South Korea Defence and Security Report Q1 2013

The South Korea Defence and Security Report examines the country's strategic position in the North EastAsian region and the wider world. It provides an overview of the contemporary geopolitical challengesfacing the country, and the challenges it may face in the future.

The report examines the trends occurring in the country's current and future defence procurement, and theorder of battle across its armed forces. The intention is to provide a clear and concise discussion of theseissues. The report's general conclusion is that the death of North Korean leader Kim Jong Il and thesuccession of his son, Kim Jong Un, has done little to alter the security dynamic on the Korean peninsula.As a result, Seoul will continue to invest heavily in modern military equipment, and also remain acommitted US ally and a core partner in the US's 'pivot' to Asia.

Attention is now turning towards South Korea's presidential election in December 2012, and to the newpresidential term beginning in February 2013. With both leading presidential candidates expressing adesire to kick-start talks with the North, much will depend on the approach of Kim Jong Un, who remainsa largely unknown quantity. If Kim is minded to engage in meaningful negotiations, then tensions on thepeninsula could be significantly reduced. Indeed, the North's implementation of experimental marketreforms in the agriculture sector - a reform known as the 6.28 Policy - could signal that the younger Kimis seeking to modernise North Korea. If he really is preparing North Korea for Chinese-style marketreforms, then the security environment on the peninsula would improve significantly.

While the North Korea regime has appeared close to achieving the capability to test a third nuclear bombfor much of 2H 2012, the fact that no such test has occurred augurs well for the resumption of talks whenthe new South Korean president takes office. However, the North may attempt to use its nuclearprogramme to blackmail the South into making concessions, and that would only meet with resistance,whoever is elected in December.

Over the last quarter BMI has revised the following forecasts/views:

The security policies of the two leading South Korean presidential candidates are discussed.While conservative candidate Park Geun-hye has voiced her intention to open a new round ofdiplomacy with the North, her liberal rival Moon Jae-in has promised a return to an updatedversion of the Sunshine Policy of the 1990s. Whatever the outcome, the South appears ready tore-engage with the North, with the hard line pursued by outgoing President Lee Myung-bakgenerally perceived to have yielded little.

Ahead of the anticipated talks with the new South Korean leader, Pyongyang held two rounds oftalks with Japan in September and November, ending several years in which the two sides hadhad virtually no bilateral contact.

Seoul has tightened its defence ties with the US, signing space and cyber defence pacts, and alsobeing released by the US from a commitment to deploy ballistic missiles with a range no greaterthan 300km. Seoul will now field missiles with a range of 800km, placing all of North Koreanterritory within range, though some fear that the North will view this as an act of provocation.

Having sold submarines to Indonesia earlier in 2012, Koran shipbuilder DSME now has theopportunity to supply Norway with a fleet of new submarines, after Oslo issued an RfI to DSMEand three other firms in November.