South Korean Annual Defense Expenditure to Reach US$43.3 Billion by 2017

During the review period (2008-2012), the South Korean defense budget increased at a CAGR of 4.01% to value US$28.6 billion in 2011. Moreover, the South Korean defense budget it is expected to record a stronger CAGR of 7.11% during the forecast period (2013-2017) to reach US$43.3 billion by 2017. This contrast in defense spending is attributed to the change in dollar conversion value which is used in converting the local South Korean currency. Furthermore, the country has one of the largest defense expenditures in Southeast Asia and consistently features among the top 15 defense spenders in the world. Cumulatively, the country is anticipated to spend a total of US$189.7 billion on defense during the forecast period (2013-2017), including US$66.7 billion on the acquisition of military hardware and technology.

The South Korean government places increasing emphasis on technical cooperation and technology transfer, to ensure that the South Korean defense industry is not perceived as a sub-contracted supplier of low-technology parts. South Korea has changed its policies to achieve technology transfer in each of its defense deals to reduce its dependence on imports of advanced defense systems.The foreign contractor is required to provide a guarantee in advance that the proposed technologies will be approved by the respective government or regulatory agencies for transfer to South Korea prior to the approval of the offset contract.

South Korea has a negative reputation for industrial disputes in terms of wages and dangerous working conditions, and records frequent strikes or violent protests. Although the South Korean government has demonstrated strong commitment to the restructure of the corporate, services and labor sectors, South Korea is perceived as a risk for foreign and domestic investors.

Source: ASDReports - Market Research
Date: Jul 20, 2012