South Korea Defence and Security Report Q3 2011
Includes 3 FREE quarterly updates
Tensions on the Korean peninsula remain heightened and North Korea is likely to carry out more provocations in the region over the coming months, as the regime moves to shore up heir apparent Kim Jong Un's political position.
South Korea’s armed forces are unsurprisingly concentrated within the ground forces, owing to the possibility of invasion from the North. In 2010, the armed forces comprised approximately 655,000 troops, with 522,000 in the army, 68,000 in the navy and 65,000 in the air force. Another feature of the armed forces in the Republic of Korea (RoK) is the massive number of reserves, with some 4.5mn troops within the reserve force. Should invasion occur, the reserves would prove a vital defensive element in preventing the DPRK from dominating the entire peninsula within a short period of time. Domestic forces are supported by the presence of an estimated 25,000 US personnel, comprising 17,130 US troops and 7,800 in the air force.
South Korea and the European Union (EU) officially signed a free trade agreement (FTA) on October 6 2010 that should bring considerable economic benefits to both parties. Indeed, bilateral trade is expected to receive a significant boost given that more than 98% of tariffs will be removed within five years from the time the deal takes effect. The accord would come into provisional effect on July 1 as long as it receives endorsement from both parliaments. While the European parliament gave its approval to the Korea-EU FTA on February 17, domestic politics have delayed ratification procedures on the South Korean end, keeping the agreement one step shy of going into effect on July 1.
The South Korean economy decelerated in Q410, with seasonally-adjusted growth coming in at 0.5% y-oy, compared to 0.7% in Q310, bringing the 2010 full-year growth figure to 6.1%. Private consumption and net exports were the key growth drivers in Q410, contributing 0.2 and 1.1 percentage points (pps) respectively to the quarterly growth figure. In contrast, government consumption and gross fixed capital formation weighed on growth, subtracting 0.1 and 0.8pps respectively. For 2011, we see real GDP growth coming in at 4.0%, lower than the government's target of 5.0%. Indeed, we expect growth to be slower this year, largely due to inflationary headwinds and weaker investment growth.
South Korea's headline consumer price inflation slowed in May, coming in at 4.1% year-on-year (y-o-y) from 4.2% in April, reaffirming our view that inflation peaked in March. Although we believe the odds are in favour of a rate hike during the central bank's rate meeting on June 10 given the acceleration in core inflation, we highlight that we see at most one more 25 basis points hike in 2011.
Tensions on the Korean peninsula remain heightened and North Korea is likely to carry out more provocations in the region over the coming months, as the regime moves to shore up heir apparent Kim Jong Un's political position.
South Korea’s armed forces are unsurprisingly concentrated within the ground forces, owing to the possibility of invasion from the North. In 2010, the armed forces comprised approximately 655,000 troops, with 522,000 in the army, 68,000 in the navy and 65,000 in the air force. Another feature of the armed forces in the Republic of Korea (RoK) is the massive number of reserves, with some 4.5mn troops within the reserve force. Should invasion occur, the reserves would prove a vital defensive element in preventing the DPRK from dominating the entire peninsula within a short period of time. Domestic forces are supported by the presence of an estimated 25,000 US personnel, comprising 17,130 US troops and 7,800 in the air force.
South Korea and the European Union (EU) officially signed a free trade agreement (FTA) on October 6 2010 that should bring considerable economic benefits to both parties. Indeed, bilateral trade is expected to receive a significant boost given that more than 98% of tariffs will be removed within five years from the time the deal takes effect. The accord would come into provisional effect on July 1 as long as it receives endorsement from both parliaments. While the European parliament gave its approval to the Korea-EU FTA on February 17, domestic politics have delayed ratification procedures on the South Korean end, keeping the agreement one step shy of going into effect on July 1.
The South Korean economy decelerated in Q410, with seasonally-adjusted growth coming in at 0.5% y-oy, compared to 0.7% in Q310, bringing the 2010 full-year growth figure to 6.1%. Private consumption and net exports were the key growth drivers in Q410, contributing 0.2 and 1.1 percentage points (pps) respectively to the quarterly growth figure. In contrast, government consumption and gross fixed capital formation weighed on growth, subtracting 0.1 and 0.8pps respectively. For 2011, we see real GDP growth coming in at 4.0%, lower than the government's target of 5.0%. Indeed, we expect growth to be slower this year, largely due to inflationary headwinds and weaker investment growth.
South Korea's headline consumer price inflation slowed in May, coming in at 4.1% year-on-year (y-o-y) from 4.2% in April, reaffirming our view that inflation peaked in March. Although we believe the odds are in favour of a rate hike during the central bank's rate meeting on June 10 given the acceleration in core inflation, we highlight that we see at most one more 25 basis points hike in 2011.
Contents
SWOT AnalysisSouth Korea Security SWOT
South Korea Defence Industry SWOT
South Korea Political SWOT
South Korea Economic SWOT
South Korea Business Environment SWOT
Global Political Outlook
Japan After The Quake
Global Hotspots: Libya, Iran, Afghanistan, Korea
Wild Cards To Watch
North East Asia Security Overview
Geopolitical Importance Of North East Asia
Flashpoints And Faultlines In North East Asia
The Evolution Of North East Asia
Security Risk Analysis
BMI’s Security Ratings
Table: Asia Pacific Regional Security Ratings
Table: Asia Pacific State Vulnerability To Terrorism Index
South Korea’s Security Risk
City Terrorism Rating
Table: BMI’s Asia City Terrorism Index
Political Overview
Domestic Politics
Long-Term Political Outlook
Inter-Korean Relations
Foreign Policy
Security Overview
Internal Security Situation
External Security Situation
Armed Forces And Government Spending
Armed Forces
International Deployments
Table: South Korea’s Deployments
Weapons Of Mass Destruction
Market Overview
Arms Trade Overview
Industry Trends And Developments
Procurement Trends And Developments
Competitive Landscape
Table: Key Players In South Korea’s Defence Sector
Industry Forecast Scenario
Armed Forces
Table: South Korea’s Armed Forces, 2007-2014 (‘000 personnel, unless otherwise stated)
Table: South Korea’s Available Manpower For Military Services, 2008-2015 (aged 16-49, unless otherwise stated)
Defence Expenditure
Table: South Korea’s Government Defence Expenditure, 2008-2015
Table: South Korea’s Defence Expenditure By Changing % Of GDP, 2008-2015 (US$mn)
Defence Trade
Key Risks To BMI’s Forecast Scenario
Macroeconomic Forecast
Table: South Korea - Economic Activity, 2008-2015
Company Profiles
Doosan Heavy Industries & Construction
Daewoo Shipbuilding & Marine Engineering (DSME)
Korea Aerospace Industries (KAI)
Samsung Thales
Country Snapshot: South Korea Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2002-2005
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 2001-2006
Table: Consumer Expenditure, 2000-2012 (US$)
Table: Average Annual Wages, 2000-2012
BMI Methodology
How We Generate Our Industry Forecasts
Defence Industry
City Terrorism Rating
Table: Methodology
Sources 75 Skip to top