Arab states use Israel's existence as justification to military dictatorship. Saddam also used the threats from Iran (which were very real).
Meanwhile, Israel managed to develop into an industrial democracy despite being surrounded by enemies from all directions.
I don't think you can be considered a democracy if you are at war with half of the people within your borders.
Was the US a liberal democracy during WWII when it cluster bombed Germany and Japan?
Think about the context here: how South Korea in the 80s was treating its own people.
Israel is a democracy within its local population despite being surrounded by enemies.
Therefore, having an enemy at the border is not a good excuse for a military dictatorship.
Put another way, I'm sure even Pyongyang has some happy citizens. Even dictators usually let some local population live happily. The trick is being part of the right local population.