S.Korea, US agree on defense-cost sharing

SEOUL - South Korea and the United States reached a final agreement to share annual defense costs for the 28, 500 US troops stationed here over the next five years, according to sources with South Korean Foreign Ministry.

Delegations from both sides held the ninth round of negotiations for the five-year Special Measures Agreement (SMA) in Seoul, and finally succeeded in narrowing differences on Saturday over how much South Korea should pay for the presence of the US Forces Korea (USFK), the ministry said in a press release on its website on Sunday.

South Korea agreed to pay 920 billion won (870 million US dollars) in 2014 for the USFK presence costs, up 5.8 percent from last year's 869.5 billion won. The prior SMA expired at the end of last year.

The agreed figure seemed in favor of South Korea as Seoul had offered to keep its payment share at 869.5 billion won, while Washington had demanded a hike to about 1 trillion won.

The agreement will be effective over the next five years through 2018. An annual hike in the defense costs will be calculated on multiplying the prior year's figure by the headline inflation two years earlier, but the ceiling on the annual hike rate was set at 4 percent.

The United States faced growing financial burden to station its 28,500-strong forces in South Korea as Washington was hit hard by the partial government shutdown amid lackluster economic growth.

US President Barack Obama has sought the rebalancing towards the Asia-Pacific, but Washing asked its Asian allies such as South Korea and Japan to contribute more to its policy shift.

To improve transparency of the cost expenditure, the two allies agreed to strengthen the fine-turning in advance of the actual spending, while reporting to lawmakers of South Korea on the budgeting and settling of the costs.

South Korea and the United States signed their first SMA in 1991. The latest deal was reached in 2008, with Seoul agreeing to pay 4.07 trillion won for the next five years through 2013.