Fri, May 03, 2024 page9

• South Korea’s cheap weapons will not sell themselves

  • By Mihir Sharma / Bloomberg Opinion
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  South Korea has long punched above its weight as an industrial power. Facing a constant existential threat has strengthened its resilience, self-reliance and competitiveness.

  Until recently, the South Korean defense industry had not quite matched the export performance of the rest of the nation’s economy. That is changing: South Korea now ranks among the world’s top 10 arms exporters, notching US$14 billion in exports last year to 12 nations, up from just four in 2022.

  South Korean exports, which are very competitively priced, are filling an obvious gap in the market. Some of its biggest customers are in eastern Europe — Poland, for example. Nations that cannot afford high-end weapons from the US or western Europe are looking for alternatives that do not come with the strings attached to arms from Russia, China or Turkey.

  However, South Korea has not yet maximized its biggest potential market, which is on its doorstep in the Indo-Pacific region. Nations from India to the Philippines, which confront real military threats and stretched defense budgets, are looking for alternatives. To win them over, Seoul needs to focus as much on geopolitics as on finance and technology.

  Commercial South Korean manufacturers already excel in selling to South and Southeast Asia. Seoul is trying to expand its support to defense exporters. When a multibillion-dollar deal with Poland struggled to achieve financial closure, legislators increased the export-import bank’s capitalization to match the scale of the transaction. A Polish delegation visited Seoul last week and closed the deal.

  Cost is only one consideration for nations entering into long-term defense arrangements, trust is also an issue. Are your relationships with your arms suppliers strong enough to withstand a shift in geopolitical winds? Will those nations move heaven and earth to make maintenance and resupply available in a crisis?

  Developing a stronger military-to-military relationship is also key.

  India has long bought arms from Russia, for example. Nobody else so far has been willing to offer the particular combination of technology transfer and cost that the Russians did. If New Delhi is to scale down its dependence on Moscow, it is likely to be because it feels that it should buy platforms used by militaries with whom it might need to conduct joint operations.

  Finally, there is the question of reciprocity. A nation that buys warplanes from another, for example, often expects some benefit to the larger bilateral economic relationship. If taxpayer money from one nation keeps assembly lines open in another, the politicians spending that cash naturally want something in return.

  For South Korea to expand its footprint in the region, it would have to work harder to build up this kind of trust. Consider Indonesia, its biggest Southeast Asian customer. The Indonesians understandably grumbled after a German submarine refitted in South Korea mysteriously sank in 2021, killing 53 sailors.

  South Korea’s KF-21 fighter is another flashpoint: The Indonesians think Seoul is being stingy with technology transfer, while the South Koreans worry that payments are overdue and complain of “attempts by Indonesian engineers to leak confidential data.”

  South Korean defense planners might believe that treating arms exports as commercial rather than strategic decisions would give buyers confidence that they come with few strings attached, but the negatives of this approach might outweigh the positives. Few nations would invest billions into either making or buying a weapon if they fear that geopolitics might get in the way a decade from now. Building a long-term arms trade around a strategic relationship rather than a particular price point makes better commercial sense.

  Seoul has traditionally been somewhat hesitant about more assertive diplomacy in the Indo-Pacific region, although its current president has taken a few halting steps forward. Trust is built through institutions — and relations with nations such as India and Indonesia would require institutionalization.

  South Korean officials need to master an entirely new grammar of bilateral engagement — regular ministerial-level summit meetings, security-focused working groups, discussions about economic security and supply chains, more academic exchanges. They need to offer as much as they take — and to do that, they need to better understand what their potential partners want.

  When it comes to defense, South Korea can no longer rely on its giant companies to open new markets for their products, as it has for decades. South Korean vehicles and appliances have conquered Asia; Brand Korea has built its soft power across the region. Still, South Korea’s ambitions to be a “pivotal state” requires a bit more effort.

  Mihir Sharma is a Bloomberg Opinion columnist. A senior fellow at the Observer Research Foundation in New Delhi, he is author of Restart: The Last Chance for the Indian Economy. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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