S.Korea targets growing Asian defence market with fighter jets

SACHEON, South Korea Mon Aug 19, 2013 6:02am EDT

SACHEON, South Korea Aug 19 (Reuters) - South Korea, renowned for making hi-tech consumer devices, cars and ships, now has its sights on exporting fighter jets amid a projected sharp increase in demand for military weapons in Asia over the next decade.

South Korea's first home-built light fighter, the FA-50, will roll out on Tuesday from the Korea Aerospace Industries Ltd (KAI) assembly plant in the southern city of Sacheon.

KAI officials say that they aim to sell about 1,000 FA-50s and T-50s overseas over the next three decades, and are eyeing markets in Southeast Asia, Eastern Europe and the Americas.

"Countries in Southeast Asia and South America are finding FA-50s enormously attractive," Park Jeong-soo, a senior official from KAI's external affairs department told reporters.

Global defence budgets are forecast to increase by 9.3 percent to $1.65 trillion by 2021, according to analysts IHS Janes. Defence budgets in the Asia Pacific are forecast to outstrip North America by 2021, up 35 percent from 2013 levels to $501 billion, it added in its Balance of Trade report in June.

That will pit South Korea's fighters against U.S., European, Chinese and Russian companies in an increasingly crowded - yet still lucrative - market.

South Korea is also planning to develop a much larger KF-X fighter with the help of U.S. defence contractors, although that has been delayed by budgetary constraints.

The first FA-50 is part of an order for 20 fighters by South Korea's air force, which will use them to replace its ageing Northrop F-5 fighters.

Negotiations are ongoing with the Philippines, with a local online news outlet reporting that a $460 million deal with Manila for 12 FA-50s could be completed this month.

Officials at the Sacheon headquarters of KAI declined to comment due to the sensitivity of the matter.

KAI CEO Ha Sung-yong said while South Korea's conventional export markets such as cars and shipbuilding faced tough competition, its aerospace industry should grow strongly.

"Now that has KAI established the groundwork with its own technology, it is necessary to grow the industry ... by contributing to the national military's force integration and creating jobs and exports," Ha said.

The FA-50 is based on the T-50 advanced jet trainer, which is already in service in South Korea and was developed together with U.S. defence contractor Lockheed Martin.

The T-50 can also be fitted with weapons under its wings and used as a light attack aircraft. Indonesia was the first export customer with a 2011 order for 16 T-50s, and Iraq is in negotiations to buy 24.

KAI and Lockheed are gearing up for a lucrative U.S. Air Force competition for at least 300 aircraft and maybe hundreds more worth several billion dollars, a deal that one South Korean officer called the "jackpot".

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