South Korea seeks bigger role in global arms bazaar

Wed Apr 22, 2015 6:15am EDT
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By Joyce Lee and Tony Munroe

SEOUL (Reuters) - When South Korean president Park Geun-hye stopped off in Peru this week, her diplomatic tasks included drumming up interest in her country's home-grown light fighter jets.

While Park did not come away with a new contract, state-run Korea Aerospace Industries (KAI) (047810.KS: Quote) is in the running for a contract to supply Peru with 24 of its FA-50 fighter jets, worth as much as $2 billion.

Park's efforts are part of a broader push to turn the South Korean defense industry into an export powerhouse.

With South Korea's arms makers experiencing sluggish domestic growth, its defense exports have gone from $144 million in 2002 to $3.6 billion last year, with an average annual gain of 31 percent over the past five years.

The industry, developed mostly with American technology during a decades-long standoff with North Korea, is hoping to sustain that growth by selling beyond its main export markets in Southeast Asia into Latin America, Europe and the United States.

"They've got a strong combination of technology, skills, reasonable costs, an export-driven economy, and a domestic defense market that's large enough to justify home-grown products," said Richard Aboulafia, vice president at the Virginia-based Teal Group.

Although it is a close ally of the United States, South Korea lacks the diplomatic baggage that hinders some players in the global arms trade, such as China, Israel and Russia. Regional rival Japan only relaxed its ban on weapons exports last year.

"There are no negative geopolitical strings attached," said Tim Huxley, executive director of the International Institute of Strategic Studies in Asia.   Continued...

Engineers assemble a FA-50, South Korea's first home-built light fighter, at an assembly plant of the Korea Aerospace Industries (KAI) in Sacheon, about 440 km (273 miles) southeast of Seoul in this August 14, 2013 file photo.  REUTERS/Lee Jae-Won