Bloomberg Highlights South Korea’s Defense Industry
Saudi Arabia: World’s Second Largest Arms Importer
Bloomberg reported on the 19th (local time) through Tim Culpan’s column that South Korea’s confirmation of long-term, large-scale arms exports to Saudi Arabia will be key to realizing its ambition to become a global defense powerhouse.
Previously, President Yoon Suk Yeol and Saudi Crown Prince Mohammad bin Salman announced in a joint statement adopted for the first time in 43 years on the 24th of last month that they would enhance cooperation in defense and defense industries. Following this, the Blue House stated that they are in the process of signing a contract, suggesting that K-defense exports to Saudi Arabia are expected to increase.
In particular, the “Korean Patriot” Cheongung II, jointly developed by LIG Nex1, Hanwha Systems, and Hanwha Aerospace, is expected to receive orders from Saudi Arabia in units. If the deal is concluded, it will surpass the $3.5 billion contract signed by former President Moon Jae In with the United Arab Emirates (UAE) for Cheongung II in January 2022.
According to the Stockholm International Peace Research Institute (SIPRI), Saudi Arabia is the second largest arms importer in the world after India, accounting for 8.6% of global arms imports in the last five years. The country is in urgent need of air defense weapons due to the threat of rockets, ballistic missiles, drones, and drone attacks from Houthi rebels in neighboring Yemen.
South Korea ranks ninth in global arms exports, accounting for 2.3%, to become the world’s fourth largest arms exporter. The U.S. dominates the arms export market share with 78%, followed by France (6.4%) and Spain (4.9%).
The column speculated that if South Korea opens up an export route to Saudi Arabia, it could break the monopoly held by the U.S., France, and Spain. So far, South Korea has mainly sold weapons to Asian countries such as the Philippines, India, and Thailand.
While South Korea is primarily known as a cannon manufacturer, the column reported that its reputation for more sophisticated weapons is also rising. Last year, LIG Nex1 achieved sales close to $1 billion with precision-guided weapons such as land and sea-based surface-to-air missiles and underwater torpedoes. Korea Aerospace Industries produces helicopters and airplanes. However, both companies rely primarily on domestic sales.
Douglas Kim, an analyst, said on the global independent research platform ‘SmartKarma’ last month, “Companies like Korea Aerospace, Hanwha Aerospace, and LIG Nex1 have improved the world’s top defense systems at a more affordable price. If a large-scale, long-term arms deal between Saudi Arabia and South Korea is concluded, it could benefit Korea’s top defense companies like Hanwha Aerospace and Korea Aerospace Industries.”
The column also diagnosed that if a large-scale arms contract is confirmed between the two countries over several years, it can send a signal to other potential customers that South Korea is a legitimate supplier capable of supplying advanced weapons systems.
South Korea has a high potential for arms exports. The proportion of South Korean companies exporting to India, the world’s largest arms buyer, is evaluated as very small at 11%. Hanwha only mentioned supplying the K9 self-propelled howitzer to a South Asian country in its recent earnings announcement in 2017.
Japan, which imports 97% of its weapons from the U.S., could also import weapons from South Korea. Given the growing need for Japan and South Korea to confront China’s threat and Japan’s most aggressive military expansion since World War II, it’s not unthinkable that South Korea could export weapons to Japan.
Moreover, the column pointed out that if an arms contract with Saudi Arabia is concluded, it could help correct the imbalance in Asia, which imports more than it sells in the arms industry. Currently, Western countries lead arms supplies, while Asia-Pacific countries mainly import. According to SIPRI, six of the world’s top ten major arms importers in the past five years were Asian countries, but only two of the leading ten arms suppliers were Asian.
The column suggested, “If South Korea wants to become a big player in the global arms market, it needs to secure large orders from major customers. If that happens, it will also help achieve another goal of reducing foreign influence in Asia.”
By. Lee Jin Young
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