Arms Markes Target Exports as Government Weapons Buying Slows

Nikkei Asian Review

01 October 2015

The biggest initial public offering in South Korea this year will not be related to the country’s mainstay automotive and consumer electronics industries. Instead, it will be a defense company. The Oct. 2 listing of LIG Nex1, a missile and military electronics group that is South Korea’s third largest defense contractor by sales, underscores the country’s ambitions to expand its export markets.

The South Korean defense industry has grown rapidly over the past decade as military spending has risen in response to the continuing North Korean threat. South Korea’s armed forces are now among the strongest in Asia, on a par with Japan’s. This year’s defense budget, which accounts for a hefty 10% of total government spending, amounted to 37.4 trillion South Korean won ($32.1 billion). But the threat of slowing budgets over the next decade as the government focuses on expanding social welfare programs is forcing South Korean defense companies to accelerate a push into overseas markets, particularly in Asia.

The full range of South Korea’s arms production will be on show at the biennial Seoul International Aerospace and Defense Exhibition, starting on Oct. 20, which will showcase to potential foreign buyers weapons such as the K-9 Thunder self-propelled 155mm howitzer and the Hyundai Rotem K-2 battle tank as well as state-run Korea Aerospace Industries’ T-50 Golden Eagle supersonic trainer jet and its FA-50 light fighter variant.

… South Korea’s rising commercial priorities have helped it break into Southeast Asian arms markets along with other emerging defense suppliers such as Brazil and Poland, according to Richard Bitzinger, a defense analyst at the S. Rajaratnam School of International Studies in Singapore.

But Bitzinger warned that South Korea faces challenges. “Korea is still a relative newcomer in the arms export business, so there are a lot of unknowns when it comes to reliability and support,” he said. “It’s difficult to overcome most countries’ preferences for ‘tried and true’ arms suppliers.”

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Last updated on 13/11/2015