Monopoly on rifles for the Army turns into duopoly

The rifle monopoly for the Korean military has been opened to another manufacturer for the first time in four decades.

Ministry of Trade, Industry and Energy announced Tuesday that a defense company called Dasan Machineries will now be able to supply rifles and pistols to the military.

Currently, S&T Motiv is the primary manufacturer of small arms for the army. The company was established in 1973 by the administration of President Park Chung Hee to localize production weapons that the army was importing.

The late Park wanted Korean-made rifles because he thought foreign rifles like the M16 don’t suit Koreans because they were smaller in stature. In the long run, Park believed it would be cheaper to produce rifles than import them. The company was privatized in 1981.

However, the government now plans a duopoly with Dasan Machineries and S&T Motiv.

The Defense Acquisition Program Administration dropped a policy to allow only one defense company to produce certain defense-related good in 2008. There are a total of 1,305 defense-related goods designated by the government and 53 products are now purchased through tender offers.

Dasan asked the Trade Ministry to consider allowing the company to submit a bid for a rifle contract in December, and the government accepted the request recently.

Dasan was established in 1992 and entered the market with magazines for rifles and pistols. The company started off with seven employees, a figure that has grown to nearly 350. Its yearly sales were 56.2 billion won ($50.3 million) last year and its exports surpassed the $30 million-level in 2013.

Some 80 percent of the company’s sales come from exporting gun parts to the United States, Europe and countries in the Middle East.

“We have focused on exports since we believed that would help us to grow,” said Kim Byung-hak, CEO of Dasan Machineries.

S&T Motiv is unhappy with the new competition.

“The arms factory that the government has built is in a crisis,” said S&T Motiv in a press release.

S&T Motiv representatives have argued that the government’s decision was made even though the rifle market in general is slowing.

“We supplied nearly 60,000 K2 rifles this year but the military said they won’t need any next year,” an S&T Motiv representative said. “Demand for rifles is expected to drop 20 percent starting next year and we are already under an emergency management system to be prepared for it.”

The two defense companies will now compete when the government needs rifles.

BY KIM MIN-SANG, KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]