The global arms markets have restored their vigor lost in the aftermath of the 2008 global financial crisis, but Korea's defense industry is struggling at home and abroad, industry sources said Monday.
They cite two reasons for the Korean industry's slump: the rapid shrinkage of the domestic market as the result of the widespread corruption and stepped-up investigations by the prosecution, and the government's inconsistent policies as well as its excessive regulations on supply prices.
According to the Defense Acquisition Program Administration, Korea's arms exports remained at $3.49 billion last year, down 3.4 percent from $3.61 billion in 2014. This is in contrast to international trends because global arms trade volume increased 11 percent to $65 billion over the cited period, DAPA officials said.
The growth in global weapons trade volume was the biggest since 2008, HIS, an international consulting firm, also said.
"Rich countries in the Middle East, including Saudi Arabia, have sharply increased their arms imports to enhance national defense, prolonging the boom in global industry through the first half of this year," the industry sources said.
Korea's arms exports had been rising, as shown by the annual export growth rate of 11.6 percent on average from 2011 to 2014. Foreign shipments began to fall rapidly in the latter half of 2014, however, when the prosecution intensified its probes into irregularities of the defense sector.
"Korea's inconsistent defense industry policies, which have changed with each new administration, and the government's excessive regulations on production costs have combined to weaken the industry's competitiveness," said an industry executive. "Worse yet, the extensive investigation into corruption in the arms trade have aggravated the Korean industry's reputation in global markets beyond repair."
The dark industrial prospects have forced major makers to pull out. The Samsung Group sold two of its defense unit -- Samsung Techwin and Samsung Thales -- to the Hanwha Group last July, and the Doosan Group also sold Doosan DST to Hanwha.
"The defense industry is an export industry in which high technologies are concentrated," said Noh Dae-rae, chair professor of Sungkyunkwan University and former administrator of DAPA. "The government should push for its development with consistent policies and deregulations, and revive it as one of the key industries."