South Korea's ideas to boost strategic position

The Korean peninsula sits in the middle of two much larger powers in the northwestern Pacific - Japan and China. Both of those countries vie for influence with ever more dangerous tactics even though trade ties remain strong, and will likely continue to be strong into the future.

This competition between the two heavyweights has stunted South Korea’s growth in the past, but an evolution is already well underway and the peninsula is set to grow both economically and militarily.

Assuming nothing significant changes in the current system, North Korea is not going to include itself in the international system in the near term. This gives Seoul at least a bit of breathing room.

But the same cannot be said for South Korea. The country is a buzzing economy primed to take early advantage of a global trade recovery. It is also quietly upgrading its own naval forces to better protect its regional interests.

The global financial crisis in 2007/8 affected South Korea slightly as its GDP declined only briefly. It managed to recover relatively quickly due to a mix of direct government intervention, speedy central bank action, and a valuable overflow from proximity to the Chinese fiscal surplus.

Fine economic weather

However, as the rest of the world wallows in the economic doldrums, South Korea has had a loss of momentum since the worst periods of 2008. Growth in the peninsula averaged just 3.2% from 2008 through to today, which is well below the 4.8% averaged in the seven years to 2007.

The finger of blame has been pointed at weakening consumer expenditure growth and export growth, coupled with a dip in construction deals.

A government boost to the economy in 2013 pushed the GDP growth rate up to 4.4%, the highest in two years. Their technology sector - especially in mobile phones and semiconductors - has been the key driver of Korea’s export strength and was relatively untouched by the yen depreciation - and concurrent won strengthening - which occurred as a result of Japan’s aggressive monetary stimulus.

The Korean won today remains around 35% below its 2007 peak. But according to a recent Goldman Sachs analysis, only 30% of Korean exports are affected by a weakening Japanese yen, whereas 70% either benefit or are only slightly affected. The report suggested that at the macro level Korea will be less affected by the yen depreciation that many at first assumed.

Even while the economy seems to be on a balanced keel, investors are still a bit worried about Korea.

Their export dependence is the main concern, accounting for 54% of GDP in 2013 - up from 44% before 2008, 30% in 2003, and significantly higher than the 23% figures of 1997. This high export performance is also influencing domestic demand and could become more detrimental to the health of the Korean economy as both domestic and external demand wanes.

So although South Korea’s economy is vulnerable to exchange rate appreciation and sluggish emerging market growth, its exposure to these problems is probably less than many analysts think.

The same could be said for the perceived dangers of a depreciating Japanese yen to hurt the Korean economy. All of which places the country in a good position to tackle other problems emerging around the region. For instance, there is a great opportunity for South Korea’s to develop a competent blue water navy.

Reports in recent media highlight the South Korean ambitions to build its own true blue water navy are moving into the fast track. Such a fleet will be able to both project force from its peninsula and embrace the responsibility of protecting its trade routes and sea lines of communication.

But even though their economy might be able to afford the expected significant and expensive upgrades to their fleet, South Korea will have plenty of obstacles to overcome on this route.

Seoul is encountering similar problems to Japan in regards to their long-term security guarantee with the United States. Washington is looking to create a more inclusive partnership with its allies in the region by dividing the responsibility of security between them all.

South Korean plans for a navy

The US is likely to remain in strong control of the whole dynamic, but there’s still a lot that countries like Japan, the Philippines and South Korea could be doing themselves.

Washington would like to encourage independence as much as they can but there are obvious limits. If the US can remain as the military strong-point in the region, other countries will not need to shoulder 100% of their security burden.

This is the way Washington wants it to be for as long as possible. The US probably wants to avoid its partners becoming too independent too quickly. So the exact percentage split between the various partners is still largely an unknown.

In the past, South Korea has spent a lot of its military efforts in defending the demilitarised zone with North Korea. But it is geographically constrained to be more of a sea power because, like Japan, it is highly dependent on the oceans for trade and interaction with other nations.

And while Seoul prioritised its land forces, South Korea is so much further advanced compared to their northern neighbour today that it now feels it can begin to focus on shipbuilding without too much worry about ceding important ground to Pyongyang.

To this end, Seoul plans to commission at least three more highly capable destroyers by 2023 and add larger, more powerful submarines. There are also ideas to build two 30,000-tonne light aircraft carriers between 2028 and 2036.

In addition, the larger 3,000-tonne submarines they plan to build will be far better suited for blue water operations than the 1,800-tonne vessels currently active.

Ultimately though, Japan and South Korea are very aware that protecting their national interests is best left to the US Navy.

Because no matter how well their economies are flourishing, maintaining a strong naval fleet is very expensive and will inevitably ratchet up tensions between the powers by increasing the amount of military traffic in the region.

While the tensions rise between Japan and China over the Senkaku/Diaoyu islands and the controversial proper demarcation of each country’s historic territory, it is easy to forget that South Korea recognises just as much reason to be worried about its two neighbours duelling for supremacy.

Neither China nor Japan has historically been long-term friends with the various owners of the Korean peninsula, even going so far as to occupy the peninsula on occasion.

On top of this, the growing close relationship between Japan and the United States is giving South Korea further incentive to build up its naval capabilities.

So long as Seoul can hold onto its economic good weather, the country might be able to return to its historic position as a regional sea power within the next few decades.

Nathan Smith has studied international relations and conflict at Massey University. He blogs at INTEL and Analysis