A test launch of LIG Nex1's Cheongung-II missile defense system. [LIG Nex1]
A test launch of LIG Nex1's Cheongung-II missile defense system. [LIG Nex1]

The Middle East defense market could grow to more than 220 trillion won ($146 billion) on the back of recent conflicts in the region, analysts say. South Korean defense firms, which have already secured trillion-won contracts there, plan to build on that momentum through localization strategies.

According to a report titled "Outlook for Reconstruction Projects in Key Middle Eastern Countries After the US-Iran War," released Saturday by the Overseas Economic Research Institute of the Export-Import Bank of Korea, the Middle East defense market is projected to grow from about $73.4 billion (111 trillion won) this year to about $150.4 billion (227 trillion won) by 2035, at an average annual rate of 8.3 percent. The region's share of the global defense market is expected to expand from 12.9 percent to 15.4 percent over the same period.

The more than doubling of the Middle East defense market in nine years reflects heightened security uncertainty across the region. While the United States and Iran are currently engaged in end-of-war negotiations, major Middle Eastern countries are increasingly likely to ramp up military spending to guard against unpredictable security risks. In fact, even during the negotiations, Iran's attacks on commercial vessels in the Strait of Hormuz have triggered mutual military strikes between the two countries.

Some countries had already begun bolstering their defense capabilities before the war broke out. Saudi Arabia announced its "Saudi Vision 2030" plan, which calls for replacing 50 percent of the defense budget with locally produced goods by 2030 to strengthen the country's domestic defense industry.

The growth of the Middle East defense market is good news for South Korea's defense sector, which has a track record of winning large-scale contracts on the strength of its cost-effectiveness. LIG Nex1 signed a series of export contracts for its Cheongung-II missile defense system with three Middle Eastern countries — the United Arab Emirates, Saudi Arabia and Iraq — worth trillions of won between 2022 and 2024.

Hanwha Aerospace signed a package export deal with the Egyptian government in 2022 worth 2 trillion won, covering the K9 self-propelled howitzer, the K10 ammunition resupply vehicle and the K11 fire-control armored vehicle. Last year, it concluded a guided-weapons supply contract with a Middle Eastern country worth 400 billion won. Korea Aerospace Industries signed an export contract with the Iraqi government in 2024 for the Surion utility helicopter — the first export of a domestically developed Korean helicopter — valued at 135.8 billion won.

Hanwha Aerospace's K9 self-propelled howitzer. [Hanwha Aerospace]
Hanwha Aerospace's K9 self-propelled howitzer. [Hanwha Aerospace]

South Korean defense firms are pursuing localization strategies to secure additional contracts in the Middle East, emphasizing their ability to contribute to local defense capabilities through expanded marketing efforts and the establishment of local factories.

Hanwha Aerospace set up a Middle East and North Africa subsidiary in Saudi Arabia last year to expand its regional sales network and is exploring a joint venture with the Saudi government. LIG Nex1 established a joint venture with a local company in the UAE last year and plans to set up an additional independent subsidiary there before the end of this year. Korea Aerospace Industries and Hyundai Rotem consistently participate in Middle Eastern defense exhibitions.

The high level of trust in South Korean defense products is expected to work in the industry's favor for future contracts. The Cheongung-II systems imported by the UAE were deployed in combat for the first time during the Middle East conflict, demonstrating a high missile interception success rate.

Industry analysts say South Korean defense firms will need to develop stronger unmanned systems technology to win large-scale contracts, pointing to the significant role that drones and other unmanned strategic assets played in shaping the outcome of the US-Iran war.

Hwang Gwang-taek, a senior researcher at the Export-Import Bank of Korea's Overseas Economic Research Institute, said the Middle East defense landscape would undergo a wholesale transformation toward advanced defense and unmanned systems, as combined saturation attacks mixing low-cost drones with precision missiles become the norm and asymmetric wars of attrition spread.


yeongdai@heraldcorp.com