▲ With the economic downturn in the domestic economy and rising raw material prices due to Corona 19, the manufacturing industry experience is deteriorating, and it is time to utilize the defense industry as a driving force for national economic development through the development of a promising new defense export market.
[기계신문] According to the report “2020 KIET 10 Promising Countries for Defense Export”, which was published for the first time in 2014 by the Korea Institute of Industry (KIET) in 2014, and the third most promising country for defense exports in 2018, for the next five years (2020-2024). Australia, Poland, and Colombia, along with middle and late Asian countries such as India and the Philippines, have high export potential.
For the five years from 2016 to 2020, defense industry export orders continue to stagnate at the level of $3 billion, and competition with global defense companies is expected to intensify along with the decrease in national defense budgets due to Corona 19.
Therefore, the report analyzed that in order to achieve the government’s’defensive export orders of $10 billion’ and respond to global competition, a differentiation strategy for each type centered on the top 10 defense export promising countries was devised, while strategic support from the government-wide level was desperate.
The government newly enacted the Defense Industry Development and Support Act (Defense Industry Development Act) last year to systematically foster and support the defense industry. Together, the defense goods trade support center (KODITS) has been systematized to enable institutional support for industrial cooperation and export financing between countries through reinforcement of the function. In addition, it has set a goal of achieving 10 billion dollars in orders as a concrete action plan for export promotion.
▲ Trends in domestic defense exports and orders (2012~2020) (Unit: USD 100 million) * Estimated domestic defense exports in 2019
However, despite the government’s efforts, the proportion of exports to the domestic defense industry output is still only 15%, and defense export orders, which recorded more than $3.5 billion between 2013 and 2015, have also been received over the past five years (2016-2020). The stagnation continues at the billion dollar level. In particular, it seems that the recent COVID-19 outbreak has limited defense companies’ export orders, making it more difficult to expand exports.
In the aftermath of Corona 19, defense budget declines are becoming visible in most countries, and it is expected that the central and late-developed countries, which are Korea’s major defense export markets, will increase the proportion of government budget allocation focusing on the welfare of the coronavirus and vitalization of the domestic economy. As a result, it is expected to intensify competition in the defense export supply market by inducing a decrease in the arms acquisition budget as well as the defense budget reduction.
▲ Prospects for global defense budget and arms acquisition budget before and after Corona
The report pointed out that it is very likely that major global advanced defense companies will focus on targeting the mid- and late-developed markets, which are our main markets, to respond to their reduced defense budgets and to maintain and expand sales, so it is imperative to prepare countermeasures. .
In order to gain an edge in the competition with major global advanced defense companies with comprehensive price, performance, and government-supported competitiveness, a’selection and concentration’ strategy based on clear target market selection is required. He stressed that the demands for industrial cooperation and financial support should be met with’advanced countries +a’.
▲ Top 10 Promising Defense Export Countries
According to the report, Australia, Poland, and Colombia were newly selected as promising countries for defense export over the next five years (2020-2024), along with countries with very high arms purchasing power in the world’s third to fourth-largest defense budgets such as India and Saudi Arabia.
As a result of analyzing the selected 10 countries based on the arms acquisition budget and the country’s industrial maturity, the characteristics of each country are very prominent, and it is necessary to establish a differentiated export strategy for each country in consideration of this.
First of all, advanced countries such as Australia, which have a large arms acquisition budget and high industrial maturity (Quad I 1), are most important in technology and quality competitiveness to meet the required performance. Quadrant) As Nordic countries, such as Norway, are highly interested in economic acquisition methods of weapons systems, it is necessary to introduce new types of export methods such as used equipment, parts exports, and leases rather than the existing direct export of finished products.
Late-developed countries, such as Indonesia and Colombia, with a small arms acquisition budget and low industrial maturity (Quadrant III), can improve their private sector industrial maturity with the accompanying financial support for consumers to secure price competitiveness in the first place. The existing industrial cooperation plan should also be presented in the form of a package.
▲ Export strategies by type and level of major defense export promising countries (20 countries) *★ 1st to 10th countries, ● 11th to 20th countries, industrial maturity per capita manufacturing value added (excluding petrochemicals), based on 2009~18 (UNIDO), the acquisition budget is based on the forecast for 2020-2024
Lastly, for India and Saudi Arabia, which have a large arms acquisition budget but low industrial maturity (fourth quadrant), they pursue shared growth in the defense industry of the country through the purchase of Korean defense products such as technology transfer, local production, joint development, and local employment. You need to approach the market with a strategy.
The report aims to achieve the goal of the government’s defense export orders of $10 billion, and to actively respond to the market attack of advanced US and European companies in response to the recent changes in the defense export environment rapidly changing due to COVID-19. It is suggested that it is necessary to find an integrated export strategy through capacity building.
Mi-jeong Kim, a researcher at the Korea Institute of Industry, said, “In order to gain an edge in the competition with major advanced defense companies, the selection and concentration of the top 10 defense export promising countries, the formation and operation of the’export dream team by country’ centered on industries, associations, and governments, It is imperative to establish a strategic export support policy at the level of government-wide, such as preparing a plan for industrial cooperation and financial support for advanced countries + type a, and for export negotiations, it is urgent to change the paradigm of’GtoG-centered by big deal between governments’ from the existing corporate-centered BtoG type. I emphasized.
In addition, the need for a new military KSP (Knowledge Sharing Program) project was proposed to dramatically improve the current domestic procurement-type weapon system development method, convert it to an export-consideration-type weapon system development policy, and continuously and systematically discover potential export markets in the long term. I did.
Machinery News, Machinery Industry News Channel
Reporter Han Eum-pyo [email protected]