South Korea Makes Major Move in World’s Arms Market
Filed under: Business Line, Companies, Countries, Germany, production program
The production of advanced weaponry used to be reserved for the United States, its Western Allies and the former Soviet Union. Countries needing things like submarines, jet fighters, missiles and warships would often buy directly from these sources. In some cases they would license the technology to create an indigenous production capability. This was often done to aid in winning the deal or for diplomatic reasons. Many times the original owner of the technology would place restrictions on its use or transfer. The United States compared to other nations has always had strict controls over the future transfer of its weapons but this is not always true of other companies and governments.
South Korea has been working for several years with the German company Howaldstswerke-Deutsche Werft (HDW) on the production of submarines for its Navy. These include conventional diesel electric but also fuel cell powered vessels. So far 12 submarines are in use and a further 6 are being planned for construction. The 3 fuel cell Type 214 were built in Germany but as part of the contract South Korea established the ability to build them at their own yard.
Now the Korean company Daewoo Shipbuilding and Marine Engineering (DSME) is working on a contract with Indonesia to provide 3 submarines manufactured alongside the Korean ones. This contract if it is executed could be worth over $1 billion. This is much larger then the previous record for trainer aircraft for that country worth about $400 million.
This contract is not only important to the development of South Korea’s arms industry but it will help offset the cost of producing weapons for its own use at a time when it is very concerned with North Korea. It also puts pressure on the U.S. and Western defense contractors who are looking for such types of deals to help them weather the coming downturn in defense spending. Now they face more competition for contracts in Asia, the Middle East and South America which are the prime markets to help cushion the lack of contracts from their governments.
The delivery of the submarines will also mean South Korea has taken a major step forward as an arms supplier to the world. These are complex systems and require a substantial supplier base for components. This will be further developed as more contracts are made with the South Korean and foreign navies that will then support cheaper and more advanced systems.