South Korea Defence & Security Report

Published 25 November 2014

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South Korea Defence & Security Report

BMI View:   South Korea's defence and security outlook is dominated by the unpredictable and tense relationship with Pyongyang. Uncertainty drives defence spending increases and technological development, with missile-defence and jet fighters the pre-eminent concerns for Seoul at present. Domestic defence companies have generally stagnated in 2013 and 2014, with a handful of key civilian orders providing a much-needed boon to their finances. Longer-term, we see emerging markets in the Middle East and Sub-Saharan Africa as key areas for South Korean defence export growth.

A significant portion of defence expenditure funds are expected to be used to upgrade South Korea's missile defence system. The Korea Air Missiles Defence system (KAMD), or so called 'kill chain project' will see Seoul move from its German-made PAC-2 missile system to the PAC-3 system produced by American contractor Lockheed Martin. This project is expected to cost the Ministry of National Defence (MND) approximately USD26.4bn by 2019.

In another windfall for Lockheed Martin, the MND has agreed a deal for 40 F-35 Lightning fighter jets. The deal was signed in early 2014 and is worth USD6.8bn; procurement is set to begin in 2018. The deal will be part-funded by Indonesian engagement for technological development, and includes direct technology transfers from Lockheed to either Korean Aerospace Industries (KAI) or the aerospace division of national airline Korean Air.

In a revised arrangement with the US, Seoul will pay USD866mn in 2014 to maintain an enhanced US military presence in South Korea, with US forces in Korea boosted to 29,300 personnel with the addition of 800 troops in February 2014. The cost has risen by 5.4% from 2013 and has been agreed for at least five years. This is a key part of President Obama's 'pivot' strategy and bolsters Seoul's security against both North Korea and a more assertive China.

Beijing's announcement in Q413 of an Air Defence Identification Zone (ADIZ)...

Table of Contents

BMI Industry View
South Korea Security SWOT
South Korea Defence & Security SWOT
Business Environment
Industry Forecast
Defence Expenditure
Table: Defence Expenditure (South Korea 2011-2018)
Armed Forces
Table: Armed Forces Personnel (South Korea 2004-2011)
Table: Manpower Available For Military Service (South Korea 2011-2018)
Macroeconomic Forecast
Economic Analysis
Developed Markets, Investment Spending To Support Growth
Outlook Not All Rosy
Table: Economic Activity (South Korea 2009-2018)
Industry Risk Reward Ratings
Asia Security Risk Ratings
Table: Asia Security Risk Ratings
Table: Asia State Vulnerability To Terrorism Index
South Korea Security Risk Ratings
Market Overview
South Korea Defence Market Overview
Recent Developments
Armed Forces
Domestic Industries
Table: Key Companies in South Korean Defence Industry
South Korea Security Overview
Domestic Threats
Regional Threats
International Threats
Company Profile
Daewoo Shipbuilding & Marine Engineering (DSME)
Doosan Heavy Industries & Construction
Korea Aerospace Industries (KAI)
Samsung Thales
Regional Overview
North East Asia Security Overview
Global Industry Overview
Political Risk Analysis
Industry Forecast Methodology
Sector-Specific Methodology
Security Risk Ratings Methodology
Table: Indicators And Weighting

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.

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'An essential, multi-faceted research tool. BMI’s thorough understanding of the major market players enables an informed – and informative – review of the sector’s actual performance, together with useful insights into current industry issues, which are topped-off with detailed and invaluable forecasts of industry and macroeconomic trends.’

Senior Research Analyst, ABC International Bank plc