Hyundai Wia, $100 Million Artillery Export

[Asia Economy Yang Nak-gyu, Military Specialist Reporter] Domestic defense company Hyundai Wia has signed an export contract worth approximately 100 million USD (118.7 billion KRW) for naval gun components with the global defense company BAE Systems.

According to the Defense Acquisition Program Administration (DAPA) on the 26th, this contract is the first to be concluded under the Pre-Value Accumulation System. The Pre-Value Accumulation System is a system where foreign companies accumulate 'offset trade value' like mileage when they sign export contracts or engage in joint development with domestic companies. Offset trade refers to transactions where foreign companies provide counter-benefits such as technology transfer or purchasing parts from domestic companies when selling weapons.

BAE Systems, which signed the purchase contract with Hyundai Wia, can utilize the mileage accumulated from this contract when conducting offset trade in future projects with the Republic of Korea government. Hyundai Wia is the first to conclude an export contract under the value accumulation system. Since December 2018, DAPA has signed value accumulation system agreements with five foreign companies.

A DAPA official explained, "We are introducing the Pre-Value Accumulation System, which is implemented by major countries with defense environments similar to ours, such as Israel and Turkey," adding, "This system is like saving money in a bank during normal times and withdrawing it when needed. Foreign companies accumulate achievements of cooperation with domestic companies (such as parts manufacturing, export, joint development) and freely use the accumulated offset trade value for future contracted projects."

However, the defense industry points out that various systems need to be introduced as defense exports continue to decline. Defense export amounts from 88 defense companies reached 2.7358 trillion KRW in 2016. However, after the current government took office in 2017, the amount decreased to 1.7013 trillion KRW in 2017, 1.9991 trillion KRW in 2018, and recorded 1.7698 trillion KRW last year. Defense exports were tallied at 329 billion KRW through March of this year.

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