2005/2006 REPORT TO CONGRESS ON ROK CONTRIBUTIONS

UNCLAS SEOUL 000410 SIPDIS SIPDIS PLEASE PASS TO PM/SNA AND OSD/PA&E DOD FOR OASD//ISA/EUR// DOD FOR OASD//ISA/AP// DOD FOR OASD//ISA/NP// DOD FOR OASD//ISA/NESA// DOD FOR OASD//ISA/BTF// E.O. 12958: N/A TAGS: MCAP PREL PGOV PARM MARR ECON KS SUBJECT: 2005/2006 REPORT TO CONGRESS ON ROK CONTRIBUTIONS TO THE COMMON DEFENSE REF: STATE 223383 SUMMARY -------------- ¶1. (U) The Republic of Korea made significant contributions to the common defense of the Korean peninsula in 2004 and ¶2005. The ROKG demonstrated a strong commitment to the U.S.-ROK alliance, working closely with the U.S. to address the DPRK nuclear issue and making important contributions to the war on terror and coalition efforts in Afghanistan and Iraq. Most notably, in 2004, the ROK deployed approximately 3,000 troops to Iraq, becoming the third largest foreign troop contingent. In December 2005, the ROK National Assembly renewed the dispatch of ROK troops to Iraq for another year. Under the Security Policy Initiative (SPI), and its predecessor the Future of the Alliance (FOTA) Policy Initiative, the U.S. and the ROK undertook a number of important projects to enhance the combined deterrent capability and made solid progress on realignment and modernization of U.S. Forces Korea and the alliance, including base relocation and mission transfers. In another positive development, the ROK Ministry of Defense (MND) unveiled a comprehensive plan to reform its military from the top down in the next 15 years. However, the ROK Special Measures Agreement contribution for 2005 decreased by nine percent from the previous year. END SUMMARY. USFK REALIGNMENT -------------- ¶2. (U) In 2004 and 2005, the two governments continued to implement a number of initiatives to realign U.S. Forces Korea (USFK) and modernize the alliance. These important measures include troop reduction, base consolidation, and mission transfers. Total U.S. troops on the peninsula will be reduced by 12,500 to 25,000 by the end of 2008. In the most significant realignment in 50 years, USFK will close dozens of facilities and consolidate its presence into two major hubs-- one in the Osan and Pyongtaek region approximately 40 miles south of Seoul and another in the Busan-Daegu region in the southeastern part of the peninsula. During this process, approximately two thirds of the land currently occupied by USFK will be returned to the ROK. Also during 2005, the ROK military assumed responsibility for several significant military missions previously the responsibility of USFK. Plans also are underway to jointly identify additional missions for transfer to the ROK military. SUPPORT FOR OEF/OIF, PKO -------------- ¶3. (U) The ROK currently has over 3,500 military personnel deployed to 14 locations in 12 countries in support of the Global War on Terror and ongoing Peace Keeping Operations. In October 2004, the ROKG dispatched approximately 3,000 troops (Zaytun Unit) to Irbil in support of Operation Iraqi Freedom. That number reached 3,300 by the end of 2005. The ROK also has a brigade in Swarashi, located 30 km from the Irbil Airport, to help rebuild nearby rural areas. The South Korean Air Force 58th Airlift Group (173 personnel) also operates C-130's from Kuwait, in support of the Zaytun unit. At the end of 2005, the South Korean National Assembly voted to extend its troop deployment for one year, with a plan for a phased reduction of troops. The ROK also has been a willing partner in Operation Enduring Freedom, and has dispatched five liaison officers to CENTCOM, three to Afghanistan and one to Djibouti. In addition, one ROK medical support unit, consisting of 58 military personnel (14 officers and 44 enlisted),has been station in Bagram since February 2002 to assist in the treatment of allied personnel, Afghan trainees, and civilian patients. The ROK has also dispatched an engineering construction battalion, consisting of 14 officers and 133 enlisted troops, in February 2003 to take responsibilities for runway and facility construction. ¶4. (U) The ROK continues to support Peace Keeping Operations (PKO) around the globe. A medical support team of 20 military personnel, 18 officers and two enlisted, has been in the Western Sahara since August 2004. Nine ROK personnel have been in Islamabad, Pakistan since October 1994 as part of the India-Pakistan Armistice observer group. Under the authority of the UN Observer Missions, the ROK deployed seven military personnel to Georgia in November 1994, two to Liberia in October 1993, two to Burundi in September 1994, and eight personnel were recently sent to Sudan in November ¶2005. In addition, under UN authority, the ROK dispatched one person to Kabul in July 2003. In December 2005, the ROK committed to sending two observers to the Initial Planning Conference (IPC) for the Khaan Quest IV PKO training exercise. However, the ROK is still undecided about its full participation in the exercise. ¶5. (U) In the area of humanitarian relief, the ROK has quickly responded to international needs in the face of natural disasters. During 2005, the ROK contributed almost USD 45 million in cash support of Hurricane Katrina relief efforts, the Pakistan Earthquake Relief Operation, and the Tsunami Relief Operations. SIPDIS ROK DEFENSE REFORM -------------- ¶6. (U) In September 2005, the ROKG announced a plan to drastically transform and modernize its military by 2020, including an initiative to downsize its total troop level to 500,000 from the current 681,000. In conjunction with the reductions, the plan calls for dramatically streamlining the military's combat organization, with numerous units being consolidated or eliminated. To maintain combat effectiveness, the ROKG plans for significant modernization of its military's combat weaponry and support systems. ¶7. (U) The reform plan calls for annual increases of 11 percent in the defense budget until 2015. From 2016 to 2020, the military budget would then be increased 7 percent annually. However, it is not clear whether the National Assembly would appropriate sufficient funds for the major undertaking. For 2006, NA allotted 22.5 trillion won (USD 22.84 billion) for defense in the new year, representing a 6.7 percent increase over the 2005 defense spending. Moreover, spending on The Force Investment Program, which includes Force Improvement, Research and Development, and support activities, was only raised 2.7 percent from the previous year (to 7.4 trillion won (USD 7.51 billion)). The bulk of the 6.7 percent increase was in Operations and Maintenance (O&M) activities, which as a category increased 8.8 percent (to 15 trillion won (USD 15.23 billion)). Expenses for salary, pension, meals and clothing accounts for over 70 percent of the O&M budget, but the majority of the increase was centered around quality-of-life-expenditures such as housing improvements and personnel welfare programs. O&M makes up approximately two-thirds of the defense budget. DEVELOPMENTS IN DEFENSE PROCUREMENT -------------- ¶8. (U) The United States remains the principal offshore source of defense articles and services for the ROK. However, U.S. market share is shrinking as we lose influence over ROK purchases. In the past decade, 78 percent of Korea's offshore procurement came from the United States. In 2004 the share shrank to approximately 70 percent. That said, in FY2005 Korea's FMS purchases were the third largest in the region, behind Japan and Taiwan, and sixth worldwide, with an open FMS case value of over USD 10.01 billion as of December 2005. Korea continues to view Foreign Military Sales (FMS) as an important method for acquiring U.S.- origin defense articles and services. In FY2005, over 81 percent of all U.S.- origin defense articles and services were acquired through FMS. Since 1996, there has only been one year in which the FMS share of the total U.S. sales to Korea was less than 50 percent (in 2002 when Korea purchased the F-15K through DCS). Although U.S.-ROK interoperability is still considered, cost, offsets, and technology transfers have become increasingly important considerations. ¶9. (U) The ROK procurement strategy is to promote indigenous production first and buy offshore only when ROK production is prohibitively expensive or technically unfeasible. Government agencies and companies from both nations continue close coordination to mutually develop defense related systems. One recent example is the ROK's interest in a cooperative venture with the U.S. Navy to develop the LOGIR missile. The ROK proposed to invest USD 5 million, and several man-years into the project. Other discussions currently underway include proposed cooperation on Airborne Warning Surveillance System (AWSS) and Broad Area Maritime Surveillance (BAMS). ¶10. (U) Another example of efforts to improve interoperability with the U.S. is the ROK's enthusiastic participation in U.S. training programs. There are currently numerous programs in place whereby military officers from both the ROK and U.S. attend training and professional schools hosted by the counterpart nation. For example, the ROK has a total of 61 FMS students studying in military schools in the U.S. There are also four ROK military officers studying in the U.S. under the Professional Military Education (PME) exchange program. COST SHARING -------------- ¶11. (U) FY 2004 and FY 2005 USFK Cost Sharing Report Table 1 summarizes USFK Non-Personnel Stationing Costs (NPSC). Total NPSC are the criteria used to compute the ROK cost sharing contributions Table 1 - USFK NPSC Summary (FY 2004 & 2005) All Data in billions of Korean Won CATEGORY FY04 FY05 -------------- -------------- -------------- US NON-PERSONNEL STATIONING COSTS* Total O&M (w/civ pay) 1,579.8 1,483.9 Ttl Family Housing Operation 53.1 49.3 Ttl Family Housing Construction 5.1 10.3 Total MILCON 140.8 82.4 USFK Direct Logistics Costs 179.3 167.8 USFK Direct KN Personnel Costs 130.0 171.7 -------------- -------------- USFK SUBTOTAL 2,088.1 1,965.4 ROK Direct Cost Sharing Contribution 789.4 713.2 ROK Indirect Cost Sharing Contribution 657.3 568.0 -------------- -------------- ROK Subtotal 1,446.7 1,281.2 -------------- -------------- TOTAL NPSC COSTS 3,534.8 3,246.6 -------------- -------------- * USFK NPSC costs computed at average expenditure rates of 1,050 Won:1 Dollar for 2004 and 1,000:1 for 2005. Table 1 report covers ROKG cost-sharing contributions for the periods 2004 and 2005. These two years fell into the provisions of two different SMA's, one covering the 2002-2004 period, and another the 2005-2006 period. The 2004 ROK SMA contribution was 747.7 billion Won. This amount, while short of Congressional and SECDEF mandate, constituted the highest level of ROKG cost-sharing to date. However, the ROK SMA contribution for 2005 was 680.4 billion Won, representing a 9 percent decrease from 2004. Table 2 and 3 show the summary of ROK's direct and indirect cost sharing contributions. Table 2 - ROK Direct Cost Sharing Contributions Summary In billions of Korean Won CATEGORY CASH In-Kind Total Remarks 2004 2005 2004 2005 2004 2005 -------------- -------------- Labor (KN) 324.1 287.4 324.1 287.4 1 ROKFC 224.7 236.9 11.8 12.5 236.5 249.4 2 CDIP 87.1 43.0 87.1 43.0 3 Logistics 100.0 100.6 100.0 100.6 4 Rents 12.0 1.4 12.0 1.4 5 KATUSA 9.4 8.8 9.4 8.8 6 Relocation Construction 20.4 22.6 20.4 22.6 7 Vicinity Improvements 0.0 0.0 0.0 0.0 8 -------------- -------------- TOTAL 590.6 557.1 198.9 156.1 789.4 713.2 Notes: ¶1. Labor (Korean National) - SMA category; the ROKG provided three equal cash deposits in April, June, and August. ¶2. Republic of Korea Funded Construction - SMA category; 95 percent cash, 5 percent in-kind ¶3. Combined Defense Improvement Projects - SMA category ¶4. Logistics Cost Sharing - SMA category; in-kind projects/services provided by ROK MND ¶5. The cost of leases and rents of privately owned land and facilities occupied or used by U.S.; ROK MND budgeted and paid to applicable landowners ¶6. Korean Augmentees to the U.S. Army; KATUSA salaries budgeted by ROK MND. ¶7. Costs of the functional transfer of a structure and function from a facility being released by U.S. forces to a facility being retained ¶8. Improvements to the vicinity of facilities and areas occupied by U.S. forces, e.g., projects aimed at disaster prevention and noise abatement Table 3 - ROK Indirect Cost Sharing Contribution Summary In billions of Korean Won CATEGORY 2004 2005 REMARKS -------------- -------------- -------------- -------------- Foregone Rents 512.4 430.0 1 Tax Exemptions 144.9 138.0 2 -------------- TOTAL 675.3 568.0 Notes: ¶1. Estimated; foregone rents include leases and fair-market value of rent of government-owned land used by U.S. forces ¶2. Estimated; tax exemptions include tax concessions and customs duties that are waived by the host nation COMMENT: The Republic of Korea (ROK) total 2004 cost sharing contribution of 1.45 trillion Won paid for approximately 40.9 percent of USFK's Non-Personnel Stationing Costs (NPSC) of 3.53 trillion Won. The ROK's total 2005 cost sharing contribution of 1.28 trillion WON paid for approximately 39.5 percent of USFK's NPSC of 3.25 trillion Won. END COMMENT. CONTINGENCY OPERATIONS, MILITARY ASSISTANCE, HUMANITARIAN ASSISTANCE -------------- ¶A. Recent Contingency Operations: -------------- NONE ¶B. Military Assistance (as provided by ROK MOFAT): -------------- In number of personnel Iraq - a. Zaytun Unit 3,265 b. MNF-I 14 Afghanistan - a. 100th Construction Battalion 147 b. 924th Medical Support Group 58 c. CJTF-76 2 d. CFC-A 1 CENTCOMM - 5 CJTF-HOA - 1 United Nations Activities a. Sub-Sahara Medical Support Team 20 b. India-Pakistan Armistice Observer 9 c. Georgia Observer Group 7 d. Liberia Observer Group 2 e. UN-Afghan Group 1 f. Brundi Observer Group 2 ¶C. Humanitarian Relief Operations: -------------- Pakistan Earthquake Relief Operation - USD 4.2 million Hurricane Katrina - USD 30 million Tsunami Relief Operations - USD 20 million ¶D. Capacity Building: -------------- ¶12. (U) The ROK has been active in educating and training Iraqis and Afghanis on law enforcement, judicial assistance, and public administration. The ROK invited 475 Iraqis to educate them on public administration and development and dispatched 10 ROK personnel to teach irrigation and sewage treatment methods. Two ROK personnel have been dispatched to Afghanistan, and 60 Afghans were invited to Korea for law enforcement training. The ROK also hosts an unspecified number of officials from sundry African countries to teach economic policies. ¶E. Counterproliferation Contributions: -------------- ¶13. (U) ROK continued to be a strong supporter of USG nonproliferation efforts and participated actively in international nonoproliferation reforms. The ROK was a key participant in the Six Party process on the North Korean nuclear problem, and recently decided to participate as an observer in some aspects of the Proliferation Security Initiative (PSI). The ROK also contributed USD 90 Million and USD 28 Million, respectively in 2004 and 2005 to the Korea Energy Development Organization (KEDO). KEDO is now defunct, the ROK, in addition to Japan, the U.S., and the EU, are finalizing plans to settle all outstanding obligations by the organization. ROK DEFENSE BUDGET -------------- ¶14. (U) ROK Defense Expenditures for FY2004 in billion Won units: CLASSIFICATION FY2004 Percentage -------------- -------------- -------------- Operation & Maintenance 12,648 66.8 Personnel Expenses 7,988 42.2 -------------- ¶1. Wages/Pension 6,655 35.1 ¶2. Other 1,333 7.0 Operational Expenses 4,660 24.6 -------------- ¶1. Meals/Clothes 1,310 6.9 ¶2. Troop Activities 475 2.5 ¶3. Education & Training 168 0.9 ¶4. Equipment & Facility 779 4.1 Maintenance ¶5. Resource Procurement 100 0.5 ¶6. Military Construction 818 4.3 ¶7. Reserve Forces 71 0.4 ¶8. Research/Subsidiary 159 0.8 Organization ¶9. USFK Support 334 1.8 ¶10. Basic Project Expenses 428 2.3 ¶11. Other 18 0.1 Force Investment 6,293 33.2 -------------- Force Improvement 3,376 17.8 Research & Development 651 3.4 Support Activities 2,267 12.0 Total 18,941 100.0 ROK Defense Budget under Medium-Term Expenditure Framework (MTEF) for 2005-2008 in trillion Won units FY2005 FY2006 FY2007 FY2008 Growth -------------- -------------- -------------- -------------- -------------- Operations & Maintenance 13,738 14,861 15,560 16,711 7.2 -------------- Personnel Expenses 8,595 9,032 9,582 10,165 6.2 Operational Expenses 5,143 5,828 5,978 6,546 8.9 Force Investment 7,085 7,849 9,345 11,095 15.2 -------------- Force Improvement 4,034 4,347 5,033 6,548 18.3 Research & Development 754 895 1,022 1,114 14.9 Support Activities 2,298 2,607 3,290 3,432 11.3 Total 20,823 22,709 24,905 27,806 10.1 -------------- ¶15. (U) The Embassy point of contact (POC) for this report is PolMilOff Hyun S, Kim, TEL 82-2-397-4215, e-mail: kimhs@state.sgov.gov ¶16. (U) This cable was coordinated with USFK. VERSHBOW