Go to the Mian menu
Go to the Mian menu

i-KIET Issues & AnalysisKIET Korea Institute for Industrial Economics and Trade

  • home
  • Publications
  • i-KIET Issues & Analysis

Defense Offset Agreements to Lower the Youth Unemployment Rate By 6 Percent

Author Won-Joon Jang, Young-Su Ann Date 2013.02.19 Issue No 551

○ The major importers of weapons use defense offset agreements as instruments for promoting their own industrialization, creating jobs, and increasing the exports of their defense industries.


- A defense offset is a form of international trade in which the importer of weapons imposes certain conditions that the exporter or the seller ought to satisfy in order to sell its weapons.


- Peru, which recently decided to import KT-1 aircraft from Korea, is actively using the opportunity to create more jobs in its territory by requiring Korea to build a petrochemical industry cluster in return


- The United Arab Emirates, Israel, India, the Netherlands, and South Africa are also seeking the growth of their industries, jobs, and exports by demanding foreign direct investment and increase in volumes of exports in return for the defense goods and weapons they import.


Converting the current defense offset agreements involving Korea into K-Move, and other such public projects for creating jobs, can create as many as 18,400 jobs for young people; thereby lowering the youth unemployment rate by 6 percent.


- Over the next five years (2013 to 2017), the defense offset agreements involving Korea and fighter and tanker experimentals will amount to at least USD 6.3 billion.


- Converting approximately 10 percent of the defense offset arrangements into job creation for young people, and increasing the rate of parts exports to 60 percent, will create as many as 30,765 jobs, 18,400 of which will benefit young people.


○ By expanding the scope of K-Move, the Korean Government can shift the focus of the current defense offset arrangements from the acquisition of transfer to the encouragement of jobs, exports, and small-to-medium businesses.


- To this end, the Korean Government will need to update its rules on defense offsets, launch an organization like the Defense Offset K-Move Center to oversee the related activities, and establish a system of interdepartmental cooperation to enhance the support for increasing the exports of parts from Korean small- and medium-sized businesses contingent upon defense offsets.