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Seoul, Washington reach agreement on defense cost sharing

Seoul, Washington reach agreement on defense cost sharing

Posted March. 11, 2021 07:28,   

Updated March. 11, 2021 07:28


South Korea and the United States have reached the Special Measures Agreement (SMA) which ties South Korea’s contribution to the cost of U.S. Forces Korea (USFK) to the South Korean government’s national defense budget increase rates each year. The agreement will be valid for six years with regard to U.S. forces residing in Korea for the next five years starting this year. It is the first time for the agreement to be signed based on the increase in defense cost instead of inflation rates.

Based on the South Korean government’s mid-long terms plans (2021-2025), the annual average increase rate for national defense is estimated to be 6.1%. This hints that the annual defense cost increase for South Korea by 2025 averages up to 7.6%, suggesting that Seoul’s contribution will be significantly higher than the previous agreement.

According to the conclusion of the 11th round of SMA negotiations as released by the Ministry of Foreign Affairs on Wednesday, both countries have agreed to keep the increase rate of the defense costs based on the increase rate of defense budget of the previous year, but applying 13.9% for this year as an exception. Against this backdrop, South Korea will cover 1.1833 trillion won this year, which reflects last year’s national defense cost increase rate (7.4%) and wage increments to Korean employees at US forces (6.5%). For next year’s increase rate, this year’s defense cost increase rate of 5.4% will be applied, totaling next year’s contribution to 1.2471 trillion won.

Defense cost for last year was 1.0389 trillion won according to the agreement that had been in deadlock during the Trump administration. “The agreement will be valid for six years, adding one year to the five-year term between 2020 and 2025,” said a high-ranking official at the South Korean Foreign Ministry.

Ji-Sun Choi aurinko@donga.com