South Korea Defence and Security Report Q1 2013

The South Korea Defence and Security Report examines the country's strategic position in the North East Asian region and the wider world. It provides an overview of the contemporary geopolitical challenges facing the country, and the challenges it may face in the future.

The report examines the trends occurring in the country's current and future defence procurement, and the order of battle across its armed forces. The intention is to provide a clear and concise discussion of these issues. The report's general conclusion is that the death of North Korean leader Kim Jong Il and the succession of his son, Kim Jong Un, has done little to alter the security dynamic on the Korean peninsula.

As a result, Seoul will continue to invest heavily in modern military equipment, and also remain a committed US ally and a core partner in the US's 'pivot' to Asia.

Attention is now turning towards South Korea's presidential election in December 2012, and to the new presidential term beginning in February 2013. With both leading presidential candidates expressing a desire to kick-start talks with the North, much will depend on the approach of Kim Jong Un, who remains a largely unknown quantity. If Kim is minded to engage in meaningful negotiations, then tensions on the peninsula could be significantly reduced. Indeed, the North's implementation of experimental market reforms in the agriculture sector - a reform known as the 6.28 Policy - could signal that the younger Kim is seeking to modernise North Korea. If he really is preparing North Korea for Chinese-style market reforms, then the security environment on the peninsula would improve significantly.

While the North Korea regime has appeared close to achieving the capability to test a third nuclear bomb for much of 2H 2012, the fact that no such test has occurred augurs well for the resumption of talks when the new South Korean president takes office. However, the North may attempt to use its nuclear programme to blackmail the South into making concessions, and that would only meet with resistance,
whoever is elected in December.

Over the last quarter BMI has revised the following forecasts/views:

- The security policies of the two leading South Korean presidential candidates are discussed.

While conservative candidate Park Geun-hye has voiced her intention to open a new round of diplomacy with the North, her liberal rival Moon Jae-in has promised a return to an updated version of the Sunshine Policy of the 1990s. Whatever the outcome, the South appears ready to re-engage with the North, with the hard line pursued by outgoing President Lee Myung-bak generally perceived to have yielded little.

- Ahead of the anticipated talks with the new South Korean leader, Pyongyang held two rounds of talks with Japan in September and November, ending several years in which the two sides had had virtually no bilateral contact.

-Seoul has tightened its defence ties with the US, signing space and cyber defence pacts, and also being released by the US from a commitment to deploy ballistic missiles with a range no greater than 300km. Seoul will now field missiles with a range of 800km, placing all of North Korean territory within range, though some fear that the North will view this as an act of provocation.

- Having sold submarines to Indonesia earlier in 2012, Koran shipbuilder DSME now has the opportunity to supply Norway with a fleet of new submarines, after Oslo issued an RfI to DSME and three other firms in November. SHOW LESS READ MORE >

Executive Summary 5

SWOT Analysis 7

South Korea Security SWOT 7

South Korea Defence Industry SWOT 9

South Korea Political SWOT 10

South Korea Economic SWOT 11

South Korea Business Environment SWOT 12

Global Political Outlook 13

North East Asia Security Overview 18

North East Asia: The Strategic Outlook For The 2010s 18

The Geopolitical Importance Of North East Asia 18

Flashpoints And Faultlines In North East Asia 19

The China-North Korea Border 22

The Taiwan Strait 23

Disputed Islands 24

The Russia-China Border 25

China's Western Periphery 26

The Evolution Of North East Asia 27

Security Risk Analysis 30
Table: Asia Pacific Regional Security Ratings 30
Table: Asia Pacific State Vulnerability To Terrorism Index 31

South Korea's Security Risk 31

Political Overview 33

Domestic Politics 33

Long-Term Political Outlook 34

Security Overview 39

Internal Security Situation 39

External Security Situation 40

Armed Forces And Government Spending 53

Armed Forces 53

International Deployments 53
Table: South Korea's Deployments 53

Weapons Of Mass Destruction 54

Market Overview 55

Arms Trade Overview 56

Industry Trends And Developments 59

Procurement Trends And Developments 61

Competitive Landscape 61
Table: Key Players In South Korea's Defence Sector 63

Industry Forecast Scenario 64

Armed Forces 64
Table: South Korea's Armed Forces, 2002-2009 ('000 personnel, unless otherwise stated) 64
Table: South Korea's Manpower Available For Military Services (aged 16-49, unless otherwise stated), 2010-2017 64

Defence Expenditure 64
Table: South Korea's Defence Expenditure, 2010-2017 65
Table: South Korea's Defence Expenditure By Changing % Of GDP, 2010-2017 (US$mn) 66

Defence Trade 66

Key Risks To BMI's Forecast Scenario 67

Macroeconomic Forecast 68
Table: South Korea - Economic Activity, 2011-216 70

Company Profiles 71

Daewoo Shipbuilding & Marine Engineering (DSME) 71

Doosan Heavy Industries & Construction 72

Korea Aerospace Industries (KAI) 74

Samsung Thales 75

BMI Methodology 76

How We Generate Our Industry Forecasts 76

Defence Industry 76

Sources 77

Company Profiles
Daewoo Shipbuilding & Marine Engineering (DSME)
Doosan Heavy Industries & Construction
Korea Aerospace Industries (KAI)
Samsung Thales