[Reviving K-Defense]③ Experts Say "Need to Strengthen Items, Technology, and Systems"

Not Only Cost-Effectiveness but Also Securing Technology in K-Defense
Mid-to-Long-Term Strategies Needed Including Product Diversification and Financial Support

Experts point out that to sustain the boom in defense exports, South Korea must implement mid- to long-term strategies such as diversifying product lines, securing technological capabilities of domestic companies, and providing financial support. This is because K-Defense needs to build competitiveness not only in cost-effectiveness, which has drawn attention, but also across various fields to compete with major defense-exporting countries.

According to defense and defense industry experts on the 14th, for South Korea to leap forward as an advanced defense nation, it is necessary not only to expand export volume but also to diversify export items and provide government support for technology development in small and medium-sized enterprises (SMEs) and mid-sized companies.

In particular, with large-scale defense exports as a turning point, the export methods are shifting from finished product exports to local production, licensed production by local companies, and overseas joint cooperative development. This shift raises the urgent issue of domestic small parts suppliers being excluded. As local parts suppliers’ participation increases according to the demands of export destination countries, the export trickle-down effect decreases, raising concerns that small parts suppliers may be marginalized. Reflecting this, industry voices say that while large corporations have seen an increase in orders due to changes in export methods, small parts companies with reduced delivery volumes are experiencing intensified workforce outflow.

There are also recommendations that the government should support acquisition systems favorable to domestic companies, provide technological support, and foster large-scale workforce training. The Defense Export Strategy Meeting, launched by the National Security Office on April 26, should serve as a control tower that not only pursues simple export expansion strategies but also reflects industry voices to create a 'win-win strategy.' Yoo Hyung-gon, director of the Korea Defense Technology Society, said, "Just as reaching the World Cup semifinals does not mean being ranked fourth in football skills, even if South Korea achieves the fourth-largest defense export volume, it is difficult to simply applaud," adding, "The government must work to enhance the quality alongside increasing export volume, which is often highlighted as a success."

There is also advice that domestic defense companies should enhance export competitiveness through independent development of core technologies. For example, just as Hanwha Systems is developing an active electronically scanned array (AESA) radar, domestic companies should find new growth engines beyond existing items such as self-propelled artillery, fighter jets, and tanks to achieve product diversification. AESA radar performs various missions such as detection, tracking, and imaging of air and ground targets. Hanwha Systems signed a 'Heads of Agreement (HOA) on Key Conditions for Export of AESA Radar for Light Attack Aircraft' with European defense company Leonardo at the Paris Air Show held on the 19th of last month. Shin Jong-woo, secretary-general of the Defense Security Forum, said, "Core technologies like AESA do not require loans or local factories, and modules produced in Korea are supplied, which is an advantage," advising, "Companies should take such cases as lessons."

[Image source=Yonhap News]

There is also a need to accelerate preparations for financial support for large-scale defense exports. In the case of the United States, in 1988, the Export-Import Bank’s charter was amended to allow exceptions, recognizing non-lethal, defensive, and crime response purposes as exceptions to credit support restrictions. Through Foreign Military Financing (FMF), the U.S. provides up to 100% financial support in the form of loans to export destination countries. Like the U.S., major defense-exporting countries designate defense as a national strategic industry and provide systematic financial support. On the other hand, the Export-Import Bank’s statutory capital limit is currently 15 trillion won, which is considered insufficient to support export financing as a public export credit agency (ECA).