'Defense Reform 307' Activated One Year After the Cheonan Ship Attack

Inclusion of Defense Industry in Top 100 National Tasks under MB Government
Goal to Reach World’s Top 7 Defense Industry Level by 2020

The 65th Armed Forces Day event in 2013 was held at Seongnam Seoul Airport, showcasing state-of-the-art equipment (Photo by Kim Namho).

[Kim Min-wook, Editor-in-Chief of Monthly Defense and Technology] The 18th Presidential Transition Committee for the inauguration of the Lee Myung-bak administration selected "Transforming the Defense Industry into a New Economic Growth Engine" as a national agenda in February 2008, with the aim of enabling the defense industry to play a new driving role in national economic growth. Subsequently, when reorganizing the 100 major national agendas of the Lee Myung-bak administration on October 7, 2008, "Transforming the Defense Industry into a New Economic Growth Engine" was included as one of the 100 major national agendas.

The main content set the goal of nurturing the defense industry as a new growth engine to reach the level of the world's top seven countries in defense industry exports and defense technology by 2020, and promoted achieving annual defense industry production of 10 billion USD, annual exports of 4 billion USD, and employment of 50,000 people. This policy reflects the expectation and will that defense exports could become a new driving force for economic growth.

▲ Abolition of the Specialization and Affiliation System and Introduction of a Fully Competitive System= Regarding the promotion of the defense industry, the most important policy change during the improvement of the defense acquisition system and the establishment of the Defense Acquisition Program Administration (DAPA) was the abolition of the specialization and affiliation system.

The specialization and affiliation system played a pillar-like role in leading the growth of South Korea's defense industry, but its abolition marked a milestone for the defense industry to move away from protection and nurturing toward openness and competition. The specialization and affiliation system is a unique defense protection and nurturing policy found only in South Korea. Although other advanced defense countries often grant exclusive rights to specific companies due to market structure inevitabilities or policy decisions, no other country is known to have explicitly designated and operated such a system by regulation as South Korea did.

The purpose of introducing the specialization and affiliation system was to secure a stable supply source for weapon systems, promote defense industry technology development, enhance expertise, and prevent redundant investments at the national level. In other words, it was expected that assigning specific companies to long-term development and production tasks in certain fields would ensure stable supply sources and secure technological expertise.

However, from the mid-1990s to the early 2000s, awareness began to emerge that the protection and nurturing system of the defense industry was hindering its competitiveness. As a result of the long-term implementation of the specialization and affiliation system, companies designated as specialized or affiliated tended to rest on their vested interests, showing weak incentives for cost reduction or technology development, and there was criticism that the entry barriers for technologically capable small and medium-sized enterprises (SMEs) were high. To overcome these drawbacks, the perception that a transition to a fully competitive system was necessary spread, but opposition was significant, so the system was gradually opened through prolonged debate.

During the Roh Moo-hyun administration, as part of improving the defense acquisition system, the existing "Special Measures Act on Defense Industry" was abolished, and the "Defense Acquisition Program Act" was enacted in January 2006, deciding to abolish the specialization and affiliation system.

To mitigate the shock of sudden implementation, a three-year grace period was set, and the system was completely abolished on December 31, 2008. Since then, openness and competition have been expanded, such as increasing the multiple designation of defense materials, and the protection and nurturing policy has gradually declined. Especially, as bureaucrats from government economic departments began entering DAPA, voices advocating that the defense industry should follow market economy principles grew louder, and policies have been promoted focusing on expanding competition up to recent times.

Ignoring the unique characteristic of the defense industry, where the state is the sole demand entity, the dominance of market economy logic from the civilian sector in policy began to appear. As a result, in some large projects such as wheeled armored vehicles and TICN, new companies entered or competition among related companies escalated to legal disputes. Additionally, policies pushed for increased company investment in defense projects, multiple development burdens on companies, and institutional pressure for companies to financially contribute to state-led projects, increasing the cost burden on companies in defense research and development.

Abolition of the Specialization and Affiliation System for Defense Companies Began During the Roh Moo-hyun Administration
Market Economy Logic from Civilian Sector Began to Dominate Policy
73 Reform Tasks Set and Promoted Following the Cheonan Ship Sinking Incident

Meanwhile, from January 1, 2009, after entering a fully competitive system, the Korean defense industry introduced various measures to activate SME participation as a complementary measure. These included introducing SME bonus points in company selection, establishing a basis for designating preferential items for SMEs, and including excellent SME products in export support targets for offset trade. In May 2012, the defense material and company designation system was improved to allow, as a policy, the designation of two defense companies per one defense material, instead of only one. In June 2012, criteria for selecting multiple development projects were established and practically implemented.

▲ Introduction and Implementation of the Advanced Concept Technology Demonstration (ACTD) System= The ACTD project is a program to develop weapon systems or core components with new operational capabilities by utilizing already mature civilian technologies and to verify their military practicality within a short period of three to four years.

It was introduced to develop new concept weapons in a short time, verify performance, and rapidly deploy them. It was reviewed as an improvement task by the Acquisition System Improvement Committee under the Prime Minister's Office in 2004, reflected in the (former) Defense Capability Improvement Project Management Regulations after the establishment of DAPA in 2006, and three projects were first launched in 2008.

▲ Defense Reform 307 Plan= Following the Cheonan ship sinking incident on March 26, 2010, President Lee Myung-bak elevated the "Defense Modernization Promotion Committee" to a presidential direct organization in July 2010, and in May 2010, established the presidential direct "National Security Comprehensive Inspection Meeting," setting 73 reform tasks considering security threats and changes in the defense environment, categorized into short-, medium-, and long-term tasks.

The defense reform plan derived by the "Defense Modernization Promotion Committee" was formulated into a concrete plan executable by the Ministry of National Defense and finally approved by President Lee Myung-bak on March 7, 2011, known as the "Defense Reform 307 Plan." The name comes from the report date to the president, March 7.

The reform plan includes 37 short-term tasks (2011?2012), 20 medium-term tasks (2013?2015), and 16 long-term tasks (2016?2030). Detailed contents include improvements in upper command structure and defense education system, adjustment of priority in force enhancement, establishment of the Northwest Islands Defense Command, reduction in the number of generals, and compliance with the composition ratio of army, navy, and air force personnel in the Joint Chiefs of Staff and joint units.

Regarding defense acquisition in the "Defense Reform 307 Plan," the adjustment of force enhancement priorities is notable. While "Defense Reform 2020" focused on preparing for potential future threats, the "Defense Reform 307 Plan," prompted by the Cheonan incident, prioritized acquiring some forces necessary to counter existing North Korean local provocations and asymmetric threats.

Key elements include acquiring new forces to counter North Korean submarine provocations and 240mm and 122mm long-range artillery, establishing a response system for weapons of mass destruction (WMD), securing next-generation stealth fighters (F-X) like the F-15K, and early acquisition of high-altitude unmanned reconnaissance aircraft such as the Global Hawk. Additionally, the new Arthur counter-battery radar was to be deployed to the northwest islands by February 2012, and joint direct attack munitions (JDAM) were to be expanded for destroying cave fortifications.

Furthermore, under the "307 Plan," the Northwest Islands Defense Command was established in June 2011 based on the Marine Corps Command, and 24 types of forces including attack helicopters and K9 self-propelled howitzers were reinforced to effectively defend five northwest islands such as Baengnyeongdo and Yeonpyeongdo, establishing an immediate retaliation posture against provocations. Dedicated units were also created to counter North Korean special warfare and cyber threats.

From the defense industry perspective, the contents of the Defense Reform 307 Plan are not significantly different from those of Defense Reform 2020, so development and production volumes were not affected, but most of the urgently introduced forces were secured through foreign procurement.

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