[Exclusive] K-Defense exports are in a golden window, but Big Three chiefs face the prospect of appearing at parliamentary audits one after another

Kim Dong-kwan, senior vice chairman of Hanwha Group; Shin Ik-hyun, president of LIG Defense & Aerospace (D&A); and Kim Jong-chul, president of Korea Aerospace Industries (KAI), are among the heads of leading K-defense companies who have been placed on the list of proposed witnesses for the National Assembly's National Defense Committee audit. The move has sparked strong opposition within both the ruling and opposition parties. The requests are intended to address Hanwha's pursuit of a KAI acquisition and allegations that an LIG D&A executive provided bribes, but critics question whether it is appropriate to have defense-industry chiefs appear at the audit one after another. Concerns have been raised that this could burden corporate management at a time when the industry must respond to expanding exports and competition in advanced technologies, including manned-unmanned teaming systems. As a result, it remains unclear whether the parties will agree to adopt the witness requests.
■Kim Dong-kwan, Kim Jong-chul and even Joo Byung-ki proposed as witnesses over Hanwha's KAI acquisition
According to the list of proposed general witnesses for the National Defense Committee's audit obtained by Financial News on the 17th, the names include Kim Dong-kwan, senior vice chairman of Hanwha Group and CEO of Hanwha Aerospace; Kim Jong-chul, president of KAI; and Shin Ik-hyun, president of LIG D&A. Kim Dong-kwan was proposed as a witness by both Hwang Myeong-seon of the Democratic Party of Korea and Chun Ha-ram of the Reform Party. They requested his attendance at the Ministry of National Defense audit on the 7th of next month, the Defense Acquisition Program Administration (DAPA) audit on the 13th, and the comprehensive audit on the 26th. Over the same matter, Chun also proposed Kim Jong-chul and Joo Byung-ki, chair of the Fair Trade Commission, as witnesses for the DAPA and comprehensive audits.
On August 31, the Fair Trade Commission approved the acquisition of KAI shares by three companies: Hanwha Aerospace, its U.S. affiliate and Hanwha Systems. Hanwha Group has consequently secured a 15.89% stake in KAI and is currently seeking merger review from the Fair Trade Commission in accordance with applicable law. The move is being viewed as opening the door to KAI's privatization.
However, the labor unions at KAI and LIG D&A oppose the acquisition, citing concerns about a monopoly in the defense market. Kim Jong-chul also reportedly raised concerns about a monopoly at a recent internal meeting and suggested that DAPA and the Ministry of Trade and Industry would oppose the acquisition.
Some in the industry believe that this year's parliamentary audit could instead provide an opportunity to clarify and organize the outstanding issues surrounding Hanwha's acquisition of KAI. Since the final completion of the acquisition depends on government approval, parliamentary discussions could reveal the positions of the government and other stakeholders.
■Attempt to summon Shin Ik-hyun over an LIG D&A executive's alleged bribery
Chun proposed Shin Ik-hyun as a witness in connection with allegations that an LIG D&A executive provided bribes. The executive was indicted and detained on charges of providing bribes and making illicit solicitations to a public official in order to receive favorable evaluations in bids for DAPA projects. The allegations involve providing 320 million won and the right to recommend subcontractors over five years from 2021.
Prosecutors believe that biased evaluations took place in six projects worth a total of 91.5 billion won. It has not yet been established, however, whether the illicit solicitations were carried out at the company level or constituted individual misconduct by the executive for personal performance.
Moreover, political and industry circles have pointed out that Shin Ik-hyun's responses would be limited even if he attends the National Assembly, given that the trial is ongoing. DAPA may also be limited in its ability to answer questions about the specific facts of the case.
Although the witness requests concern specific issues, some lawmakers from both the ruling and opposition parties say that demands for the attendance of company chiefs should be handled cautiously, as the country is investing heavily in fostering the K-defense industry.
A People Power Party member of the National Defense Committee said, "Both the ruling and opposition parties have raised the question of whether calling in all the major defense contractors' chief executives would help K-defense," adding, "The situation goes beyond a lack of agreement between the ruling and opposition parties. Opinions are not aligned even within each party, making it difficult to adopt the requests."
[email protected] Kim Yun-ho Reporter