[Exclusive] DAPA Moves to Support Small and Midsize Defense Firms; Export Fund to Make First Investment This Month, Policy Finance Set to Reach Record High

[Financial News] The Defense Acquisition Program Administration (DAPA) has launched an all-out effort to support small and midsize defense companies. It plans to execute the first investment from the 186 billion won K-Defense Export Fund this month, while policy-finance support is also expected to reach a record high this year.
According to Han Min-soo, a Democratic Party of Korea lawmaker on the National Policy Committee, the first investment from the K-Defense Export Fund is expected to be executed this month. Three sub-funds are expected to be established for investment. The first sub-fund, established at 66 billion won in June, will make its initial investment this month. The second sub-fund is expected to be established at 60 billion won by the end of this year. Since the first sub-fund began investing just three months after its creation, the second sub-fund is also expected to begin investing early next year. The timing for establishing the third sub-fund is being coordinated for next year.
DAPA said the fund could expand through additional government financial support and further private fundraising. As K-defense exports continue to grow year after year, the fund is expected to increase further depending on its investment performance.
The government is also creating funds financed by policy and private capital. These include the 500 billion won Defense Startup Fund and the 310 billion won Defense Technology Innovation Fund. Including the K-Defense Export Fund, the total reaches 1 trillion won.
Financial support for small and midsize defense companies is also expanding. DAPA has been operating an interest-subsidy program that provides low-interest loans to small and midsize defense companies through commercial banks and covers part of the interest.
The amount disbursed was only about 5 billion won in 2017, but exceeded 16.3 billion won last year, more than tripling. This year, the amount supported had already surpassed 10.6 billion won by July, putting it on track to set a new record. The loan volume for this year is 230 billion won.
The budget for programs designed to help small and midsize defense companies enter the market is also increasing. A demonstration-testing package is a prime example. The program allows small and midsize companies to participate in military demonstrations so they can supply products directly to the military.
The program was introduced for the first time this year with a budget of 7.9 billion won, while 17.4 billion won has been included in next year’s budget proposal. The budget was more than doubled following strong performance, with 5.3 billion won—more than half of the annual allocation—executed as of July. A total of 22 first- and second-round combat-experiment projects have been selected, leading to the increase to expand demonstrations of products featuring advanced technologies. Government R&D contributions alone amount to 17.1 billion won.
Lee Kyung-hoon, head of DAPA’s Defense Small and Midsize Business Support Division, said at a defense-industry forum held at the National Assembly last month, "The program is improving sales by allowing small and midsize defense companies to participate in demonstrations so they can supply products directly to the military." He added, "It meets the needs of both sides: companies can introduce their products to the military, while the military can use civilian products firsthand."
[email protected] Kim Yoon-ho Reporter