South Korea and the U.S. Reach Final Agreement on Defense Cost-Sharing Pact for Six Years Until 2025

[Asia Economy Reporter Yoo In-ho] South Korea and the United States have finalized the 11th Special Measures Agreement (SMA) on defense cost-sharing under the conditions of "6 years, 13.9% increase rate."

The Ministry of Foreign Affairs announced on the 10th that negotiations for the conclusion of the 11th SMA were completed through the 9th meeting held in Washington, USA, from the 5th to the 7th. Jeong Eun-bo, South Korea's defense cost-sharing negotiation ambassador, and Donna Welton, the U.S. Department of State's defense cost-sharing negotiation representative, conducted the negotiations.

[Image source=Yonhap News]

This comes 1 year and 7 months after South Korea and the U.S. began negotiations. Since September 2019, the two countries reached the final agreement through nine official meetings and close consultations and coordination via diplomatic channels.

The Ministry of Foreign Affairs evaluated the significance of the final SMA agreement as "South Korea and the U.S. early and smoothly resolving key alliance issues since the inauguration of the Joe Biden administration, demonstrating the firm resilience of the ROK-U.S. alliance."

The 11th agreement is a multi-year agreement valid for a total of 6 years from 2020 to 2025. The total amount for 2020 is frozen at 1.0389 trillion KRW, the same level as in 2019.

Both sides agreed to exclude from the total 2020 contribution the entire amount of livelihood support funds (totaling 314.4 billion KRW) paid to workers under a special law due to unpaid furloughs of Korean workers employed by the U.S. Forces Korea and personnel costs prepaid to the U.S. side in 2020. The actual total defense cost paid to the U.S. side in 2020 is 724.5 billion KRW.

The total amount for 2021 is 1.1833 trillion KRW, a 13.9% increase compared to 2020.

The 13.9% increase rate is the sum of the 7.4% increase in the 2020 defense budget and a 6.5% increase in personnel costs for Korean workers employed by the U.S. Forces Korea due to the expansion of the minimum allocation ratio for defense cost-sharing personnel expenses.

From 2022 to 2025, the annual total amount will be applied based on the previous year's increase rate of South Korea's defense budget. The defense budget increase rate reflects South Korea's fiscal level and defense capabilities and is finalized through National Assembly deliberations.

Additionally, since the unpaid furlough of Korean workers employed by the U.S. Forces Korea first occurred during the negotiation period in 2020, the government agreed on institutional improvements to ensure that the employment and livelihood stability of Korean workers will not be affected by defense cost-sharing negotiations in the future.

The minimum allocation ratio for personnel expenses in defense cost-sharing will be expanded from 75% to 87% starting in 2021. Of this, 85% has been changed from a "shall endeavor" provision to a mandatory "shall" provision. The U.S. side agreed to endeavor to allocate at least an additional 2%.

By explicitly stipulating in the agreement for the first time that personnel expenses can be paid at the previous year's level in case of an agreement gap, the possibility of a recurrence of unpaid furloughs of Korean workers employed by the U.S. Forces Korea, as in 2020, has been blocked.

South Korea and the U.S. will upgrade the joint working group for improving the special measures agreement, agreed upon in the 10th agreement, from the previous section chief level to the director general level to enhance its effectiveness.

South Korea and the U.S. plan to have the agreement come into effect as soon as possible after completing domestic procedures.

A senior official from the Ministry of Foreign Affairs said, "This agreement served as an opportunity to reaffirm the importance of the firm ROK-U.S. alliance as a core axis for peace and prosperity on the Korean Peninsula and in Northeast Asia, as well as the necessity of the stable stationing of U.S. Forces Korea," adding, "The defense cost-sharing special agreement agreed upon this time will contribute to the development of the ROK-U.S. alliance and the strengthening of combined defense posture."

This content was produced with the assistance of AI translation services.