On the evening of the 1st, which was Lunar New Year's Day, the news of Hanwha Defense's signing of a contract to export K-9 self-propelled howitzers to Egypt was announced through a press release from the Defense Agency.
The DAPA said that it was a splendid achievement for the largest export of K-9, with the contract amount exceeding KRW 2 trillion.
In connection with Hanwha Defense's K-9 export to Egypt, the Egyptian government has decided to borrow 1.6 trillion won, 80% of the contract amount, from the Export-Import Bank of Korea.
When there was a controversy about "lending money and exporting weapons", the government countered that it was "a common export technique."
Normally, export with a loan is a state in which both the export contract of the company and the loan contract of the bank have been completed.
It is the same principle that a car contract is completed only when the option and price are set with the car dealer and the installment period and interest rate must be confirmed with the capital.
On the other hand, a loan agreement between the Eximbank and the Egyptian government for the K-9 Egyptian export has not yet been signed.
We will have to negotiate for a long time to come.
The government is in the position of "announcing the export contract because the loan negotiations were virtually over without signing it."
However, the Eximbank, which is a party to the loan, confirmed that "the Egyptian government's intention to reach an agreement is only indirectly communicated to the Egyptian authorities."
An Egyptian government official conveyed the agreement to the loan terms to Hanwha Defense and Hanwha Defense employees to the Eximbank employees only verbally.
Not a single legally valid loan document came.
How the loan negotiations will unfold is uncertain.
Nevertheless, as the government extensively publicized the contract to export self-propelled artillery, the Export-Import Bank was pursued and pressured by Egypt in negotiations.
I'm worried about the loan negotiations and contracts going well.
Someone in Egypt only communicated their opinions with 'words'...
Combining the coverage of the five key executives and employees from the team leader to the vice-president of the Export-Import Bank of Korea, what happened with the Egyptian loan is as follows.
Eximbank first sent a letter of intent (LOI) to the Egyptian government in early August last year.
It is a document containing the general conditions such as interest rates and repayment period.
Afterwards, an employee in charge of overseas sales at the Export-Import Bank of Korea visited Egypt twice to check the intentions of the Egyptian government.
There was not much progress, but a change occurred with the President's visit to Egypt last month.
The Export-Import Bank of Korea sent a letter of intent for a loan back to Egypt just before the president's tour, and the response came.
At the end of last month, after the tour, an Egyptian Ministry of National Defense official verbally delivered to Hanwha Defense that he agreed to the letter of intent, and an overseas sales employee of Hanwha Defense conveyed this word to the team leader in charge of the Export-Import Bank of Korea by phone.
A high-ranking official at the Export-Import Bank of Korea explained, "The Egyptian doctor did not come in writing, but was communicated indirectly only orally through Hanwha Defense employees."
This is all communication between the Eximbank and the Egyptian government.
A high-ranking official of the Ministry of National Defense, citing a report from the Defense Agency, said, "The loan negotiations are practically over and only the signature is left, so we signed an export contract," but there is a big difference in temperature.
The Export-Import Bank only heard the word of an Egyptian official across the bridge.
It is difficult to see it as a phase where only the signature remains.
Contrary to what the government claims, the next process is negotiation, not signature.
“When the Egyptian government sends a loan request, the negotiations begin in earnest,” said a loan officer at the Export-Import Bank of Korea.
The words of Egyptian officials have no legal effect.
You can even change your words.
I can't help but wonder about the role and position of Egyptian officials, but the Export-Import Bank of Korea "does not know" and Hanwha Defense said "it cannot be disclosed".
Similar cases… Both export contracts and loan contracts must be signed
France's export of Rafale fighters to Egypt is often cited as a similar example of the export of K-9 self-propelled artillery to Egypt.
Egypt signed a $4.5 billion contract to purchase 30 Rafale fighters in May last year.
Foreign media reported on Egypt's Rafale contract and also introduced Egyptian loan contracts of four French banks: BNP Paribas SA, Credit Agricole, Societe Generale, and CIC.
In other words, the fighter export contract and the bank's loan contract were disclosed at the same time.
It was similar when Daewoo Shipbuilding & Marine Engineering and Korea Aerospace Industries exported submarines and trainers to Indonesia 10 years ago, respectively.
According to officials from Eximbank, Daewoo Shipbuilding & Marine Engineering, and Korea Aerospace Industries, our defense companies negotiated with the Indonesian defense authorities and Eximbank with the Indonesian financial authorities, respectively. evaluated.
In contrast, in this Egyptian case, the government overtook the company and announced the conclusion of an export contract even though proper negotiations had not even begun, let alone a loan contract.
Park Geun-young, a spokeswoman for the DAPA, insisted, "We can sign an actual contract and then negotiate a loan."
Although the order of loan negotiations is not set, it will be decided after the loan agreement is concluded whether the export with the loan is successful.
As in Egypt, we are at a disadvantage by the government's extensive publicity of export contracts before the full-scale loan negotiations have even started.
Shin Jong-woo, Senior Analyst at the Korea Defense Security Forum, said, "The complete export contract is when both the real contract and the loan contract are finished, but I doubt the intention of hastily announcing that the real contract was signed." After doing so, the Export-Import Bank of Egypt was forced to sign a loan contract even if Egypt made unreasonable demands.”
Janes, "Korea-Egypt signed an MOU to export self-propelled artillery"
In an article under the heading 'Egypt signs for K-9 howitzers' on the 2nd, Janes, an authoritative British military media outlet, said, "I confirmed it with a spokesperson for the Egyptian Ministry of Defense." We have signed an MOU) with Korea.”
MOUs and contracts are very different.
An MOU is a non-binding promise.
When I asked the reporter why the MOU was written through the parent organization, the answer came: "Korea unofficially mentions it as a contract, but Korea and Egypt expressed this deal as an MOU."
The reporter of Janes may have come to the conclusion of an MOU by covering the situation where the export contract for Hanwha Defense was signed but the loan contract with the Export-Import Bank was not signed.
It is questionable why the government hastily announced an export contract even though there was no loan contract.
What if you waited patiently, signed a reasonable loan contract, and announced the export of self-propelled artillery to Egypt?
People in the defense industry agree that it would have been more beneficial to the company and the country.
Park Jin-ho, a member of the Defense Project Promotion Committee of the Ministry of National Defense, pointed out, "The financial package is included as an option in the case of export to Egypt." .
Even among high-ranking officials at the Ministry of National Defense and the Export-Import Bank of Korea, there is an opinion that "it cannot be regarded as a complete export."