{"id":2205699,"date":"2024-07-08T14:54:17","date_gmt":"2024-07-08T05:54:17","guid":{"rendered":"https:\/\/koreapro.org\/?p=2205699"},"modified":"2024-07-09T16:39:26","modified_gmt":"2024-07-09T07:39:26","slug":"europes-push-for-domestic-arms-production-threatens-south-koreas-exports","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/07\/europes-push-for-domestic-arms-production-threatens-south-koreas-exports\/","title":{"rendered":"Europe’s push for domestic arms production threatens South Korea’s exports"},"content":{"rendered":"

South Korea\u2019s defense industry faces significant obstacles in its efforts to expand into the European market, despite recent successes in countries like Poland and Romania, as the European Union (EU) works to bolster its own defense capabilities and reduce reliance on non-European suppliers.<\/span><\/p>\n

The EU Commission <\/span>stated<\/span><\/a> in March its plans to raise the proportion of EU-made weapons purchases within the bloc from 20% to 60% by 2035. Similarly, French President Emmanuel Macron <\/span>emphasized<\/span><\/a> the importance of buying European-made military equipment to ensure Europe\u2019s defense autonomy.\u00a0<\/span><\/p>\n

Macron highlighted European nations\u2019 recent acquisitions of American and Korean weapons in response to Russia’s invasion of Ukraine, questioning the region’s ability to assert sovereignty without a developed domestic defense industry.<\/span><\/p>\n

While experts recognize South Korea\u2019s successful arms sales in Europe as a positive trend, they caution that sustaining this success may be hindered by challenges in export financing and the complex geopolitical dynamics of the European market.\u00a0<\/span><\/p>\n

\"\"

Then-ROK defense minister Lee Jong-sup and Polish defense minister Mariusz B\u0142aszczak shake hands in front of South Korean K9 self-propelled howitzers in Poland, Feb. 24, 2023 | Image: Polish Ministry of Defense via Flickr<\/a><\/p><\/div>\n

DIVERGING THREAT PERCEPTIONS<\/b><\/p>\n

Two years after Russia invaded Ukraine in Feb. 2022, experts note a stark difference in perceived security threats between Eastern and Western Europe. This divergence has led to Eastern European nations becoming early adopters of South Korean weapons, which meet NATO standards compared to their Western counterparts.<\/span><\/p>\n

Since sealing a <\/span>landmark defense export deal<\/span><\/a> with Poland in 2022, South Korea has expanded its footprint in Eastern Europe, selling K9 howitzers to <\/span>Romania<\/span><\/a> and <\/span>Estonia<\/span><\/a> in recent years.<\/span><\/p>\n

In June, Poland <\/span>announced<\/span><\/a> plans to start domestic production of K2 tanks through a cooperation agreement with South Korea, ensuring technology transfer and preparation for local manufacturing. The Polish government also stated that a new contract for 180 additional K2 tanks will be formalized during the upcoming Kielce defense industry expo.\u00a0<\/span><\/p>\n

Choi Gi-il, a professor in Sangji University’s national security division, told <\/span>Korea Pro<\/span><\/i> that Poland and Romania have had underlying tensions with Russia for decades. As former Soviet satellite states, Warsaw and Bucharest are especially sensitive to the ongoing war in Ukraine. Their geographical proximity to Ukraine puts them under direct threat, necessitating an enhancement of their military capabilities.<\/span><\/p>\n

\u201cThese countries are quite satisfied with the cost-effectiveness and prompt delivery capabilities of South Korea\u2019s weapons, which has continued to build trust even amid government changes,\u201d said Jang Won-jun, a research fellow at the Korea Institute for Industrial Economics and Trade (KIET).<\/span><\/p>\n

Jang added that Eastern European countries urgently need cost-effective tanks and armored vehicles, making immediate needs more pressing than broader EU policies.<\/span><\/p>\n

However, experts caution that expanding arms sales to Northern and Western Europe may become increasingly difficult as traditional European arms manufacturers like France and Germany view Seoul as a strategic competitor.<\/span><\/p>\n

Earlier this year, <\/span>Norway<\/span><\/a> and the <\/span>U.K.<\/span><\/a> announced their respective decisions to procure German tanks and howitzers despite the cost-effectiveness of their South Korean counterparts.<\/span><\/p>\n

Shin Seung-ki, a senior analyst at the Korea Institute for Defense Analyses (KIDA), told <\/span>Korea Pro<\/span><\/i> that NATO countries feel threatened by South Korean defense companies\u2019 encroachment in their markets.<\/span><\/p>\n

Shin emphasized the significant influence of geopolitical factors on defense contracts. Deals secured by the German defense industry with countries like Norway and the U.K. are often shaped by geopolitical relationships.<\/span><\/p>\n

Choi agreed, noting that Western Europe tends to favor its own advanced and expensive weaponry, while Northern Europe, influenced by Western Europe and facing less immediate threat, aligns its decisions accordingly.<\/span><\/p>\n

\u201cThese Western European countries have long-standing military traditions and advanced defense capabilities, often producing their weapons domestically,\u201d Choi said. He added that Norway\u2019s decision to choose the Leopard 2A7 was influenced by the practicality of receiving logistical support from neighboring Germany.<\/span><\/p>\n

Shin suggested that in the short term, entering the Western European market will be challenging and that focusing on untapped markets in Eastern Europe might be more effective. \u201cBy increasing our market share and ensuring satisfaction with our military products, we can create a natural marketing effect, potentially expanding to neighboring countries,\u201d Shin said.<\/span><\/p>\n

\"\"

Models of South Korea\u2019s K9A1 self-propelled howitzer and the Chunmoo MLRS on display at Hanwha\u2019s booth at the Seoul ADEX, Oct. 16, 2023 | Image: Korea Pro<\/p><\/div>\n

FINANCIAL CHALLENGES<\/b><\/p>\n

Yang Hee-dong, a professor of Management Information Systems at Ewha Womans University, told <\/span>Korea Pro<\/span><\/i> that while the South Korean defense industry is significant, it does not immediately translate into profitability, especially in terms of cash flow.\u00a0<\/span><\/p>\n

“The reliance on export financing, crucial for facilitating these large-scale deals, has become a bottleneck, especially when most financial resources are currently directed toward sectors like semiconductors,” Yang said.<\/span><\/p>\n

As South Korea lacks geopolitical leverage over Europe, Seoul has primarily adopted a technical and business-oriented approach toward its defense sales to Europe. However, arms exports typically include long-term maintenance, updates and access to sensitive information.<\/span><\/p>\n

Yang pointed out that while the U.S. and Europe can afford to be selective in their arms sales, focusing on broader strategic interests, South Korea has marketed its defense products based on superior technology and affordability.<\/span><\/p>\n

\u201cHowever, when large orders are placed, the absence of adequate financial arrangements, such as sufficient export financing, places a significant burden on corporations like Hanwha, which must endure the financial strain,\u201d Yang emphasized.<\/span><\/p>\n

Jang of KIET concurred with Yang’s assessment, highlighting that sustaining growth in arms sales involves not just increasing export volumes but also enhancing institutional support structures like export financing.<\/span><\/p>\n

\u201cEnhancing frameworks such as the Export-Import Bank Act is crucial for aligning these systems with South Korea’s ambitious export goals. This will help ensure that South Korea not only maintains but also expands its status as a leading defense exporter globally,\u201d Jang noted.<\/span><\/p>\n

\"\"

South Korean President Yoon Suk-yeol and French President Emmanuel Macron during the NATO Summit in July 2023 | Image: ROK Presidential Office<\/a><\/p><\/div>\n

EUROPE\u2019S SHIFTING POLITICAL LANDSCAPE<\/b><\/p>\n

Monday\u2019s French <\/span>parliamentary elections<\/span><\/a> have highlighted the shifting political landscape in Europe, with the far-right Rassemblement National (RN) party falling short of expectations despite its <\/span>strong showing in the first round<\/span><\/a>.<\/span><\/p>\n

While the RN may have failed to secure a victory, the overall trend of far-right parties gaining ground remains a significant factor that could impact South Korea\u2019s defense exports to the region.<\/span><\/p>\n

Yang of Ewha Womans University explained to <\/span>Korea Pro<\/span><\/i> that the changing political dynamics in Europe, particularly in Germany and France, two of the largest economies in the region, could amplify calls to Europeanize arms procurements. This, in turn, could inevitably affect Eastern European countries, which have been key markets for South Korean defense exports.<\/span><\/p>\n

\u201cEastern European nations like Poland will reassess their alliances and economic partnerships with their Western European counterparts, and that will likely intensify competition and scrutiny for South Korea,\u201d Yang said.<\/span><\/p>\n

Yang suggested that these countries will likely be influenced by their significant economic ties within Europe, stressing that it would be \u201cunsustainable\u201d for Seoul to focus so heavily on the European market.<\/span><\/p>\n

Shin of KIDA noted that political factors often play a significant role in defense dealings, as seen in contracts secured by Germany with countries like Norway and the UK, which are influenced by political relationships.<\/span><\/p>\n

However, he suggested that while hard-right governments tend to prioritize national interests, immediate security threats could necessitate the swift procurement of necessary weaponry.<\/span><\/p>\n

\u201cIf such dynamics extend to Western Europe, these nations may no longer be able to afford to overlook Korean arms as they do presently. Even with conservative political systems in place, immediate security needs take precedence over other factors,\u201d Shin said.<\/span><\/p>\n

Edited by John Lee<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Defense & Security<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

South Korea\u2019s defense industry faces significant obstacles in its efforts to expand into the European market, despite recent successes in countries like Poland and Romania, as the European Union (EU) works to bolster its own defense capabilities and reduce reliance on non-European suppliers. 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