South Korea signed a deal with the United States on Sunday to raise its contribution to the upkeep of American troops here by 8.2 percent this year.
Top negotiators of the two sides inked the contract in Seoul, under which South Korea will pay 1.03 trillion won (US$890 million) for the operation of the 28,500-strong U.S. Forces Korea (USFK), up from 960 billion won in 2018.
It was formally called a "preliminary signing," as domestic procedures, including parliamentary ratification in South Korea, are required. The U.S. government does not need congressional approval for the accord.
South Korea's defense budgets this year have hiked 8.2 percent from 2018, but inflation has remained at 1.5 percent.
The deal put an end to monthslong disputes on money between the allies and cleared a hurdle for coordination ahead of a second summit between Pyongyang and Washington to be held in Hanoi on Feb. 27-28.
Foreign Minister Kang Kyung-wha met with Timothy Betts, the top U.S. delegate to the Special Measures Agreement (SMA) talks, minutes before the signing ceremony.
Kang said the latest SMA negotiations were a "very long process but ultimately a very successful process."
"I think at this point, we were able to close the gap on the total amount of the number," she told the U.S. official. "We have a number of domestic steps that we now need to go through."
Betts emphasized the importance of the alliance for peace and stability in the region.
"The SMA is only a small part of that. But it's an important part, and we are very pleased that our consultations resulted in an agreement," he added.
In the SMA talks, the U.S. reaffirmed that there will be no change in U.S. troop levels in South Korea, the Ministry of Foreign Affairs said in a statement.
Betts, deputy assistant secretary of state for plans, programs and operations, had 10 rounds of face-to-face negotiations with Chang Won-sam, a veteran South Korean diplomat, throughout last year. But they failed to strike a deal on how much Seoul would contribute. The previous agreement signed in 2014 expired at the end of 2018.
The two sides continued negotiations in the new year and reached a deal on the one-year contract.
It's open to an extension in case of the allies' agreement, the ministry said.
South Korea wanted it to be valid for three to five years, but the Trump administration pushed for a one-year deal, saying a comprehensive review of defense cost-sharing with allies is still underway, according to a diplomatic source.
Seoul and Washington also agreed to continue joint efforts to enhance the transparency and responsibility of splitting the USFK cost.
They plan to launch a working group for continued discussions on systemic reform amid criticism about a lack of detailed data and other information on the USFK's expenditures and standards of calculation.
South Korea has largely provided money in a lump-sum method as the U.S. is apparently loath to a "program-project based cost" settlement system.
Under the new accord, South Korea will expand its contribution in the form of goods or services, instead of money, for construction and logistical support.
At the start of the talks in March last year, the U.S. demanded South Korea pay around 1.4 trillion won a year and later offered 1.1 trillion won, a ministry official told reporters on background.
The U.S. had proposed that South Korea cover the "operational support" costs, which include budgets for the deployment of so-called strategic assets to Korea such as aircraft carriers, nuclear submarines and strategic bombers, the official added.
But Washington retracted the offer as Seoul remained firm on its position that it's outside the purpose of the SMA.
South Korea has shared the financial burden for USFK since the early 1990s. The funds are used to cover the wages of South Korean workers at USFK bases, construction and logistical support.
In a report released last May, the Korea Institute for Defense Analyses (KIDA), a state-funded think tank, said South Korea spent more than 5 trillion won in 2015 alone for the direct contribution to the USFK and provision of land and facilities, as well as tax benefits.
South Korea is also a major buyer of U.S. weapon systems.
A group of progressive activists staged a rally Sunday in front of the foreign ministry building against the compromise, claiming it would increase Seoul's burden excessively.
The Solidarity for Peace and Reunification of Korea pointed out that South Korea's contribution will increase by more than 78 billion won, far more than the 50.5 billion won in 2015 following the previous deal.
It accused the liberal Moon Jae-in administration of having lost a chance to address a number of problems in sharing the defense cost, such as the lack of transparency in setting the appropriate amount of Seoul's share and the USFK's use of the funds.