▪ Defense export orders, which were about $3 billion in the 2010s, rose sharply to approxately $7.25 billion in 2021 and reached $17.3 billion in 2022, creating 130,000 jobs and generating 46 trillion won in production.
▪ The government is pushing for the national strategic industrialization of state-of the-art defense industries with the National Task of “establishing a virtuous cycle of building state-of-the-art military capability and expanding defense exports.”
▪ Since the government is seeking to expand defense exports with the goal of becoming one of the top four global defense powers, this report looks into the performance of defense exports and the status of government support, and suggests implications for future policy directions.
▪ (Vision) Expand defense industry globally with cutting-edge capabilities
▪ (Goal) Top seven defense science and technology powers and top four defense exporters
▪ Strengthen government-wide support and cooperation for defense exports
▪ Achieved average defense exports of more than $15 billion in the last two years, and the number of defense export destinations increased to 12 in 2023 (added eight compared to the previous year)
▪ Completed export agreements with six countries, including Poland and Peru, in the first half of 2024, and plan to achieve a goal of $20 billion by exporting weapon systems to at least 15 countries in the second half of the year.
▪ Offset is common in global defense trade, and the purchasing country requires weapons-related technology transfer or follow-up logistical support due to the nature of the defense industry.
▪ The Defense Acquisition Program Administration’s 2024 budget for the Defense Export Support Project is 81.8 billion won.
▪ The Export Credit Agency (ECA) provides direct and indirect financing if needed, including policy financial support and credit enhancement to participate in international bidding and enter into and implement export contracts.
▪ In Korea, the Export-Import Bank lends production funds to the supplier or purchase funds to the purchasing country (buyer’s credit), or the Korea Trade Insurance Corporation guarantees loans provided by financial institutions.
▪ Need to pay attention to the lock-in effect* of defense exports in terms of cooperation between countries
▪ Need to create a challenge-oriented R&D environment to produce advanced weapon systems
▪ Need to establish a financial support system specialized for defense exports
▪ Need to establish a dedicated export offset organization to address various offset conditions, since exported weapon systems may lead to technology transfer due to offset