With a deepening financial crisis and sequestration imposing limits on Pentagon spending, the United States finds itself unable to move full speed ahead in its rebalancing strategy in Asia Pacific and its arms race with China.  So it has resorted to squeezing its allies in the region to pay more to maintain US troops in their countries.

According to the Status of Forces Agreement between South Korea and the United States, South Korea is obligated to contribute to the cost of maintaining U.S. troops in Korea.  How much it has to pay gets re-negotiated from time to time, and the most recent negotiations just ended in January 2014.  According to the most recent agreement, South Korea will pay 0 million this year, a six per cent increase from last year.  But that’s not all.

Perhaps the most egregious discovery during the negotiations is that U.S. Forces in Korea (USFK) may be hoarding close to tpf=board/list&board_code=11.5 billion of South Korean taxpayer money.  The United States is accused of diverting funds from South Korea’s defense cost contributions specifically earmarked for military construction and misappropriating it to pay for base relocation.  But since base relocation has been delayed multiple times – from 2008 to 2013, then once again to 2016 – the United States is allegedly hoarding the unused funds.  If true, this is a clear violation of the Land Partnership Plan, according to which the United States should foot the bill for relocation of U.S. bases in South Korea.

Public pressure forced the Park Geun-hye administration to raise the issue during its negotiation with the United States, but all it was able to get in the final agreement is a pledge for “increased transparency” on how the USFK spends South Korea’s defense cost contributions.

 

The following is a translation of an article originally published in Korean by Solidarity for Peace and Reunification in Korea ahead of the 9th round of US-ROK talks on the Ninth Special Measures Agreement on defense cost-sharing.

 

High-level talks to ratify the Ninth Special Measures Agreement on defense cost sharing between the United States and South Korea began on December 10, 2013 in Seoul. Both parties say they plan to finalize the talks this time and reach an agreement.  Key remaining issues are the total amount for defense cost sharing, the length of time the agreement will be valid, and revising the cost-sharing system.

The South Korean government says it is placing emphasis on revising the cost-sharing system – i.e. “institutionalizing a system regarding the intended use of funds to minimize the practice of hoarding funds and appropriating them for other projects, and increasing transparency”.

The total amount the United States (USFK) amassed from military construction funds between 2002 and 2008 is 1.1193 trillion won (tpf=board/list&board_code=11.055 billion), and the funds remaining after use (as of March 2013) is 738 billion won (5.5 million).  Interest earned through the amassed funds is estimated at approximately 300 billion won (2.8 million).  In addition, unused funds remaining from the 8th Special Measures Agreement period (2009-2013) is 533.9 billion won (3.4 million).

In other words, the United States is hoarding over 1.571 trillion won (tpf=board/list&board_code=11.482 billion).  This practice has been denounced by South Korean civic organizations, the National Assembly, as well as the media as a violation of the Land Partnership Plan agreement, in which the United States agreed to pay for the cost of U.S. base relocation, and South Korea’s National Finance Act, as well as an infringement of the South Korean National Assembly’s right to budget deliberation.  Keenly aware of public criticism, the South Korean administration is now calling for a revision of the cost-sharing system.

But the administration’s proposal for reform fails to get at the root of the problem.   The appropriation of military construction funds for U.S. base relocation is not merely a problem of poor transparency, but is illegal.  Rather than proposing a plan to prohibit such illegal action, the government simply approaches the problem as one of “transparency”.

The reason why military construction funds have been misappropriated for base relocation is because the South Korean government turns a blind eye.  What the administration needs to do is make clear for the record that the appropriation of military construction funds for other use is a violation of the Land Partnership Plan agreement and that it will no longer be allowed.  But the administration refuses to do so and makes it difficult for South Korean citizens to trust the government’s intention.

 

Putting an End to Illegal Appropriation Requires Eliminating the Military Construction Fund

More fundamentally, to prevent the illegal appropriation of funds, we need to either eliminate the clause regarding the “military construction fund” – which has been shown to be no longer necessary – or drastically reduce it to below 10% of the total cost-sharing amount.  The military construction fund is intended for the construction of USFK’s non-combat facilities.  But since the majority of USFK bases have been relocated (realigned) according to the Land Partnership Plan agreement and the Yongsan Garrison Relocation Plan, the fund is no longer necessary.

Expenses related to upgrading USFK facilities is provided through the “Facilities maintenance fund” (27.4 billion won (.8 million) in 2012) – a sub clause of “Logistics support”.  Therefore the military construction fund should have been either eliminated or drastically reduced to below 10% of the total cost-sharing amount.  But rather than decreasing, the portion of the military construction fund increased.  Between 2001 (immediately prior to the beginning of U.S. base relocations) and 2013, military construction expenses, as a portion of the total cost-sharing amount, jumped from 25% (100.1 billion won ( million)) to 44.3% (385 billion won (2 million)).  The rapid increase in so-called military construction costs corresponds with U.S. appropriation of the military construction fund to cover the cost of U.S. base relocation.

Leaving the clause regarding military construction costs unchanged and merely increasing so-called transparency will not prevent such illegal appropriation of funds.  The South Korean administration announced that it will have a discussion with the United States to prevent misappropriation of funds.  There is no way the United States, whose appropriation of military construction funds for base relocation had already received tacit approval from the South Korean government, would agree to such a discussion.  And even if it does agree, one can’t prevent the misappropriation of funds through a mere “discussion”.

That’s because it’s been agreed that cost assessment for military construction projects is to be done by the USFK.  It’s naive to think that the United States, which has been appropriating military construction funds all this time and has no other use for the funds except for the purpose of base relocation, would easily accommodate South Korea’s position.  Based on the South Korean government’s submissive attitude toward the United States, it’s completely predictable that South Korea will be dragged along in the talks and the United States will refuse to budge.

 

Signs of South Korea’s Retreat Before the Final Talks – Government’s Pledge Exposed as a Lie

Even before the negotiations conclude, it’s clear that the South Korean government, up against a wall of U.S. resistance, is showing signs of retreat.  Going into the third round of talks, the South Korean government had said it would propose to the U.S. side institutionalizing “discussions between the United States and South Korea on the intended use of the cost-sharing amount in order to prevent the appropriation of military construction funds for U.S. base relocation.”  (Yonhap News, August 9, 2013)  Immediately following the sixth round of talks (October 31, 2013), the media reported that the South Korean government “is focusing on revising the system to minimize the practice of hoarding and misappropriating funds from cost-sharing and increasing transparency.”

Going into the ninth round of talks, the government’s position has been reported as “strengthening transparency and responsibility in the use of funds from cost-sharing”.  (The Aju Business, December 19, 2012)  The government’s position has gradually weakened from “preventing misappropriation” to “minimizing misappropriation and improving transparency” to “strengthening transparency and responsibility.”

Immediately after ratifying the 8th Special Measures Agreement on defense cost-sharing, the South Korean government had announced, “Now that in-kind contribution is possible (referring to the agreement in the 8th SMA to provide contributions for military construction in-kind), it will prevent the practice of hoarding cash.”  But it is now clear that this was a complete lie.  Military construction funds were provided in-kind but unused funds continued to increase.

Unused cost-sharing funds amounted to 32.7 billion won (.7 million) in 2009, 85.3 billion won (.09 million) in 2010, 84.4 billion won (.8 million) in 2011, 198 billion won (5.9 million) in 2012, and 133.5 billion won (5.3 million) in 2013.  The reason why the amount of unused funds increased is because the completion of U.S. base relocation was delayed from 2008 to 2013, then again to 2016.

As U.S. base relocation plans became delayed, the use of military construction funds were also put off.  Now there are reports that South Korea and the United states agreed to delay the base relocation plan yet again to 2019 in secret negotiations.  So it seems clear that a large portion of military construction funds from the cost-sharing amount starting 2014 will continue to go unused.

The South Korean citizens have to continue to offer to the United States large sums of money without knowing when it will be used and fully aware that the intended use of the funds is illegitimate.  Why should we endure this?

The South Korean government should see to the elimination of the military construction fund so that our citizens will no longer have to suffer.  In this way, we can subtract the 385 billion won (1 million) in military construction expenditures from the 2013 total cost-sharing amount of 869.5 billion won (5.6 million) and reduce the total down to 480 billion won (0.3 million).