South Korea - Country Commercial Guide
Selling to the Public Sector
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Defense Procurement

Defense procurement is an active part of CS Korea’s portfolio. U.S. companies which sell both to the U.S. government and foreign governments should be cognizant of the importance given to military procurement in the Republic of Korea (ROK).

The Defense Acquisition Program Administration (DAPA) is the primary agency responsible for the ROK’s defense procurement and was established to ensure transparency in the overall acquisition process. Defense products and equipment are acquired through a sophisticated procurement system which may involve direct purchases, sales agents, and importer channels. U.S. manufacturers or suppliers of defense equipment should vet and utilize a qualified local Korean agent that is familiar with the ROK’s defense procurement system, well-connected with the key members of each military branch and has ample knowledge about the operations of the country’s Air Force, Navy, and Army.

Through a Gold Key Service or an International Partner Search, CS Korea is able to help U.S. defense companies identify a well-qualified potential representative. In general, former (or retired) Republic of Korea (ROK) Air Force, ROK Navy, and ROK Army officials have good potential to serve as a commissioned representative in Korea. To supply their defense products and services to the ROK’s military end-users, local representatives must first register and be certified by DAPA.

A well-selected agent or representative should be able to provide their U.S. supplier or manufacturer with information about procurement plans as well as the status of their defense bids. Since the state of ROK’s defense community is highly mature, U.S. defense suppliers should only consider this market if they have a proven track record in the U.S. and/or in other Tier I countries.

Companies seeking to supply their products or systems to the ROK military are required to register with DAPA. For more information on the registration and bidding process, please refer to DAPA’s website.

U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.

Financing of Projects

Project financing (PF) is designed to facilitate the funding of large-scale projects. The concept was first introduced in Korea to finance a highway construction project between Seoul and the Incheon International Airport. The government’s decision to introduce this financing technique was prompted by the need to boost domestic demand by stimulating investments in large-scale projects, including housing construction and social infrastructure facilities.

Most of Korea’s social overhead capital (SOC) projects are funded through PF. PF is also used to finance private sector projects, including real estate development and buy-outs of financially-troubled companies. Several Korean and foreign banks provide PF and offer venture capital investment programs for social infrastructure projects, private projects, and SMEs in Korea. These banks support companies through direct equity investments, although domestic companies generally have access to local funding and to informal and secondary financial markets charging higher interest rates. Debentures are also used as a financing alternative, although slightly more expensive than bank financing. Finally, financing in the form of long-term debt is available from the Korea Development Bank (KDB), but generally for high-priority industries.

The state-run Export-Import Bank of Korea (KEXIM) finances overseas projects where Korean companies participate in a consortium and typically undertake the entire process from construction to operation of the project. In 2023, US-based X-Energy Reactor Company signed an agreement with KEXIM to explore project financing opportunities to deploy its Xe-100 advanced small modular reactor (SMR). Other recent projects include:

·        $1.2 billion in financing for the Indonesian refinery project in 2022

·        $1.15 billion for an LNG import terminal project in Kuwait in 2018

·        $367 million for a refinery modernization project in Bahrain

·        $200 million for a copper mine project in Peru