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.
|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|
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.
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.
- 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).
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- 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).
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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
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