Why Is the Investigation into Defense Industry Corruption Delayed? [Yang Nak-gyu's Defence Club]

Fake Domestic Development and Waste of Public Funds
Police Conducted Only Internal Investigation for One Year
Diplomatic Issues Seem to Have an Impact

Investigations into various defense industry corruption cases are struggling to gain momentum. Despite allegations involving fake domestic development, military secrets leaks, and the involvement of defense company executives, progress remains slow, raising concerns that the investigation might fizzle out.

The 'box switching false report' case, which was raised at the National Assembly's National Defense Committee plenary session last August, is symbolic. At the time, Eom Dong-hwan, head of the Defense Acquisition Program Administration (DAPA), stated a firm stance to strictly deal with a company that submitted imported products as domestically developed during the missile launch vehicle localization development process, calling it a 'box switching' false report. This was in response to a question from Ahn Kyu-baek, a member of the National Assembly's National Defense Committee from the Democratic Party of Korea, asking, "Are you aware that the ADD (Agency for Defense Development) research contractor did this out of concern that the research and development would fail?"

The case overview is as follows. Since 2017, the Agency for Defense Development (ADD) has been working for four years on the localization development of 'Lyocell carbon fabric' used in missile launch vehicles. The development cost alone was 2.9 billion KRW. Missile propulsion systems require carbon composites that can withstand high temperatures and high pressure. This is the 'Lyocell carbon fabric.' Carbon composites are used in the Hyunmoo-2 and Hyunmoo-3 missiles, which are North Korea strike weapons. Since there are none domestically, all carbon composites were imported from Belarus.

Exposed for Faking Localization Development and Switching Boxes

In this situation, a research company in Jeonbuk claimed to have localized the carbon composite. In July 2021, they announced, "We have succeeded in developing Lyocell-based carbon fiber applicable to space launch vehicles for the first time in the world," but it turned out to be false. The company faked success in domestic carbon fiber development by switching boxes. ADD launched an audit, disciplined those involved, and requested an investigation from the Daejeon Metropolitan Police Agency. However, even a year after the investigation request, only an internal inquiry is ongoing instead of a formal investigation. An ADD official said, "As far as I know, the Daejeon District Police Agency is currently conducting an internal inquiry," adding, "Whether it will be converted into an investigation remains to be seen."

On the 17th, the domestically produced supersonic fighter jet KF-21 was unveiled at the 'Seoul International Aerospace and Defense Exhibition (ADEX) 2023' held at Seoul Airport in Seongnam, Gyeonggi Province. Photo by Jinhyung Kang aymsdream@

The police also detected circumstances suggesting an attempt to leak aviation technology related to the KF-21, jointly developed by Indonesia and Korea Aerospace Industries (KAI), and launched an investigation. In February this year, an Indonesian technician was caught trying to take about eight USB drives outside the company. This technician was dispatched to acquire aviation technology and share technology related to the KF-21. The industry fears that Indonesian technicians may have leaked a significant amount of information externally during their dispatch period.

Leak of Military Secrets Detected but Investigation Passive Due to Diplomatic Concerns

Although the police have started an investigation, there has been no progress yet. Some worry that the investigation might be scaled down to avoid diplomatic issues. Kang Gu-young, president of KAI, recently said in a media interview, "Since Indonesia is an important strategic partner for us, it is burdensome if this escalates into a diplomatic issue," adding, "If Indonesia purchases Korean weapons, the impact spreads across Southeast Asian countries. Considering these points, I hope a magnanimous conclusion can be reached."

There are also criticisms that this is a kind of 'eat-and-run,' stealing technology and paying less of the contribution fee. Indonesia joined the joint development in January 2016 under conditions of bearing about 20% of the KF-21 development cost, approximately 1.7 trillion KRW (later reduced to 1.6245 trillion KRW), by June 2026, receiving one prototype and various technical data. However, Indonesia has delayed payments and has only paid 278.3 billion KRW to date.

Military Secrets Smuggled Out to Participate in Project and Concluded as ‘Employee Corruption’

Investigations into the Korean next-generation destroyer (KDDX) project are also delayed. The KDDX project involves building six ships with a total budget of 7.8 trillion KRW. HD Hyundai Heavy Industries employees were caught smuggling military secrets. Between 2013 and 2014, HD Hyundai Heavy Industries employees took out more than ten classified documents, including two KDDX secrets, next-generation submarines, and special warfare support ships, from the Navy Headquarters. Nine HD Hyundai Heavy Industries employees were convicted by the Supreme Court in November last year for violating the Military Secrets Protection Act. However, DAPA reported no evidence of involvement by representatives or executives and allowed HD Hyundai Heavy Industries to bid for the basic design project.

Competitor Hanwha Ocean accused the involvement of executives during the illegal acts of HD Hyundai Heavy Industries employees and filed a complaint with the police. The police are expected to release investigation results soon, but delays are possible. Recently, Wang Jeong-hong, a former head of DAPA under the Moon Jae-in administration, was found to have held stocks in an IT-related company under a nominee and the company's CEO was subjected to a search and seizure.

A government official said, "Considering the impact on future projects, thorough and swift investigations are necessary to fundamentally block defense industry corruption."