South Korea supports defense import substitution to tackle financial ramifications of COVID-19, says GlobalData

Following the news that South Korea has signed a memorandum of understanding (MoU) to boost defense import substitution;

Madeline Wild, Defense and Security Analyst at GlobalData, a leading data and analytics company, offers her view on the situation:

“Throughout the COVID-19 pandemic South Korea has remained committed to using the defense industry to stimulate the economy through this difficult time. As such, it does not come as a huge surprise that the Defense Acquisition Program Administration (DAPA) and Ministry of Trade, Industry and Energy (MOTIE) have signed an MoU, which will help bolster local production capabilities. This will have the immediate benefits of continued production rates and low levels of job losses, but also brings wider benefits such as sustained tax revenues and ongoing export opportunities.

“The MoU echoes other bold decisions such as the sanctuarization through the crisis of key acquisition programs such as the KDDX and the KF-X at a time when other countries are taking the difficult decision to pause crucial projects in order to reroute funding to other parts of the economy. Thailand, for instance, suspended procurement of T-50 and Type 041 projects. As such, the MoU issued this week is part of an ongoing policy to not only support but improve the South Korean defense market.

“South Korea managed to quell a potentially catastrophic outbreak of COVID-19 early on in 2020. This has meant that the government has been able to maintain a level of economic stability that is allowing it to proactively follow strategic objectives. The confidence of the South Korean ministry of defense is echoed in their recent budget announcements: the budget requested by the MoD was KRW52.9 trillion, a growth rate of 7% from the previous year. The size of this will ensure the ability of South Korea to pursue its strategic aims even at a time of immense financial strain, the economic benefits of doing so will undoubtedly be felt.”

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