The government will create a separate account at the Korea Trade Insurance Corporation to support guarantee insurance for defense corporations to expand K-defense exports. As financial support such as trade insurance is a key factor in defense exports, the plan is to allocate a separate guarantee budget to support defense corporations.
According to related ministries and the financial sector on the 7th, the government will establish a dedicated defense export finance account at the Korea Trade Insurance Corporation by the end of this year to provide financial support to defense corporations.
The Korea Trade Insurance Corporation performs tasks such as guarantees and insurance for export-import corporations through the Trade Insurance Fund, and the plan is to allocate a budget in this fund to support only defense corporations. The government said that to expand defense exports, ultra-long-term and ultra-low-interest financing must be provided, but under current rules there are limits to support, so it is pursuing institutional improvements. With domestic defense corporations' weapons exports increasing recently, it determined that financial support through a separate account is necessary.
The Korea Trade Insurance Corporation mainly provides guarantees so that countries importing weapons from domestic defense corporations can obtain long-term, low-interest loans from financial institutions. When Hyundai Rotem's K2 tanks were exported to Poland in the second tranche last year, it supported a total of $5.2 billion (then about 7.267 trillion won) in export finance together with the Export-Import Bank of Korea. The Korea Trade Insurance Corporation took on $3.9 billion in guarantees.
The Korea Trade Insurance Corporation also recently provided €900 million (about 1.3 trillion won) in trade finance to Romania, which is pursuing imports of domestic weapons.
As countries increase military expenditure, competition in defense exports among global corporations is intensifying. In large defense contracts, government-level financial support is cited as the biggest variable, in addition to weapons performance and price competitiveness. Domestic defense corporations are exploring weapons exports not only to Europe but also to the Middle East and Central and South America.
According to the Defense Acquisition Program Administration, last year's defense exports totaled $15.4 billion (about 23.2 trillion won), up 60.4% from the previous year. The Export-Import Bank of Korea projected that this year's defense exports could exceed $27 billion.