Last week, the US and South Korea concluded difficult negotiations on a new cost-sharing agreement. It is likely to be approved by the National Assembly, but not without scrutiny that is almost certain to bring unwelcome details to light.
Beginning in 1991, the US and South Korea began negotiating periodic cost-sharing agreements called “Special Measure Agreements” (SMAs), the most recent covering the period 2009-2013. But the sequester placed quite substantial pressure on the US defense budget. The $10 billion the US spends a year on forces permanently stationed abroad—70 percent of it in Germany, Japan and Korea—naturally became a target of scrutiny as the SMA was set to expire. Hearings by the Senate Armed Services committee in April of last year provide background on the programs, and also the inevitable Congressional finger-pointing on alliance burden-sharing (the committee report can be found here in .pdf).
The 2009-13 agreement set South Korea’s contribution at ₩760 billion for 2009 (approximately $775 million) and allowed for increases of up to 4% a year for inflation. The payments fall into three bins. Labor Cost Sharing contributions (about 40% of total payments) go to the salaries and benefits of South Korean employees of the United States Forces Korea (USFK) and are provided in cash. Logistics Cost Sharing contributions for maintenance of facilities and equipment (roughly 20%) and Republic of South Korea Funded Construction (ROKFC) for facilities (the remaining 40%) are provided in kind, mostly through contracts that the South Korean government lets.
A political issue in the Senate hearings was the fact that expenditure by the US appears to have grown much more rapidly than ROK expenditure during the last SMA. Two other agreements reached during the period are responsible: the Yongsan Relocation Plan (YRP), which involves the move of U.S. forces from Yongsan Garrison in Seoul to Camp Humphreys and the Land Partnership Plan (LPP), which consolidates forces from areas north of Seoul to Camp Humphreys and Daegu. In fact, South Korea will cover a substantial share of both of these moves, but they do involve additional US costs.
Negotiations appear to have been particularly tough, extending over ten rounds before an agreement was reached last week. South Korea will pay ₩920 billion in 2014—about $866.6 million, a 5.8% increase over last year—with a similar 4% escalator clause built into the 2014-2018 agreement.
But the politics of this is not over yet. The Armed Services Committee hearings identified a number of questionable expenditures, some on the Korean side, some a result of US policy. Now a South Korean government audit board is about to return the favor. It has launched a preliminary investigation—under pressure from a South Korean NGO—into charges that the US has accumulated unspent SMA funds. The Democratic Party has promised to stay on the issue as it moves to expected National Assembly approval. Complex funding agreements such as these which involve both cash and in-kind contributions, contracts, rental agreements for accompanied forces, unspent funds that are carried forward, accrued interest and so on are highly vulnerable to charges of bad faith. The agreement establishes new accounting measures and improves transparency, but closer scrutiny will almost certainly produce claims that this or that aspect of the deal was inappropriate.