This Year as a Turning Point for Defense Industry - (4) Groundbreaking of Defense Companies' Factory Construction

On September 26, 1978, the first domestically produced missile Baekgom was test-fired at Anheung Test Site (Photo by Agency for Defense Development)

[Kim Min-wook, Editor-in-Chief of Monthly Defense and Technology] To minimize trial and error by defense contractors, first, companies responsible for about ten weapon items that had completed the first and second phases of domestic prototype development were selected. These companies were instructed to produce equipment by maximizing the use of existing facilities. Comprehensive technical data, including TDP (Technical Data Package), were provided to the designated defense contractors to facilitate development and production. The produced weapons underwent performance testing, and only those that passed were pushed to establish mass production systems.

To build a mass production system, the designation and construction of production plants, a prerequisite for weapon production by category, were actively discussed. Considering peacetime ammunition demand and wartime stockpiling, the construction of a gunpowder factory was prioritized, with a goal to complete it by 1974. Although a civilian gunpowder factory owned by Korea Explosives Co., Ltd. already existed in Incheon, a military gunpowder factory was separately constructed in the rear area due to regional vulnerabilities from a defense perspective. Inspired by the fact that byproducts from gunpowder production could be used as fertilizer raw materials, the 7th Fertilizer Factory was planned in Yeocheon, Jeollanam-do, and a gunpowder factory was built nearby.

At that time, the policy to replace basic small arms with the M16 was already established, but the construction or designation of a new factory for personal firearms production was not considered. The active-duty military M16 rifles and M60 machine guns were produced at the M16 factory under construction (led by the Army Ordnance Depot), and the M1 rifles, Calvins, and machine guns used by active forces were to be inherited and used by the reserve forces. However, it was decided that reserve force grenade launchers (M79), mortars, and anti-tank rockets would be produced by civilian defense contractors. Since the production of large-caliber artillery, including 105mm guns, required high-grade special steel as material, Sammi Special Steel Co., Ltd. was assigned this task. This large-caliber artillery production plant was established in the Changwon machinery industrial base and was state-of-the-art at the time.

Under this plan, excluding overlaps, 29 companies were designated as first-phase defense contractors: 19 development and production companies, 9 artillery prototype companies, 19 shell prototype companies, and 11 other companies. Since this plan was highly classified at the time, the defense industry factory construction plan was fully integrated into the heavy chemical industry construction plan, and construction funds were also disbursed from the heavy chemical industry construction budget.

▲ First Yulgok Project= In 1974, the execution policy and procedures for the Yulgok Project were established by presidential decree, formalizing the project's promotion procedures. To secure funding for defense projects, defense contributions were collected in 1974 and 1975, and a special defense tax was introduced, providing a stable financial source for acquiring weapon systems.

From April 1974 to 1981, the first Yulgok Project (an eight-year power enhancement plan) was launched, aiming to secure quantitatively and qualitatively inferior defense capabilities against North Korea and to foster a defense industry superior to North Korea’s. The key areas of power enhancement included early warning and air defense capability strengthening, air and naval power augmentation, reorganization of combat divisions and armament of rear guard divisions, reinforcement of ground firepower and mobility, and the promotion of defense research and development and the defense industry. Accordingly, by around 1981, a defense industry base capable of producing basic conventional weapon systems, excluding advanced precision weapon systems, was almost established centered on the Agency for Defense Development.

Meanwhile, during this period, the Agency for Defense Development, which was expanding research personnel and focusing on systematic R&D, achieved a remarkable milestone by successfully launching the Baekgom surface-to-surface missile on September 26, 1978, becoming the seventh country in the world to possess missiles. The Baekgom, boasting a range of 180 km, had more than three times the range of North Korea’s 50 km-range Frog missile, astonishing the world with South Korea’s rapid technological advancement in a short period.

The plaque unveiling ceremony held after changing the name from Korea Military Supplies Industry Promotion Association to Korea Defense Industry Promotion Association on March 5, 1979

▲ Establishment of the Korea Defense Industry Promotion Association= Due to the nature of the defense industry, its operational system was somewhat restricted, and it inevitably faced more policy constraints than any other industry. Moreover, the defense industry promotion policy in 1975 was not a gradual approach of preparing the industrial foundation and sowing seeds on it but rather a somewhat urgent method akin to planting seeds in barren land.

Given this background, the structural and policy environment to support the industry was not properly established, and contradictions arising from insufficient environmental factors often became burdens for defense contractors. Particularly, the structure where companies found it difficult to make profits was not only inconsistent with the basic principle of ‘developing alongside civilian industries’ but also fundamentally lowered the morale of profit-seeking companies.

For government agencies, resolving these structural contradictions was an urgent task. Without guaranteed appropriate profits and protection of company rights, future defense industry development could be affected, and other companies might avoid the defense industry, becoming obstacles to quantitative growth. Even without considering future development, companies’ management burdens and dissatisfaction could lead to reduced productivity and system collapse, so it was necessary to devise appropriate solutions as soon as possible. The establishment of a consultative body representing companies was proposed, reflecting the shared understanding of the government and companies.

Accordingly, in June 1975, the Military Supplies Deliberation Committee discussed establishing a consultative body for active defense industry promotion. The existing method, where the committee oversaw everything from improvement research to resolution, was insufficient to effectively carry out promotion tasks that required close coordination, such as studying rapidly changing domestic and international situations, system research, and company support. Since production was led by private companies, a consultative body was needed to serve as a liaison between the private sector and the military, providing guidance and support to companies and conveying difficulties and suggestions to government departments. Defense contractors who actively agreed with this necessity held discussions and preparations over five months and launched the Korea Ordnance Industry Promotion Association on March 5, 1976.

The Korea Ordnance Industry Promotion Association prioritized institutional improvements, judging that improving systems directly affecting member companies’ profits was most urgent.

Around this time, from June 1977, the Defense Industry Promotion Expansion Conference, presided over by the president, began to be held regularly. Representatives from civilian, government, and military sectors related to the defense industry gathered to directly discuss fundamental and principled issues regarding defense industry promotion. Topics mainly included smoothing defense fund support, establishing promotion funds, and improving contract conditions. Through this conference, the Korea Ordnance Industry Promotion Association continuously proposed improvements to problems in the current contract system and difficulties in funding support, eliciting interest and agreement from the government and stakeholders on the need to strengthen defense industry promotion support. As a result, presidential directives were issued through the conference to “continuously promote defense industry support policies, improve treatment of skilled workers, and establish quality control and inspection systems.” Subsequently, with active cooperation from related agencies, many achievements were made, such as expanding tariff exemption targets and broadening the scope of cost accounting recognition. The conference marked the beginning of increasingly organic development of work between the government and defense contractors.

While long-term economic development plans and defense industry promotion plans were simultaneously underway, the Yulgok Project also progressed, and the late 1970s political landscape faced challenges of large-scale projects amid relatively low income levels. In this era, export promotion of defense materials emerged as a priority solution to improve corporate profitability in the defense industry.

Starting in 1977, the Korea Ordnance Industry Promotion Association formulated plans for overseas market development activities and export system improvements and began systematic discussions with the Ministry of National Defense. To develop overseas markets, improving quality was important, but equally critical was gathering market information, investigating export potential based on demand and supply conditions in each country, and disseminating this information to member companies. They collected overseas market information, compiled lists of exportable items, and distributed them. Additionally, to facilitate overseas technology exchange, they gathered information on overseas defense industry events, including exhibitions, and provided analyses and information to members. An overseas cooperation department was established to actively promote overseas cooperation projects.

Alongside active overseas cooperation efforts, the board raised concerns about the appropriateness of the existing English name. After discussion, it was concluded that the English name did not adequately represent the association’s role, and a name change was necessary. Following a board meeting in 1978, the association was renamed the Korea Defense Industry Promotion Association on March 5, 1979.

This content was produced with the assistance of AI translation services.