Eurasia Review: The Rise Of South Korea’s Defense Industry And Its Impact On South Korean Foreign Relations – Analysis

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By Felix K. Chang*

(FPRI) — South Korean foreign policy has understandably been focused on deterring acts of aggression by North Korea for the last 66 years. After all, the two Korean neighbors are technically still at war, though an armistice halted the major fighting between them in 1953. But if South Korea’s decade-long ambition to turn its defense industry into an export powerhouse is fully realized, a new set of foreign policy challenges could be thrust upon Seoul as other countries, particularly China, may come to see South Korean arms exports as running counter to their national interests. Already, the South Korean defense industry’s latest sales of fighters and frigates have turned heads.

Right Reform at the Right Time

To be sure, the recent success of South Korea’s defense companies did not happen overnight. Their initial efforts to export high-tech defense products fared poorly. Most notably, Korea Aerospace Industries’ attempts to sell its T-50 jet trainers to Singapore and the United Arab Emirates failed in 2010. In the wake of such failures, Seoul implemented wide-ranging reforms to improve its defense industry’s competitiveness. It eased the defense offset requirements on foreign companies, promoted greater competition among South Korea’s chaebols, and nurtured small- and mid-sized defense companies that could efficiently produce the components for combat systems.[1] In the following years, South Korea’s reforms enabled not only its large defense integrators to lower their prices, but also its smaller companies to enter global defense supply chains.

Equally important to the success of the
South Korean defense industry has been its technical ability to
manufacture sophisticated military hardware. Remarkably, it has been
able to do so in not just one, but across three domains: land, sea, and
air. In the past, only big countries with deep pockets, like China,
Russia, and the United States, had the resources to do that. Of course,
South Korea’s ability did not sprout by chance. For years, South Korea has spent more on research and development as a percentage of its GDP than any other country in the world except Israel.

Still, South Korea’s defense industry
owes some of its success to good timing. By the late 2010s, the world
had become more unpredictable with the rise of China, resurgence of
Russia, and retrenchment of the United States. As a result, countries
from Southeast Asia to Eastern Europe have sought to strengthen and, in a
few cases, entirely rebuild their military capabilities. Seoul’s timely
reform of its defense industry positioned it well to capitalize on that
new demand.

Hanwha Land Systems won notable
contracts for its K9 155-mm self-propelled howitzers from Estonia,
Finland, and Norway. Daewoo Shipbuilding and Marine Engineering sold six
Chang Bogo-class diesel-electric attack submarines to Indonesia.
Hyundai Heavy Industries sold two Jose Rizal-class frigates to the
Philippines. And Korea Aerospace Industries was eventually successful in
selling not only its T-50 jet trainers to Indonesia, Iraq, and
Thailand, but also its FA-50 fighters (the combat variant of the T-50)
to the Philippines. Meanwhile, Oman and Poland have begun to evaluate
Hyundai Rotem’s K2 tanks for their armies.

No doubt, the South Korean defense
industry’s close collaboration with Western defense firms has helped
immensely. For example, the K9 is based on the design of the American
M109A2 155-mm self-propelled howitzer. The Chang Bogo class is based on
the design of the German Type 209 diesel-electric attack submarine. And
the FA-50 is based on the design of the American F-16 fighter.
Nonetheless, South Korean defense products have come a long way. They
are now both technologically and price competitive. As such, they hold
great appeal to countries in need of advanced combat systems.

Drawing China’s Ire

Clearly, the concern that has driven several Asian countries to seek those combat systems is China. While most had once regarded China’s rise as benign, many have grown wary of the country as Chinese behavior has become more truculent. In 2010, China’s then foreign minister amplified
this unease by declaring at a regional forum that “China is a big
country and other countries are small countries and that is just a
fact”—intimating that China would get its way regardless of the
interests of other countries. But, in 2017, Seoul did not heed China’s
objections to the American Terminal High Altitude Area Defense (THAAD)
anti-missile system and allowed the United States to deploy it in South
Korea. China was none too pleased, as it believed that THAAD could be
used to not only track and target North Korean ballistic missiles, but
also its own. And so, China took a series of punitive actions against
South Korea.

China’s state-owned media urged Chinese consumers to boycott South Korean products. Then, China’s national tourism administration launched
an unofficial campaign to stop Chinese tour groups from traveling to
South Korea, costing the country an estimated $7 billion. China also
intensified its harassment of South Korean firms. In particular, Beijing targeted the South Korean conglomerate Lotte,
which provided the land for the THAAD deployment, by “fining it for its
advertising practices and shutting down a large number of its
supermarkets in China for fire regulation violations.” Furthermore,
China allowed its fishermen to more forcefully assert themselves in
South Korean waters. In one incident, a group of 44 Chinese fishing boats surrounded a South Korean coast guard vessel, a tactic reminiscent of those used by Chinese fishing boats in the South China Sea.

In the future, should South Korean arms
exports of submarines and combat aircraft to Southeast Asia gain
momentum, they could make China’s pursuit of its “core interests” in the
region more difficult. Arming themselves with advanced
Western-compatible combat systems would enable Southeast Asian countries
to not only improve their ability to deter China, but also give them
the option to more closely cooperate with American and Japanese forces
to constrain China. That has the potential to irritate China to an even
greater extent than the THAAD deployment.

Broadening Security Horizons

If the ambitious plans of South Korea for its defense industry come to fruition, the country’s exports will top its record $3.5 billion. That would make South Korea a top-ten source of defense products in the world. In January 2019, Seoul updated its defense offset policy to support its export push. Rather than focus on technology transfers from foreign companies, the new policy seeks greater local production and export facilitation through international supply chains.[2]

Today, the South Korean defense industry
is busily developing its next generation of combat systems, including
the KF-X multirole fighter and the Sejong Daewang-class destroyer.
Managed wisely, these new combat systems could propel the industry into
greater growth. However, if exported in quantity to regions like
Southeast Asia, they could also erode the military advantages some
countries there currently hold. As to how those countries could react to
the prospect of losing their military edge, South Korea need only to
reflect on its recent experience with China. No doubt Seoul will have to
either guard against or prepare for such repercussions in the future.

Over the longer term, the continued growth of South Korean defense exports could impact Seoul’s foreign relations in another way. Along with Japan’s stepped-up diplomacy, South Korea’s defense exports have begun to draw the countries of Northeast and Southeast Asia closer together. Whereas the countries of each region once almost exclusively looked to global powers to improve their security, they are now increasingly looking to each other. The new defense relationships that South Korea is forging with countries like Indonesia will create new interests and incentives. Those will invariably force South Korea to widen the aperture of its foreign policy lens and possibly enmesh it in international security issues well beyond the Korean Peninsula.

*About the author: Felix K. Chang is a senior fellow at the Foreign Policy Research Institute. He is also the Chief Strategy Officer of DecisionQ, a predictive analytics company in the national security and healthcare industries.

Source: This article was published by FPRI

[1] Jon Grevatt, “South Korea launches defense industry development council,” Jane’s Defence Weekly, Sep. 7, 2011; and Sebastien Falletti and Jon Grevatt, “South Korea draws up plans for bigger defense industry,” Jane’s Defence Weekly, Oct. 21, 2010.

[2] Jon Grevatt, “Analysis: South Korea updates defence offset policy,” Jane’s Defence Weekly, Jan. 29, 2019.

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