedo that can be deployed by helicopters, ships, and aircraft.[55]Considering that ROK generated a total $2.4 billion in arms exports in 2011, Indonesia’s acquisition of these big-ticket items really aided to the growth of the ROK defense industry and the recent memorandum will continue to enhance it. [56]

Other nations in the Southeast Asia are also considering South Korea as potential supplier to upgrade their armed forces in order to deter Chinese expansion in the South China Sea. In recent years, Malaysia has spent nearly $100 million to $400 million worth of South Korea arms.[57]

Last year, Vietnam held its first military talks with South Korea to expand defense cooperation and has bolstered ties with the Philippines.[58] Recently, Thailand has expressed interest in KAI and Eurocopter’s Surion utility helicopter and the T-50 Jet.[59]

Korean Aerospace Industries aims to expand its market in South America as well. Since 2006, Latin American countries have imported $48.9 million worth of ROK defense gear including trucks, flak vests, ammunition, and communication devices.[60] In 2010, DAPA Commissioner Chang Sooman and Colombian Defense Minister Rodrigo Rivera signed a memorandum with ROK hopes to venture out into Colombia’s emerging defense industry.[61]

The DAPA along with other ROK firms have recognized the potential business opportunities in Latin- Central America as these governments seek to replace aging military equipment to enhance security capabilities to keep in pace with economic development.[62]

Colombia is extremely interested in the ROK’s tanks, armored vehicles, and guided missiles. [63]LIG Nex1’s parent, LG Group has increased investments in Colombia from $30 million in 2007 to $160 million last year.[64] Last November, KAI signed its first aircraft sale in Latin America, when Peru agreed to purchase 20 KT-1 trainers worth $200 million dollars.[65]Another Korean firm, Daewoo Shipbuilding Marine Engineering Co. (DMSE) is seeking a bid to modernize the Peruvian naval ship.[66] Historically, Colombia has closes with the US military in order to combat the illegal drug trade, but the ROK’s willingness to transfer key technology has enabled Colombia to look for alternative suppliers instead of their traditional client.

Most importantly, KAI plans to go head to head with Lockheed Martin for the US Air Force T-X program contract, which will be worth several billions of dollars and requires the development 300 aircraft.[67]

South Korean defense firms are becoming more relevant in the international arms market.

South Korea arms exports will soon exceed $2.4 billion and the South Korean Defense Agency for Technology and Quality (DTAQ) expects to double its exports by $4 billion in 2020.[68]

However, $2.4 billion only represents a small portion of the total international arms market share, which is currently dominated by United States, who received $220.6 billion for its total arms exports in 2011.[69]

In addition, South Korea defense industry has experienced some setbacks, especially last year when Korea Aerospace Industries’ T-50 Golden Trainer was outbid by Italy’s Alenia Aermacchi to sell 30 new supersonic fighter training aircraft to Israel for $1 billion.[70]Despite KAI’s initial shortcomings in the Israeli aircraft deal, the ROK responded strongly by offering to supply Israel with four frigates each worth $100 million,[71]

It is true that the United States’ grip on the international arms market is declining, while South Korean defense firms are experiencing growth.

But, the strategic alliance between these nations will ensure military cooperation in the future, which will entail further arms cooperation as well. South Korea is prepared to enter the F-35 global fleet and the global production system as well. This is an advanced manufacturing capability, which no other partner to South Korea could offer.

Sam Mayper is a former intern at a leading DC based think tank and a DC-based international security analyst.

For the recent debate over the acquisition of South Korean fighter aircraft see the following:

http://www.sldforum.com/2013/09/in-the-south-korean-fighter-program-is-the-ministry-of-finance-now-the-ministry-of-defense/

http://sldinfo.wpstage.net/re-visiting-the-south-korean-decision-on-the-silent-eagle/

http://sldinfo.wpstage.net/from-the-silent-eagle-to-stealth-why-the-south-korean-air-force-should-be-concerned/

http://sldinfo.wpstage.net/meeting-the-north-korean-challenge-building-out-21st-century-deterrent-capabilities/