[Defense Club] 'Insaman-sa'... Yoon Government's Success in Defense Export Hangs in the Balance

KAI, the Only Defense Company Without an Owner
All Former CEOs Were Appointed as Favors
Yoon Administration's Personnel Decisions Determine Defense Export Success

[Asia Economy Yang Nak-gyu, Military Specialist Reporter] President Yoon Suk-yeol made a sharp remark targeting the CEOs of financial holding companies, often called "ownerless companies." He said, "The banking system is more important than national defense," and promised to improve the appointment process with enhanced expertise and transparency. This implies that the appointment process for national defense CEOs is better than that of the banking system. But is that really the case?

Korea Aerospace Industries (KAI) is the only "ownerless company" among domestic defense companies. It was created by merging three companies?Daewoo Heavy Industries, Samsung Aerospace, and Hyundai Aerospace?that were struggling with deficits during the Kim Dae-jung administration. The largest shareholder is the Export-Import Bank of Korea. The first president of KAI, Im In-taek, served as the 35th Minister of Transportation. The second president was Gil Hyeong-bo, a former Army Chief of Staff. Gil was appointed president just ten days after retiring as Army Chief of Staff, leading to criticism that he was a parachute appointment. The third president was Jeong Hae-ju, a former Minister of Commerce, Industry and Energy, and during the Lee Myung-bak administration, the fourth president was Kim Hong-gyeong, a former Deputy Minister of Industry and Resources. The defense industry criticized these appointments as patronage without expertise.

During the Park Geun-hye administration, Ha Seong-yong was president, and under the Moon Jae-in administration, Kim Jo-won, a former Secretary General of the Board of Audit and Inspection, took office. Kim later moved to the Blue House as Senior Secretary for Civil Affairs, once again proving that the appointment was unrelated to the defense industry. The same applied to Kim Hong-gyeong, the former president and Deputy Minister of Industry and Resources.

In the case of former president Ha Seong-yong, he was subjected to a high-intensity investigation as the first defense corruption case under the Moon Jae-in government. The person who directly led the investigation at that time was Yoon Suk-yeol, then the Seoul Central District Prosecutor. There has been little change since the Yoon administration took office. Kang Gu-young, a retired three-star general who served as co-chairman of the "Defense Forum with the People," a military group supporting President Yoon in the last presidential election, was appointed president.

President Kang immediately carried out a large-scale organizational restructuring, dismissing 14 executives. Although six months have passed since his appointment, management performance remains poor. Last month, KAI lost the contract to manufacture satellite structures for the Korean Positioning System (KPS). The project was taken by Korean Air, which had withdrawn from satellite structure manufacturing ten years ago. This marks a second consecutive defeat, including last year's loss to Hanwha Aerospace in the selection of the lead company for the Nuri rocket advancement project. Although the Yoon government is promoting the space economy and the space industry is buzzing, KAI appears excluded from this atmosphere. This is why the industry points to the limitations of patronage appointments.

The heads of institutions called national defense CEOs are no different. The vice chairman of the Korea Defense Industry Promotion Association (KDIPA), formed by domestic defense companies, ended his term last month. While the chairman position is an honorary part-time role, the vice chairman is a full-time position responsible for leading defense exports. However, the announcement for the position has yet to be made. Traditionally, the KDIPA vice chairman has been an Army officer, and the executive director has been a Navy officer. Because of this, a non-expert, the head of the Military Manpower Administration, was once appointed vice chairman. It was a revolving-door appointment.

On the 3rd, interviews for candidates for the director of the Defense Technology Promotion Research Institute (DTPRI) under the Defense Technology Quality Institute will be held. DTPRI is an important organization that decides how to promote defense capability improvement projects, but rumors about candidates' backers are already rampant. National defense institution heads or CEOs are not spoils of war. It must not be forgotten that the success of defense exports depends on the personnel decisions of the Yoon administration.