The Role of the Government in the Development of the Aircraft Manufacturing Industry in Korea: Implications for Developing Countries

ABSTRACT The aircraft manufacturing industry is critical to national defense and linked to various other industries. This paper explains the development of Korea’s aircraft manufacturing industry and the role of the government. Despite late entrance to the industry, Korea has developed and produced basic and jet trainers since the 1990s. In the meantime, the government has pursued technology sharing, integrated large companies, and provided financial incentives to manufacturers. It has also supported the strengthening of human capital and established a government research institute devoted to the aircraft manufacturing industry. In the early 2020s, Korea began to produce advanced fighter jets using its technologies. Based on Korea’s experience, this research presents policy implications for developing countries. The government must play a critical role in the aircraft manufacturing industry, which is an example of the infant industry argument. In the early stages of development, a developing country may learn advanced technologies through licensed production contracts and by requesting technology transfer when purchasing aircraft. It is necessary for the government to provide appropriate incentives, particularly for R&D activities, human capital development, and a dedicated government research institute in aircraft manufacturing. Moreover, regulating the number of domestic aircraft manufacturers may lead to greater efficiency.