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South Korea remains among Top 10 global defense exporters.

| Defense News Army 2024

For the second consecutive year in 2023, South Korea has confirmed its position among the world’s top ten defense exporters, with exports amounting to approximately $14 billion. This achievement results from decades of preparation for a potential conflict with North Korea and an effective strategy to meet the growing global demand for armaments, heightened by the conflict in Ukraine.
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Officials celebrate the delivery of K2 Black Panther tanks and K9 Thunder howitzers, made in South Korea, to Poland in late 2022. (Picture source: Ministry of Defense of Poland )

Data released on Monday by the South Korean Ministry of National Defense and national defense companies revealed that South Korea, ranked ninth worldwide behind Spain, expanded its export markets to 12 countries last year. This includes new partners such as the United Arab Emirates, Finland, and Norway, up from four countries in 2022. The variety of weapons systems exported also saw a twofold increase.

This expansion aligns with South Korea's ambition to be ranked among the top four global defense exporters by 2027, aiming to secure over a 5 percent share of the global defense export market, up from the current 2.4 percent.

The surge in defense exports from Korea has been fueled by several large-scale contracts, most notably a $12.4 billion deal with Poland in 2022. This contract, made in response to increased defense needs following Russia's invasion of Ukraine, accounts for more than 35 percent of South Korea's annual defense expenditure for that year. The momentum continued into the early part of this year, with LIG Nex1 announcing a $3.2 billion agreement with Saudi Arabia for the M-SAM2 ballistic missile interceptor system last Tuesday.

South Korea’s ability to produce armaments on a larger scale than many Western competitors allows it to offer better value for money on assets such as tanks, howitzers, and lower-end fighter jets. The government also actively supports exporters by committing to place orders to keep production lines active.

Hanwha Aerospace, which boasts the largest order backlog among global defense companies, expects billions of dollars in new orders this year. The company’s order backlog has surged from $2.4 billion to $15.2 billion over the last two years. Negotiations are ongoing for exporting K-9 self-propelled artillery to Romania and multiple launch rocket systems to Poland, among other deals. Hanwha's shares have more than doubled since the Russian invasion of Ukraine in February 2022.

Additionally, Korea Aerospace Industries and Hyundai Rotem are anticipating significant orders, with KAI in discussions with Egypt and European countries for aircraft exports, and Hyundai Rotem finalizing deals for exporting K-2 tanks to Poland.

However, challenges remain, particularly in negotiations with Poland and Indonesia. After the initial enthusiasm around the Polish deal, talks between Warsaw, Hanwha, and KAI have been prolonged due to disagreements over financing and technology transfer. Moreover, the Korean government is struggling to persuade Indonesia to fulfill its financial obligations for a joint fighter jet development program.

Improving the export financing support system could enable more large-scale exports. Despite these hurdles, South Korea's expansion in the global defense market offers potential benefits for both Korea and the importing countries. The deal with Poland, for example, could be mutually beneficial, with a significant portion of the contract value remaining in the European country, thus supporting its defense industrial base.

Defense News February 2024

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