(Exim Bank of Korea)
Export-Import Bank of Korea plans to provide 100 trillion won ($65.9 billion) in financial support over the next five years to strengthen South Korea’s defense export ecosystem, from startups and parts suppliers to major weapons manufacturers, as booming global demand for K-defense products strains production capacity across the supply chain.
At Daeshin Metal’s factory in Changwon last week, dozens of machines were operating around the clock to produce aluminum components for K9 self-propelled howitzers and naval patrol vessels, reflecting surging global orders tied to conflicts across multiple regions.
The parts manufactured by Daeshin Metal are supplied to STX Engine and eventually to Hanwha Aerospace, one of South Korea’s largest defense exporters.
“Factories are running 24 hours these days,” Daeshin Metal Chief Executive Jeong Yong-taek said.
The company nearly buckled during the COVID-19 pandemic due to soaring prices for imported raw materials such as aluminum, but emergency working capital support from the Export-Import Bank of Korea helped it survive, he said.
Daeshin Metal’s sales rose about 15 percent on year to 77.2 billion won last year, driven by a 40 percent jump in defense-related revenue.
According to the financial industry on Monday, the state-run lender plans to launch a comprehensive “defense finance package” supporting every stage of the K-defense supply chain.
The program aims to expand financing beyond traditional export and import lending to cover the broader defense industry ecosystem, including startups, research and development, mergers and acquisitions, overseas facility investment, export contracts and localization efforts.
Under the plan, a new strategic export finance fund will support defense startups, while small and midsized suppliers will gain access to financing for facilities, operating costs and research spending.
The bank also plans to arrange financing for South Korean companies seeking to acquire overseas firms with core technologies or expand local production facilities abroad.
Large defense firms entering new markets or diversifying products will be eligible for purchase financing, while export contractors will receive advance payment refund guarantees and performance guarantees.
The bank is also preparing consulting and financing programs tied to growing maintenance, repair and overhaul, or MRO, demand in the global defense market.
An Export-Import Bank of Korea official described the initiative as “a financial package covering the entire cycle of defense exports, from startups and development to mergers, export contracts and localization.”
The bank believes a strong supply chain is essential for responding quickly to rising global defense demand.
Industry officials pointed to Germany’s Rheinmetall as an example. Although the company manufactures tanks, the decline of Europe’s defense supply chain after the Cold War has slowed production and deliveries.
South Korean firms such as Hanwha Aerospace have used that gap to win major export deals, including large-scale contracts with Poland.
“There are very few countries capable of producing and exporting self-propelled howitzers as quickly as South Korea,” a Hanwha Aerospace official said. “More than 150 suppliers provide parts for the K9 howitzer alone. That supply chain allows us to respond rapidly to export demand.”
The company added that fast financing support is critical when production lines must be quickly adjusted to meet customized military equipment orders from overseas buyers.
Last month, the Export-Import Bank of Korea and Hanwha Aerospace signed a cooperation agreement aimed at supporting financing costs and development expenses for smaller defense suppliers.
The state-run lender also said defense financing has helped improve the performance of smaller suppliers. Financial support provided to 35 small and midsized defense companies rose from 305.5 billion won in 2021 to 528 billion won last year.
Combined operating profit at those companies increased more than fivefold during the same period, rising from 164.8 billion won to 890.2 billion won.
One example cited by the bank was Young Poong Electronics, a defense supplier visited last year by Export-Import Bank of Korea Chairman Hwang Ki-yeon. The company secured key raw materials through bank financing, and sales more than doubled within two years as demand for K-defense products surged.
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