[Yang Nak-gyu's Defence Club] K-Defense Industry, Targeting the 'Middle East Market'

President Yoon's State Visit to Saudi Arabia
Possibility of Large-Scale Defense Exports
Expansion of Middle East Conflicts... Increasing Military Spending

Expectations for the Middle East defense market are rising following President Yoon Suk-yeol's state visit to Saudi Arabia. There is a growing outlook that the 'K-Defense Industry Myth' can be written once again as discussions on defense exports with Saudi Arabia enter their final stages.

Kim Tae-hyo, First Deputy Director of the National Security Office, stated at a local briefing in Riyadh on the 22nd (local time), "Large-scale defense cooperation discussions with Saudi Arabia are underway in the final stages across various fields such as air defense systems and firepower weapons."

[Image source=Yonhap News]

Kim added, "The defense industry is emerging as a new blue ocean in cooperation with Saudi Arabia. Last year, our defense exports reached a record high of $17.3 billion. Demand and interest in our weapon systems are growing worldwide, including Europe, the Middle East, and Southeast Asia. We will use this Middle East tour as a catalyst to expand the scope of the defense export market."

The Middle East market is known as the world's largest arms-importing region, characterized by frequent conflicts such as the Israel-Palestine and Sunni-Shia disputes, and abundant oil money. South Korea's arms exports to the Middle East have increased about tenfold over the past decade, with advantages including competitive weapon prices and fast delivery speeds.

According to data released last year by the Stockholm International Peace Research Institute (SIPRI), Saudi Arabia ranked second globally in arms imports over the past five years, accounting for 9.6% of the total, while Qatar ranked third with 6.4%. Notably, Qatar's arms imports increased by 311% from 2018 to 2022 compared to 2013 to 2017. The United Arab Emirates (UAE) ranked 10th with 2.7%.

Domestic defense companies have long focused on Saudi Arabia. Saudi Arabia, which has been attacked by Yemen's Houthi rebels using ballistic missiles and drones, has a high demand for interceptor missiles. If military spending increases actively, K-Defense could benefit significantly.

Global market share can also be increased this year. According to the 2022 World Defense Market Yearbook published by the Defense Technology Promotion Research Institute in December last year, South Korean defense companies ranked 8th globally with a 2.8% market share over the past five years (2017?2021), jumping one rank from 9th place (2016?2020) a year earlier.

The status of domestic defense companies can also rise. In the 2020 ranking of the world's top 100 arms-selling companies, Hanwha Aerospace ranked 50th, Korea Aerospace Industries (KAI) 63rd, LIG Nex1 73rd, and Hanwha Corporation 85th.

Kim Moon-tae, head of the Industrial Policy Team at the Korea Chamber of Commerce and Industry, said, "The three Middle Eastern countries are actively seeking new growth engines to prepare for the post-oil era. Since Korea has competitiveness in future industries such as advanced manufacturing, we expect this tour to expand opportunities for our companies to enter local markets."