U.S.-ROK Mil-to-Mil Relations and the ROK 2017 Defense Budget

U.S. President Donald Trump will be sending his Secretary of Defense, James “Mad Dog” Mattis to the Republic of Korea (ROK) and Japan to demonstrate his commitment to the region and perhaps to revive Mr. Obama’s failed pivot towards Asia.  This is Secretary Mattis’ first trip abroad, and it is no surprise that the Trump Administration has chosen the Northeast Asia region.  The trip is to further strengthen US-Japan partnership, underscore a robust US-ROK security relationship, and to keep Beijing and Pyongyang in check.  Although the details of the proposed meeting have yet to be released, pundits suspect Mattis to bring up the deployment of U.S. Terminal High-Altitude Area Defense (THAAD), nuclear brinksmanship of North Korea, and defense cost sharing issues when he meets his counterpart, ROK Defense Minister Han, Min-Koo.

Summary of the 2017 ROK Defense Budget

Operations and Maintenance (O&M) and Force Improvement Programs (FIP)

The ROK defense budget contains two main portions: Operations and Maintenance (O&M) and Force Improvement Programs (FIP).  The FIP budget stands at $10.51 billion (a 4.8% increase from 2016) and $24.26 billion for O&M (a 3.6% increase from 2016).  The O&M budget focuses on implementing the administration’s national tasks, such as enhancing the defense readiness posture along with improving welfare and living conditions for soldiers.  Funds for new defense procurements along with research and development (R&D) fall under FIP.  The FIP budget focuses on (1) Kill-chain and Korean Air and Missile Defense (KAMD) capabilities to counter North Korea’s asymmetric threats and (2) Defense Reform requirements.  It also increases funds for (3) Self-reliant Defense Capacity and (4) Defense Research and Development (R&D).  This relatively high increase rate of the FIP budget at a time of political gridlock and fiscal austerity is required for the ROK to meet its significant fiscal obligations for major new defense programs it committed to between 2013-2015.

2017 ROK Defense Budget Analysis

The Ministry of Strategy and Finance (MOSF) rejected the last-minute budget proposal generated from the trilateral arrangement between the Ruling Party-MND-Blue House that suggested a defense budget increase of $620.69 million.  However, the NA redirected approximately $93.10 million from O&M into the FIP category without revising the $34.77 billion defense budget originally proposed by MOSF.  The budget priorities were given to the TAURUS Long range air-ground missiles ($50.69 million increase), KF-X ($32.75 million increase), and Ballistic Missile Defense Early Warning Radar ($9.65 million increase).  Funding for KF-16 Fighter upgrades in 2017, $94.22 million, will be 53% above the MND’s request.  Lockheed Martin Corp will run the upgrade program for 132x F-16s, which includes installation of Northrop Grumman APG-83 (AESA) radars.  The U.S. Air Force has emphasized the importance of upgrades due to ROK aircraft lacking systems such as data links and advanced radars, inhibiting their ability to operate optimally with the U.S. Air Force.

The November 21st, 2016, signing of the system upgrade contract with Lockheed Martin provided strong justification for the last minute NA budget increase.  The intention to make up for the four-year program delay caused by the original BAE contract cancellation in 2013 provided additional justification for the budget increase as well.  The budget for KEPD-350 Taurus missiles, made by MBDA and Saab Dynamics, is $239.66 million, about 70% more than requested.  The Taurus is valued for its ability to penetrate hardened targets such as command bunkers and tunnels in which North Korean ballistic missiles may be hidden.  The ROKG plans to deploy Taurus missiles combined with GPS receivers and the flight termination system within the ROK Air Force.  If armed with the Taurus missile, the ROKAF’s F-15K Slam Eagle could strike Pyongyang while flying over Daejeon, 164 kilometers south of Seoul.

North Korea’s 2016 January and September nuclear tests have encouraged the ROK to spend more on defending against or deterring Pyongyang’s asymmetric threat.  The NA allocated $25.86 million for a ballistic-missile early warning radar, up from the requested $7.5 million.  Additionally, the budget emphasizes more spending in the Korea Massive Punishment and Retaliation and KAMD categories, without providing much detail on specific related programs.  MND had requested seed money for the initiation of 32 new programs, but MOSF approved funding for only 15 of these.  However, the NA subsequently reinstated project initiation funds for three new programs to include the FFX Ulsan Class (Frigate) Batch-III Combat System ($3.71 million).  The Ulsan Class Batch-II production is still in progress ($241.81 million).  The ROK Navy has not finalized the detailed fielding plan for the FFX Batch-III.  The earlier production of the Ulsan Class Frigates was awarded to Hyundai Heavy Industries.  Nonetheless, the decision to approve the development and production of the FFX Ulsan Class Batch-III is considered to be a salvation program to rescue the ailing Daewoo Shipbuilding and Marine Engineering, which has been insolvent in its finances recently.  The ROK continues to increase investment in defense R&D to strengthen its defense industrial base and technological capacity.  The 2017 R&D budget stands at $2.0 billion, an 18.8% increase from 2016, which accounts for 6.9% of the total defense budget.  The ROK aims to increase R&D investments to an 8.8% share of the defense budget by 2020.

ROK Defense Budget Allocation Trend

Since the turn of the century, the ROKG has kept its defense spending at 14-15% of its total national budget, which accounts for 2.4-2.7% of the GDP (gross domestic product).  With the decline in the ROK’s real GDP increase rate along with the need for economic growth promotion and welfare expansion, a sharp increase in defense spending is highly unlikely.  This is evidenced by the 2015-2019 National Financial Management Plan which calls for reduced 2.8% annual increases in defense spending.  In general, North Korean and regional threats, economic growth, and the incumbent administration’s priorities have determined the size of the ROK’s defense spending.  US-ROK alliance factors, such as the timing of wartime Operational Control transfer, remain a strong influence as well.  Although welfare and economic goals have posed constant challenges to increasing defense spending for the government, the incumbent administration’s policy focus has played a significant role in defense budget hikes.

ROK Defense Budget Allocation Trend

The table below shows the differences between the Roh administration (2003-2008), which stressed building a self-reliant national defense and the Lee administration (2008-2013), which gave priority to the economy over national defense.  While one of President Park Geun-Hye’s national objectives is to build a strong national security and defense posture, increased public scrutiny of the defense budget has led the ROKG to closely evaluate the feasibility and readiness of new acquisition programs.  The Park administration’s defense budget allocations do not represent a significant departure from the previous administration.

Annual Increase Rate of Defense Spending Since 2001

Conclusion and Comparison of the ROK Defense Budget with Other Nations

The ROK has grown into a major regional and global economic power.  Nonetheless, the perception exists that its defense share of GDP is relatively low when compared with other nations in conflict or with disputed areas.  In actuality, the ROK dedicates a significant amount to its defense budget on a yearly basis and spends a higher percentage of its GDP on defense than our NATO allies.  Regarding the amount spent in 2015 for defense, the ROK ranked 10th in the world based on figures compiled by the Stockholm International Peace Research Institute 2016 Fact Sheet (for 2015).

Comparison of the ROK Defense Budget with Other Nations

*Total defense budgeted in billions of Korean Won (KRW), figures calculated at an exchange rate of USD 1 = KRW 1,160).

Christopher Lee is an active duty Major in the U.S. Army. He holds a B.S. from West Point and an M.A. from Columbia University. He is currently pursuing his Ph.D. in International Cooperation from Yonsei University. He has served for eight years as an intelligence officer, and is currently serving as a Foreign Area Officer for the Northeast Asia region. Chris can be reached via Twitter @chrislee733.