Reflection on flush of ROK military exports

China Military Online
Lin Congyi
2023-11-21 18:14:26

By Yang Wangshijian

In October of this year, the 14th Seoul International Aerospace & Defense Exhibition was held, where the defense industry of the Republic of Korea (ROK) unveiled a variety of new weapons and equipment. The ROK President personally endorsed the event, demonstrating the country's determination to promote arms exports. The popularity of ROK-made weapons is a recent trend. According to media reports, the country's military exports from 2011 to 2020 have consistently maintained a level of USD 2 to 3 billion per year. This figure only increased to USD 7.25 billion in 2021, but reached USD 17 billion last year, which its Agency for Defense Development referred to as a feat in nearly half a century.

Behind the sharp increase in its military exports, however, there is something uneven about the composition of weapons sold and their export destinations. On the one hand, the majority of the exports include K-2 main battle tanks, K-9 self-propelled artillery, T-50 trainers/FA-50 light combat aircraft, and warships. Among these, warship exports account for almost 70% of the total export value. On the other hand, the large orders from a small number of countries highlight ROK's performance in international arms markets. For instance, Poland alone procured weapons worth nearly USD 15 billion from ROK last year. The rapid growth of ROK's arms exports is directly driven by the short-term export of a substantial number of specific products to specific customers. At least for now, the time span and distribution of its arms exports are relatively limited.

While experiencing rapid growth, ROK's military industry heavily relies on "foreign aid" assistance. Through the aid of other countries, ROK can easily access advanced Western military technology, elevating its weapon development capabilities, and strengthening its market competitiveness. However, this situation has also limited the country's know-how on core weapons research and development (R&D) technology. According to media reports, the localization rate of ROK's domestically-made main combat equipment is less than 50%. Core technologies such as power, electronics, and weapon systems still rely on imports. Moreover, the quantity and quality of exports in cutting-edge fields like guided weapons are not high. This reflects, to some extent, ROK's insufficient command over core military technologies.

In the perception of the general public, one of the main reasons why ROK-made weapons are popular is that they are cheaper substitutes to some advanced Western weapons. However, these weapons are only relatively inexpensive. And, in addition to their relatively low cost, there are four other factors contributing to the ROK flush.

First, ROK actively promotes the integration of its weapons into the NATO system. It has long been manufacturing equipment compatible with US-made weapons to attract countries seeking to rearm at a lower cost. Currently, it has become the third largest arms supplier among NATO countries, following the United States and France.

Second, ROK possesses certain advantages in production capacity. According to media reports, it can produce hundreds of K-2 main battle tanks in three years, whereas Germany requires five years to have 50 Leopard 2A7 main battle tanks leave factory. Poland initially signed an agreement with the US to procure the High Mobility Artillery Rocket System (HIMARS). However, due to a delayed supply schedule, it decided to concurrently procure ROK's K239 Chunmoo High Mobility Artillery Rocket System as a supplement.

Third, ROK adopted a flexible arms sales policy. While some Western countries often impose technical and political restrictions on arms exports, it is relatively lenient in this regard and can also provide diversified financial instruments and customized services.

Lastly, and most importantly, the ROK government attaches great importance to arms exports. The defense industry has been one of the most heavily supported industries in ROK for nearly half a century. In 2020, ROK updated its defense compensation policy to enable local small and medium-sized military enterprises to form alliances with foreign weapons contractors and integrate into the global supply chain of arms trading markets. In January 2020, ROK's presidential palace announced the establishment of a "defense industry officer" position. Additionally, the Ministry of Defense established a new "defense industry export planning department". These measures are all aimed at promoting the export of defense products to a higher level.

Thanks to strong market performance, ROK's defense ministry announced at the end of last year its ambitious goal of becoming the fourth-largest arms exporter in the world, with a market share exceeding 5%. At that time, it seemed highly possible to achieve the goal. However, markets are not static, and other countries will not remain stagnant either. ROK's ranking in global arms exports has fluctuated in recent years and is still far from reaching the goal of being one of the "Global Top Four". Moreover, as the share of arms exports increases, it has offended the benefits of the countries providing technical aid, which will almost definitely impose increased technical restrictions on ROK to safeguard their market share. Additionally, due to heavy reliance on external technologies, a significant portion of the revenue from ROK's arms exports will be used on paying royalties. Furthermore, the sales model of "low price + free gift" has significantly limited the profit margin of ROK military enterprises. If the order volume remains unsustainable, there is a possibility that several weapons production lines in ROK may be extensively shut down.

Based on data released by the Stockholm International Peace Research Institute, the top five positions in global arms exports have rotated among only six countries over the past 20 years, which fully reflects the unique nature of this trade. As a comprehensive reflection of a country's political, economic, diplomatic, and military strength, it is not easy for ROK to become a major arms exporter in a short period.

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