South Korea’s race to become one of world’s biggest arms dealers

Top producer: Two Paladin self-propelled Howitzers in a Combined Resolve 18 exercise in southern Germany. Given the limited production capacity of Germany’s defence industry, experts believe it could work in South Korea’s favour. — AFP

SEOUL: South Korea is using a US$13.7bil (RM60bil) arms deal with Poland - Seoul’s biggest ever - to lay the groundwork for a military-industrial juggernaut that the two nations’ defence companies hope will feed Europe’s hunger for weapons far into the future.

South Korea’s arms sales jumped to more than US$17bil (RM78.4) in 2022 from US$7.25bil (RM33.4bil) the year before, according to its defence ministry, as Western countries scrambled to arm Ukraine and tensions rose in other hot spots such as North Korea and the South China Sea.

The arms deal with Poland, a key North Atlantic Treaty Organisation member, last year included hundreds of Chunmoo rocket launchers, K2 tanks, K9 self-propelled Howitzers and FA-50 fighter aircraft. The deal’s value and the number of weapons involved made it stand out even among the world’s biggest defence players.

South Korean and Polish officials said their partnership will help them conquer the European arms market even beyond the Ukraine war, with Seoul providing high-quality weapons faster than other supplers and Poland manufacturing capacity and a sales pipeline into Europe.

Reuters spoke to 13 company executives and government officials, including those directly involved in the deal, who said the arrangement provides a blueprint for using international public-private partnerships and consortiums to extend Seoul’s reach and achieve its ambition to be one of the world’s biggest weapons suppliers.

“The Czech Republic, Romania, Slovakia, Finland, Estonia, Latvia, Lithuania and others were thinking of buying defence products only in Europe, but now it is more well known that you can buy at a low price and have it delivered quickly from South Korean companies,” said Oh Kyeahwan, a director at Hanwha Aerospace who was involved in the Poland deal.

South Korean companies do not disclose the unit prices for their weapons, which are often sold with support vehicles and spare parts.

Hanwha Aerospace already had a 55% share of the global howitzer market, a number that will rise to an estimated 68% with the Poland deal, according to research by NH Research and Securities.

The deal established consortiums of South Korean and Polish companies that will build the weapons, maintain the fighter jets and provide the framework to eventually supply other European states, said Lukasz Komorek, director of the Export Projects Office at the state-owned Polish Armaments Group (PGZ).

That will include building South Korean arms on licence in Poland, officials in Seoul and Warsaw said. Plans call for 500 of 820 tanks and 300 of 672 Howitzers to be built in Polish factories starting in 2026.

“We don’t want to just play the roles of a subcontractor, technological transfer provider and purchaser,” Komorek said. “We can both create synergy and use our experiences to conquer the European markets.”

Sash Tusa, a defence and aerospace analyst at Britain-based Agency Partners, said that although both countries have well-established defence industries, the long-term plans will face hurdles. Political winds could shift, he said, reducing demand for weapons such as Howitzers and tanks.

Even if production and demand hold up, European countries might want deals of their own with South Korea along the lines of what Poland has, co-production agreements that could create jobs and stimulate industry, Tusa said.

“It may work for some countries at very, very low volume,” he added of Polish-brokered South Korean weapons sales, discussing challenges the joint operation might face.

At a Hanwha Aerospace factory on South Korea’s southern coast, six huge automated robots and more than 150 production workers are churning out 47-tonne K9s destined for Poland.

The self-propelled guns use NATO-standard 155mm ammunition, have computerised fire-control systems, are designed to easily integrate into command and control networks, and offer performance comparable to more expensive Western options. Major powers such as Australia and India operate them.

To meet demand, the company expects to add about 50 more workers and more production lines, production manager Cha Yong-su said during a recent tour.

The robots handle about 70% of the welding work on a K9 and are key to expanding capacity, he said. They operate an average of eight hours per day but can work around the clock if needed.

“Basically, we can meet any order you want,” Cha said.

South Korea’s offer to provide weapons faster than almost anyone was a key consideration, Polish officials say. The first shipment of 10 K2s and 24 K9s arrived in Poland in December, just months after the deals were signed, and at least five more tanks and 12 additional Howitzers have been delivered since.

By contrast, Germany, another major arms manufacturer, has yet to deliver any of the 44 new Leopard tanks Hungary ordered in 2018, said Oskar Pietrewicz, senior analyst at the Polish Institute of International Affairs.

“Countries’ interest in South Korea’s offer may only grow considering the limited production capacity of Germany’s defence industry, which is a major arms supplier in the region,” he said.

Executives in South Korea’s arms industry said that will be a selling point for future clients.

A close relationship between South Korea’s military and its arms industry allows them to rearrange domestic orders to make room for export production and expand production in the country’s highly industrialised manufacturing base, officials said.

“They put things together in weeks or months that would take us years,” a European defence industry executive said, speaking on condition of anonymity. — Reuters

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