SECRET UK EYES A
8.
Overall, I found a greater air of confidence than on my last visit, both in the ROX Army and Air Force and in their aspiring defence industries. In the latter there was during my visit major industrial unrest in support of very large wage demands (up to 50%) as relatively low paid workers who have in the past helped create the economic growth and success enjoyed by ROK, now demand higher standards of living. On the whole I found senior industrialists in the 4 major corporations I visited cautiously optimistic about their future business prospects, believing that existing low wage rates had to catch up, but that greater efficiency and automation and lower manning levels would help to hold costs down to levels that remained internationally competitive.
9. Government Ministers and senior Service Officers seemed more concerned about the implication of today's unrest for future growth, though everyone agreed that the rapid transition to more democratic government was bound to create such tensions and rising expectations as part of the price of greater freedom. The key question was whether this would be a short passing phase or the onset of a long period of industrial and political unrest.
10. None of these developments seem, so far, to have undermined the prospects for our defence industries. These opportunities stem from a growing awareness in ROK that they cannot (even in their own self-interest) go on buying US equipment for ever, though they are at pains not to offend the US in this respect, recognising the enormous contribution currently made by US Forces to ROK security. Many privately feel that US interest and support will eventually decline and a few are beginning to question the US presence in such strength as a bar to eventually achieving some more constructive dialogue with the North. In the meantime, the Government, the Armed Forces and industry wish to strengthen their ties with UK companies because they recognise the quality and suitability of our equipment, and believe this route will provide the best means to start establishing, however gradually, an indigenous defence industry capable eventually of meeting their own needs. To this end, I was told that ROK intends to establish a Defence Procurement office in Europe, and in my signal at Reference A, I recommended that we should consider giving strong encouragement during Minister (DP)'s imminent visit for this office to be based in the UK.
11.
The more detailed report at Annex C indicates those defence systems where we seem best placed to do business with the ROK, who in many cases will be looking for industrial collaborative arrangements that offer more than just a straight sale. The proposed arrangements for the ROK procurement of Navy Lynx appears to be establishing a useful precedent and, if successful, should provide a useful pointer for future working arrangements in similar programmes.
F VVISREPS/1
3 of 10 SECRET UK EYES A