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Parliament seeks to bolster defense exports with increased financial support revision

Published: 23 Feb. 2024, 16:27 Updated: 23 Feb. 2024, 17:35

JIN MIN-JI
[email protected]

A Korean engineer works on a K-9 self propelled howitzer at Hanwha Aerospace factory in Changwon on September 15, 2023. [AFP/YONHAP]

The National Assembly’s Strategy and Finance Committee passed a bill that will allow Korean companies to receive more export financial support, lifting the limit that bars companies from securing more arms deals overseas.

The committee passed the bill in a plenary meeting on Friday to revise the controversial Korea Eximbank Act, which would increase the statutory capital limit of the Export-Import Bank of Korea (Korea Eximbank) to 25 trillion won ($18.8 billion) from the current 15 trillion won.

Exporting countries usually provide policy financing and guarantees for overseas defense or infrastructure procurement projects due to their large size.

The limit has prevented Korea from securing further arms contracts overseas.

Because the current law prevents the state-run bank from providing financing worth more than 40 to 50 percent of its total equity capital to a single debtor, the 15 trillion-won on cap puts constraints on the amount of export-financing that Korea can offer to the Polish government following the first round of weapons supply deals signed in 2022.

The first wave of contracts, under which Korea’s defense contractors agreed to supply 180 K2 tanks, 212 K-9 howitzers and 48 FA-50 fighter jets, are worth about $12.4 billion in total.

The bill is expected to be passed in the plenary session on Feb. 29.

European countries have been expanding expenditures on defense needed to defend Ukraine as the war with Russia persists since it began in 2022. Poland raised its national defense spending to its gross domestic product to 3.9 percent last year, higher than 3.48 percent of the United States.

Stocks of defense companies moved up on Thursday but fell on Friday, with Hyundai Rotem closing down 4.93 percent, Hanwha Aerospace down 2.47 percent, LIG Nex1 down 3.33 percent and Korea Aerospace Industries down 0.93 percent.

BY JIN MIN-JI [[email protected]]