Expanded lending limit to boost Eximbank’s arms deal support
The parliamentary approval of a revision bill to hike the Export-Import Bank of Korea’s (Eximbank) capital limit is drawing optimism that the state-run lender can better serve Korea’s goal of becoming one of the world’s top five arms exporters by 2027.
The endorsement of the bill, Thursday, increases the Eximbank’s capital limit from 15 trillion won ($11.2 billion) to 25 trillion won.
This increase was seen as necessary for the second round of arms contracts with Poland, which wants extra financial support from the Korean side following the previous round of deals worth 17 trillion won in 2022.
The maximum amount of Eximbank’s financial support to a borrower can’t exceed 40 percent of its equity capital.
Under the circumstances, the 10 trillion won hike in its equity capital gives room for Eximbank to offer additional support for arms deals with Poland after offering 6 trillion won in the form of loans and guarantees under the 2022 contracts.
Back then, the Korea Trade Insurance Corp. also provided 6 trillion won in support separately to the Warsaw government to make the arms exports possible.
Without the law revision, the second round of arms contracts was not making progress, given that the sales amount rose to 30 trillion won.
“Thursday’s approval of the revision bill is also meaningful because Korea is becoming aggressive to strike bigger deals,” said Kim Bongman, head of the International Affairs Division at the Federation of Korean Industries.
He noted the Yoon Suk Yeol administration has a vision to carve out a 5 percent share in the global arms export market by 2027, up from the current 2.8 percent.
The government accordingly aims to become the world’s fourth-largest weapons exporter after the United States, Russia and France.
“To do so, 30 trillion won or bigger arms deals with other countries should be reached more frequently, and in return, more frequent supports from Eximbank and other relevant financial parties will be needed, ” Kim said.