South Korea Defence & Security Report

Providing expert analysis, independent forecasts and competitive intelligence on the defence & security industry.

Report includes: BMI Industry View, Industry SWOT Analysis, Industry Forecasts, BMI's Security Risk Reward Index, Company Profiles and Global, Regional and Country Industry Overviews.

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South Korea Defence & Security Report
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BMI View: North Korea's pursuit of nuclear weapons and ballistic missiles represents a persistent, increasingly belligerent and direct threat to South Korea. In the face of this, South Korea will continue to invest considerably in to strengthening its defence posture - namely its counter strike, reconnaissance and intelligence capabilities - providing opportunities for multinational defence companies . Although the domestic sector lacks the ability to satisfy the more advanced requirements of the South Korean armed forces , it s export potential has , and will , continue to increase, driven by government support and close ties with the US . However, we highlight domestic structural issues as a downside risk to our forecasts. Although the country's economic outlook remains sound for the time being, over the long term, these issues will - if not addressed - act as a drag on defence expenditure growth.

Defence Expenditure (South Korea 2015-2020)
2015e 2016f 2017f 2018f 2019f 2020f
e/f = BMI estimate/forecast. Source: US Dept. Of State WMEAT, BMI
Defence expenditure, USDmn 35,069.0 35,319.0 37,249.1 40,617.0 44,913.9 48,726.5
Defence expenditure, USD, % y-o-y -6.9 0.7 5.5 9.0 10.6 8.5
Defence expenditure, % of GDP 2.7 2.7 2.7 2.7 2.7 2.7

Latest Updates

  • In May 2016, the South Korean Navy took part in the ASEAN Defence Ministers' Meeting (ADMM)-Plus maritime security and counterterrorism exercise. The multilateral exercise comes against a backdrop of rising maritime tension in the Asia-Pacific region and saw participation by the 10 ASEAN countries and Australia, China, Japan, India, New Zealand, Russia, South Korea, and the US.

  • On April 11 2016, South Korea's Hanwha Techwin was formally awarded a PHP2.42bn (USD52.5mn) contract to supply eight new amphibious assault vehicles (AAVs) to the Philippine Marine Corps.

  • On April 8 2016, the Hanwha Group was successful in its bid to acquire 100% of armoured vehicle manufacturer Doosan DST for KRW695bn (USD608mn).

  • In April 2016, South Korea's Defense Acquisition Program Administration (DAPA) was reportedly in the works of developing an updated defence offset scheme that would promote the development of small and medium-sized enterprises in the defence sector.

  • In March 2016, South Korean and US armed forces carried out their annual joint exercises 'Foal Eagle' and 'Key Resolve'.

  • In March 2016, Washington and Seoul began formal talks regarding the deployment of a US Terminal High-Altitude Area Defense (THAAD) anti-ballistic missile system to South Korea.

  • On February 26 2016, South Korea formally inaugurated a new naval base on the southern outlying island of Jeju, with easy deployment capacity to the East China Sea.

  • On February 17 2016, the US deployed four Lockheed Martin F-22 Raptor combat aircraft to South Korea in response to a North Korean rocket launch.

  • On February 2 2016, Israel Aerospace Industries and South Korean firm Hankuk Carbon established a joint venture to co-develop vertical take-off and landing (VTOL) unmanned aerial vehicles.

  • On January 6 2016, North Korea conducted its fourth test of a nuclear explosive device. North Korean media announced that the successful test involved a hydrogen bomb, although these reports have not been confirmed.

  • In late-December, the Ministry of Defence introduced additional guidelines to its procurement procedure to weed out corruption in the process.

  • In December 2015, Hungary and South Korea signed a defence trade and industrial collaboration agreement.

  • On December 3 2015, South Korea's National Assembly approved a 2016 defence budget of KRW38.8trn (USD33.5bn). This was slightly below the KRW40.1trn budget initially requested by the Ministry of Defence.

  • In October 2015, Pakistan's government announced that it was in talks with South Korea in regards the establishment of joint ventures between some of the respective countries' defence companies.

Defence Industry Risk Reward Index

South Korea's Defence Risk/Reward Index score for 2016 comes in at 53 out of 100, placing it sixth among 14 Asia Pacific states. Owing to the consistent and increasingly belligerent North Korean threat, as well as the domestic sector's inability to provide much of the modern platforms and weaponry (namely complete aircraft and advanced C4ISR systems) required by the South Korean armed forces, the country will continue to seek out and depend on imports to enhance its defence posture. This will create opportunities for multinational defence firms looking to capture such advanced defence contracts. However, a still relatively opaque and restrictive regulatory framework and domestic issues stemming from a worsening demographic profile will pose risks to defence expenditure going forward.

BMI Industry View
Table: Defence Expenditure (South Korea 2015-2020)
Defence Industry SWOT
Industry Forecast
Defence Expenditure
Table: Defence Expenditure (South Korea 2014-2019)
Table: Defence Expenditure (South Korea 2020-2025)
Defence Trade
Industry Risk Reward Index
Defence Industry Risk Reward Index
Table: Asia Pacific - Defence Industry Risk Reward Index
Market Overview
Defence Market Overview
Domestic Defence Sector
Domestic Defence Market
Armed Forces Overview
Armed Forces
Table: Armed Forces Personnel (South Korea 2006-2013)
Table: Manpower Available For Military Service (aged 16-49 unless otherwise stated) (South Korea 2013-2020)
Security Overview
Domestic Threats
Regional Threats
Company Profile
Daewoo Shipbuilding & Marine Engineering (DSME)
Hanwha Group
Hyundai Heavy Industries
Korea Aerospace Industries (KAI)
LIG Nex1
Industry Forecast Methodology
Risk/Reward Index Methodology
Sector-Specific Methodology
Table: Defence Risk/Reward Index Indicators
Table: Weighting of Defence Risk Reward Index

The South Korea Defence & Security Report features BMI Research's independent forecasts for national and international security, the defence industry, military expenditure, employment in arms production, and arms imports and exports, as well as examining industry trends and prospects, national and multinational arms producers and the regulatory environment.

BMI's South Korea Defence & Security Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and regional competitive intelligence on the Korean defence and security industry.

Key Benefits

  • Benchmark BMI's independent defence and security industry forecasts on South Korea to test other views - a key input for successful budgetary and strategic business planning in the Korean defence and security market.
  • Target business opportunities and risks in the Asia defence and security sector through reviews of latest industry trends, regulatory changes and major deals, projects and investments in Asia.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).


Global and Regional Political Outlooks

A strategic overview of the world’s major political risks, identifying countries facing leadership successions and nations at risk of upheaval, inter-state conflict, or separatism and insurgencies, plus a summary of the world’s ‘wild card’ low-probability high-impact risks.

SWOT Analysis

Snapshot evaluation of the major issues affecting the defence and security sectors, economy and politics, with issues subdivided into strengths, weaknesses, opportunities and threats.

BMI Industry Forecast Scenario

Historic data series and forecasts to end-2019 for key industry indicators supported by explicit assumptions, plus analysis of key downside risks to the main forecast.

  • Defence Expenditure: Defence expenditure (local currency and USDbn); defence expenditure (% of total budget); defence expenditure per capita (USD); defence budget (local currency and USDbn).
  • Armed Forces (to 2012): Manpower available for military service, manpower fit for militaryservice, army personnel, navy personnel,air force personnel, total armed forces, (‘000) (% population).
  • Arms Trade: Arms and ammunition exports and imports (USDmn); bombs, grenades and missiles exports and imports (USDmn); revolver and pistol exports and imports (USDmn); weapons excluding guns and swords exports and imports (USDmn).

Political Risk Assessment

Drawing on BMI’s heritage of more than 25 years of Country Risk analysis, this comprehensively evaluates the key risks to domestic politics and foreign relations, focusing on issues most likely to affect either domestic security or the defence sector.

Security Risk Analysis

BMI’s proprietary Security Risk Indices provide investors with a reliable and country-comparable guide to conflict, terrorism and criminal risk, backed up by our analyst’s latest assessment of each component. Furthermore, drawing on our Country Risk expertise, we assess the state’s vulnerability to a serious, or prolonged, terrorist campaign.

Armed Forces Spending/ Expenditure

The reports contain a detailed breakdown of areas of expenditure by the armed forces, these include spending on international deployments, WMDs and missile defence systems as well as individual breakdowns of the cost-per-soldier.

Competitive Landscape

The domestic security overview lists the various potential internal security threats facing a country, ranging from internal security issues such as terrorism, cyber terrorism, crime and drugs, to external security issues including general defence procedures and potential threats from specific countries. The reports also provide a regional overview which details specific issues and flashpoints affecting the Americas, along with potential risks in the coming year.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.


The Defence & Security Market reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.