The Asia-Pacific Journal | Japan Focus Volume 8 | Issue 13 | Number 2 | Article ID 3333 | Mar 29, 2010

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Military Spending and the Arms Race on the Korean Peninsula　朝鮮半島における軍事支出と軍拡競争

Chung-in Moon, Sangkeun Lee

Military Spending and the Arms Race onthe Korean Peninsula1

Chung-in Moon and Sangkeun Lee

The Korean War technically ended in 1953 withthe signing of an armistice agreement. But notonly has there been no peace treaty, but inter-Korean military confrontation and heightenedtension have continued, often resulting in overtmilitary clashes. Defying the new securityarchitecture followed by the demise of the ColdWar system, the Korean peninsula still remainsas its last relic without any clear signs ofconflict termination. Suspicion and mutualdistrust emanating from the protracted conflicthave further accelerated fierce conventionalarms races on the Korean peninsula. Takingadvantage of its economic growth andindustrial maturity, South Korea has beenmaintaining an edge over the North in thisarms race. Meanwhile, North Korea hasresponded to the widening disparity inconventional forces by venturing to play thenuclear weapons card. As a result, peace andsecurity on the Korean peninsula have becomeall the more precarious and uncertain. Againstthis backdrop, the article examines the patternsof military spending of the two Koreas,compares their conventional militarycapabilities, and traces implications forweapons of mass destruction on the Koreanpeninsula. The article concludes with somepolicy suggestions for denuclearization andpeace-building in Korea.

Patterns of Defense Spending in TwoKoreas: South Korea

According to Table 1, South Korea spentmeagerly on the military during the decadefollowing the Korean War (1950-1953). From1953 to 1965, its annual average defensebudget was less than $150 million and the ratioof defense spending to gross national product(GNP) decreased from an annual average of 7percent in the 1950s to 4 percent in the 1960s.Despite the bitter experience of the KoreanWar, economic backwardness prevented theSouth Korean government from allocating alarger portion of public expenditure to the

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defense sector. During this period, a greatportion of defense expenditures was financedthrough a counter-fund created through thesupply of Korean goods and services to theAmerican military based in South Korea.2

Table 1. Defense Spending in South Koreaby Year*

Sources: Various Issues of the Defense WhitePaper (ROK Ministry of National Defense); ROK

Ministry of National Defense, The History ofNational Defense, vol. 4; Hamm, Arming the

Two Koreas; The Bank of Korea.

* Current price. Data on percent of GDP after1981 were drawn from Defense White Paper

(2009), p. 358. Data prior to 1980 arecalculated from nominal GDP. As to estimates

of foreign exchange rate (1960-1989), see Taik-young Hamm, The Political Economy ofNational Security (in Korean) (Seoul:

Beobmunsa, 1998), pp. 206-207. Rate ofincrease refers to previous year.

During this period, U.S. military assistance wasvital given the overall economic conditions, asit was virtually inconceivable for the SouthKorean government to maintain its 600,000forces independently. For example, U.S.military assistance reached $356 million in1958, almost three times South Korea’s totaldefense budget of $143 million.3 South Korearelied heavily on the United States for theacquisition of weapons, equipment, and

logistics.4 Only in 1969 did South Korea almostdouble its defense spending to $269 million,reaching $374 million in 1971. Nevertheless,defense spending as a share of GNP remainedat 4 to 4.5 percent from 1968 to 1971. This canbe partly attributed to a post-Korean Wareconomic boom followed by the adoption of anexport-led growth strategy in the mid-1960s.

A major transformation in defense spendingoccurred in the mid-1970s. Alarmed by NorthKorea’s military provocation, combined withthe waning American security commitmentunder the Nixon Doctrine, President ParkChung-hee decided to pursue a self-reliantdefense posture. Defense industrializationbecame the top policy priority, and the size ofthe defense budget rose 51.2 percent, from$461 million in 1973 to $697 million in 1974.The annual rate of increase in defensespending reached 59 percent in 1976, by thistime accounting for almost 6 percent of GNP asa result of defense industrialization and thedefense burden-sharing formula with theUnited States. The trend continued until 1983.As part of the effort to modernize and upgradeits weapons and equipment, the Park Chung-hee government initiated and implemented thefirst phase of the armed force modernizationproject (Yulgok Project) by imposing a newdefense tax. Almost 30 percent of the defensebudget was allocated to the Yulgok project,amounting to a cumulative total of 3.14 trillionwon during 1974-1982.

Although it continued to allocate a significantportion of the defense budget (5.32 trillionwon) for the second phase of armed forcemodernization,5 the succeeding Chun Doo-hwangovernment encountered a dilemma. On theone hand, his government was obliged to spend6 percent of GNP in order to comply with thedefense burden sharing formula with theUnited States, but on the other hand, it wasunder immense pressure from the IMF toimplement macroeconomic stabilizationthrough tight fiscal and monetary policy. The

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Chun government began to trim its defensebudget by adhering to the IMF’s call formacroeconomic stabilization. The defensebudget share of GNP dropped from 5.79percent in 1983 to 4.5 percent in 1984, anddefense spending was cut from $4.8 billion in1983 to $4.1 billion in 1984 (see Table 1).

The democratic opening and the advent of thepost-cold war era further facilitated adownsizing of the defense budget. Althoughdefense spending rose incrementally inabsolute terms, its relative share in GNP andgovernment expenditure began to fall sharply.The defense-budget-to-GNP ratio fell from 3.9percent in 1989 to 3.18 percent in 1993 and tothe 2 percent level under the Kim Young-samgovernment (1993-1997), while its share oftotal government expenditures decreased from27.3 percent in 1989 to 24.2 percent in 1993and 20.8 percent in 1996. National securitycould no longer be justified as a deus exmachina under the post-cold war template, anddemocratization created greater public demandfor welfare and education. Noteworthy is asharp drop in absolute defense spending from$14.5 billion in 1997 to $9.87 billion in 1998,corresponding to a fall in the share ofgovernment expenditures from 18.3 percent in1998 to 16.4 percent in 1999. The immediatecause of the downturn was the acute financialcrisis in 1997-98, which necessitated a severefiscal contraction as well as the diversion ofgovernment budget to the welfare sector inorder to expand the social safety net for victimsof the crisis. President Kim Dae-jung’sassertive pursuit of engagement with NorthKorea and the new zeitgeist for peaceful co-existence following the first Korean summit in2000 further eroded public support for defense-sector spending.6

However, the progressive Roh Moo-hyungovernment, which championed a self-reliantdefense posture, reversed this trend. PresidentRoh stated in a meeting with mil itarycommanders on June 21, 2003: “It takes money

to seek a self-reliant national defense. I willrestore defense budget to the level prior to thefinancial crisis.”7 Subsequently, the Rohgovernment increased the share of defensespending in GDP from 2.42 percent in 2003 to2.72 percent in 2007. The share of defensespending in total government expenditures alsoincreased from 14.8 percent in 2003 to 15.5percent in 2007, which were still much lowerthan in many earlier years, especially in termsof share of GDP. The absolute size of thedefense budget rose by 79.4 percent in dollarterms during this period. The move can beattributed to President Roh’s efforts to reducedependence on the United States in criticalweapons and equipment, as well as to preparefor strategic uncertainty in the region goingbeyond North Korea. Roh was well aware thatwhen Korea was weak, it fell prey to big- powerconflicts against its will, as evidenced by theSino-Japanese War in 1894 and the Russo-Japanese War in 1904. In light of the NorthKorean nuclear problem, the cross-straittension, territorial disputes, and great powerrivalry, he believed that such a historicalpattern could recur and that South Koreashould prepare for such strategic uncertainty.8

Ironically, the pattern of defense spendingunder the Lee Myung-bak government, whichwon the presidential election on a conservativeplatform emphasizing a strong nationaldefense, has been quite different. Although theactual amount of defense spending rose slightlyas part of a fiscal stimulus package to copewith the global financial crisis, the relativeshare of total government spending wasradically reduced to 10.8 percent in 2009. TheLee government has also announced plans tocut the estimated budget for the DefenseReform 2020 from the original budget of 621.3trillion won to 599.3 trillion won.9

Patterns of Defense Spending in TwoKoreas: North Korea

A close comparison with North Korea in the

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period immediately following the Korean War isdifficult since statistics on North Korea’sdefense spending were difficult to come byuntil the early 1960s. The North did not clarifythe appropriation category of defense-relatedspending. It was only after First Vice PremierKim Il made an open report to the 5th KoreaWorkers’ Party Congress on defense spendingin 1970 that statistical analysis became moremeaningful. As Table 2 demonstrates, anestimated average of 19 percent of governmentspending was allocated to the defense sectorduring 1960-1966, rising to 30 percent in 1967and continuing upward until 1971. Two factorscan account for the trend. First, the worseningrelationship with China and the Soviet Uniondrove the North Korean leadership to attempt amore self-reliant defense build-up. The SovietUnion drastically reduced its militaryassistance to North Korea as the latter favoredChina during the Sino-Soviet dispute in theearly 1960s. But Pyongyang’s relationship withBeijing also deteriorated because of theCultural Revolution. In this context, NorthKorea began to spend more on defense for arapid military build-up.10 Second, North Korea’smilitary adventurism was another factor. GivenNorth Korea’s increased military provocationsduring this period―the commando raid on theBlue House, the presidential residence, in1968; the seizure of US naval ship Pueblo; theheightened mil itary tension over thedemilitarized zone―the defense buildup couldhave been closely associated with its offensivemilitary posture toward the South.

But the ratio of defense to governmentspending proceeded to fall beginning in 1972,decreasing from 31.1 percent in 1971 to 17percent in 1972. The trend continued throughthe 1980s, reaching a floor of 11.4 percent in1994. The advent of détente and the July 4thJoint Declaration of 1972 could have facilitatedthe downward spiral, likely furthered by theend of the Cold War in 1990. However, thedownsizing also appears to dovetail with overalleconomic performance, as worsening economic

conditions made it difficult to maintain highlevels of defense spending. The collapse of thesocialist bloc and subsequent suspension of itseconomic and military assistance dealt anadditional blow to the North.

Table 2: North Korea’s Defense Spending:Official and Estimated Figures

Sources: ROK MND, Defense White Paper(various issues); ACDA/US Department of State

Bureau of Verification and Compliance,“WMEAT”; Nodong Shinmun (various issues);IMF, “Democratic People’s Republic of KoreaFact Finding Report”; Yonhap News; Hamm,

Arming the Two Koreas; Moon Sung-min, “ThePresent Condition and Problems of North

Korea’s Financial Institutions.”

During the period of “the Arduous March”(1994-1997), figures on defense spending werenot made available. Only after 1998 did theNorth report a return to normal patterns ofdefense spending. For the decade of1998-2008, the share of defense spending intotal government expenditure hovered between14 percent and 16 percent (see Table 2). Asudden rise in the amount of defense spendingfrom 3.3 billion North Korean won (NKW) in2002 to NKW50.7 billion in 2003 was not aresult of a budget increase, but a change inaccounting units that reflected a new monetaryand foreign exchange rate policy in July 2002.Interestingly, no interaction effects can bedetected in the defense spending of the twoKoreas. On the contrary, an asymmetric pattern

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of defense spending has emerged since themid-1970s in which the North has beenreducing its spending on the defense sectorwhile the South has been accelerating itsmilitary spending.11

However, a caveat is in order regarding NorthKorea’s defense spending figures. As evident inTable 2, there are several contending estimateson North Korea’s defense spending. TheMinistry of National Defense (MND) of SouthKorea estimated that the North allocated anannual average of 30 percent of its governmentbudget for the defense sector between 1972and 1995, and increased this figure to roughly50 percent since 1997. Estimates by the USState Department, including the Arms Controland Disarmament Agency (ACDA), have beenslightly higher than those of the MND.Meanwhile, estimates by the InternationalInstitute for Strategic Studies (IISS) andStockholm International Peace ResearchInstitute (SIPRI) have been derived fromofficial data provided by the North Koreangovernment.12 Hamm presents the mostconservative figures (See Table 2). Thesecontending estimates have produced areliability problem with regard to NorthKorea’s data, eventually leading to asuspension of ef forts at est imat ion.Transparency has been a major problem.Official defense budgets only include figuresfor wages, operation and managementexpenses, maintenance, and acquisition ofweapons and equipment. But investments inthe secondary economy (defense industrialsector) , R&D investment in dual -usetechnology, and other social welfare servicesprovided through the defense sector are notf u l l y r e f l e c t e d i n t h e o f f i c i a lfigures.13 Additionally, were purchasing powerparity to be factored in, North Korea’s defensespending could be much higher.

Data unreliability notwithstanding, ROK’sDefense White Paper 2008 estimated that morethan 30 percent of North Korea’s gross national

income (GNI) went to the defense sector in2007.14 According to the Bank of Korea, NorthKorea’s GNI is estimated at $20.8 billion in2004 and $26.7 billion in 2007, from which wecan infer that the North spent $6.24 billion in2004 and $8 billion in 2007 for the defensesector. Meanwhile, South Korea’s defensespending in 2007 was $26.3 billion, which isalmost equivalent to North Korea’s GNI ($26.7billion) and three times larger than that ofNorth Korea.

Comparing North and South Korea MilitaryCapabilities

A static, bean-counting analysis of militarycapabilities between the two Koreas suggeststhat North Korea is far superior to the South.Table 3 reveals that the South leads the Northonly in three areas: the size of navy personnel(South, 68,000; North, 60,000), armoredvehicles (South, 2,400; North, 2,100), andhelicopters (South, 680; North, 310). NorthKorea maintains a rather striking superiority inother areas. In addition to manpower (South,655,000; North, 1.19 million), the North faresfar better than the South in tanks (2,300 vs.3,900), field artillery (5,200 vs. 8,500), multiplelauncher rocket systems (MLRS) (200 vs.5,100), warships (120 vs. 420), landing vessels(10 vs. 260), submarines (10 vs. 70), andfighter planes (490 vs. 840). North Korea alsohas an estimated 7.7 million people in thereserves who can be readily mobilized, whilethe South has about 3 million people in thereserves. On the surface, South Korea shouldappear alarmed at this huge gap in defensecapabilities vis-à-vis North Korea. In reality,however, South Korean government officials aswell as ordinary citizens seem to be littleconcerned about this disparity. This may bedue to a “perceived superiority” in conventionalforces by South Korea.

Table 3. Comparison of MilitaryCapabilities between ROK and DPRK (As of

December 2008)

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Defense White Paper 2008, p. 316.

* Naval troops of the ROK include 27,000troops of the Marine Corps. Ground forces

units (division, brigade) and equipment includethose of Marine Corps.

* Field artillery of the North does not includeinfantry regiment’s 76.2mm guns.

An in-depth analysis reveals why. Let’s take theexample of tanks. Although the Northmaintains a competitive edge in quantity, aqualitative analysis produces quite a differentoutcome. North Korea introduced most of itstanks (i.e., T-55, T-54, T-59) in the 1950s. TheCheonmaho, improved from the T-72 in the1990s, is i ts most updated version indeployment, but it cannot match South Korea’sK-1 tank and K1A1 armored vehicle in terms offire power and capability.15 Similarly, mostsurface ships in the North are small in size,being less than 100 tons, and are outdated inf i re contro l systems and e lectronicequipment.16 In the case of air power, the Northappears even more inferior. Two thirds ofNorth Korea’s fighter planes are MIG-19 andMIG-21, with only thirty five of the moreadvanced MIG-29s in service. The North hasalso acquired an unknown number of MIG-23s

and SU-25s. But South Korea has been retiringoutdated fighters comparable to the MIG-19and MIG-21, and has acquired 118 KF-16Cs, 47KF-16 Ds, and 39 F-15Ks, cutting-edge fighterseven by global standards.17 Furthermore, theNorth Korean air force cannot match its SouthKorean counterpart in terms of sortie numbers,flying time, and on-ground training viasimulators.

The South Korean government has thus begunto adopt a more realistic force assessmentsince 2004. The Korea Institute of DefenseAnalysis (KIDA) is known to have applied theRand-developed Situation Force Scoring (SFS)method to assess inter-Korean defensecapabilities by taking into account variablessuch as fire power, mobility, sustainability,training, morale, combat readiness, combatscenarios, and overall terrain.18 Its findingsshow that ROK air power is superior to that ofNorth Korea by 103 to 100, whereas navalpower (90 vs. 100) and ground power (80 vs.100) favor the North.19 Nevertheless, Hammand Suh suspect the reliability of the KIDAfindings because they hardly differ fromprevious findings based on a simplisticassessment.20 In fact, O’Hanlon and Suh, alongwith Hamm and Suh, have all concluded thatthe South alone could cope with North Korea’soffensive attacks even without Americanmilitary support.21

Despite the efforts by South Korea’s militaryestablishment to overestimate North Korea,overall conventional defense capabilities favorSouth Korea. But South Korea remainsconcerned about some of North Korea’sasymmetric military assets. A South Koreannational assemblyman has recently requestedeach of the armed services to identify NorthKorea’s five most dangerous conventionalweapons in order of size of the threat. Thearmy identified the KN-02 short range ballisticmissiles (range 210 km.), 240 mm. multipleretrievable launchers (range 60 km.), 170 mm.self-propelled multiple launchers (range 50

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km.), 122 mm multiple launchers (range 20km.), and the Cheonmaho tanks. Meanwhile,the navy identified submarines, ground-to-surface guided missiles SS-N-4, STXY surface-to-surface guided missiles (range 45 km.),torpedo boats, and guided missile launchingboats. In somewhat of an anomaly, the air forcechose outdated airplanes such as the AN-2 lighttransport plane, IL-28 bomber, and MIG 21, 19,17.22 On the whole, while the short-rangeballistic missiles and multiple launchers cancause critical damage, especially to the Seoulmetropolitan area, the other weapons identifiedare likely to incur only tactical impact, whichcould be countered by combined conventionalforces of South Korea and the United States.

WMD and a New Spiral of the Arms Raceon the Korean Peninsula

Even a cursory comparative examinationreveals that the South is far superior to theNorth in terms of conventional capabilities,especially when ROK-US combined forces aretaken into account. North Korea’s response hasbeen the development of asymmetric forces,especially weapons of mass destruction (WMD).It is quite likely that the North chose nucleararmament as a way of coping with its inferiorityin conventional forces. In light of the wideningeconomic and conventional forces gap, theNorth may have regarded the nuclear weaponscard as the most economical and effectiveoption.

Nuclear Warheads and Missiles

What, then, is the status of North Korea’snuclear weapons’ capability? In order for acountry to become a nuclear weapon state, itmust satisfy four conditions: possession ofnuclear warheads, deployment of workablemissiles, success in nuclear testing, andacquisition of miniaturization technology. Sincethe second nuclear standoff in 2003, NorthKorea is not only known to have reprocessed8,060 spent fuel rods stored in a water pond,but also additional spent fuel rods obtained

from reactivation of its 5 MW reactor inYongbyon. Estimates of North Korea’splutonium (PU) bombs vary, but it is estimatedthat reprocessing of the 8,060 spent fuel rodsstored in a cooling pond should have yieldedone or two bombs. Reactivation of the 5 MWreactor is believed to have allowed themanufacture of 5-6 PU warheads from theproduction of 44-52 kilograms of PU.23 As ofApril 2009, North Korea is estimated to haveproduced about 40-50 kilograms of plutoniumand to have acquired five to ten nuclearweapons.24

Some have projected that North Korea mayhave been capable of producing 75 kilogramsof highly enriched uranium (HEU) annuallystarting in 2005, which would be sufficient tomanufacture three HEU weapons everyyear.25 Despite wild speculation on NorthKorea’s HEU-related programs and the North’spurported admission of development, no hardevidence on acquisitions has yet beenpresented. North Korea may have acquiredsome parts and components of a HEU programs u c h a s g a s c e n t r i f u g e s a n d h i g hstrength/quality aluminum tubes, but it is likelyto be short of establishing a complete HEUprogram and actual bombs.26 Thus, it is highlyunlikely that North Korea possesses actualHEU programs and bombs. Nevertheless,North Korea has at the very least acquiredplutonium bombs, satisfying the firstprecondition of possession of nuclearwarheads.

The capability to deliver them is anotherprecondition. North Korea has so far provedthat it has credible short- and middle-rangedelivery capability. It currently possessesseveral types of missiles: Scud B (range 320kilometer, payload 1,000 kilograms), Scud C(range 500 kilometer, payload 770 kilograms),and Nodong (range 1,350-1,500 kilometer,payload 770-1,200 kilograms).27 But three test-launchings of inter-continental ballisticmissiles―Daepodong-1 missile (range

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1,500-2,500 kilometer, payload 1,000-1,500kilograms) on August 31, 1998, Daepodong-IImissile (range 3,500-6,000 kilometer, payload700-1,000 kilograms) on July 6, 2006, and asimilar one on April 5, 2009―are all believed tohave failed. In view of this, although NorthKorea has not yet developed long-rangemissiles capable of threatening the mainlandUnited States, it does have the ability to causeconsiderable damage to South Korea and Japanwith its short- and medium-range missiles.28

Nuclear Testing and Technology

With respect to nuclear testing, North Koreahas undertaken two underground nuclear tests,one on October 9, 2006 and the other on May25, 2009. Despite North Korea’s claims, mostinternational nuclear experts believe that itsfirst nuclear testing failed because theexplosive yield measured by seismic analysiswas quite low, only 0.5-0.8 kilotons. Given thatthe lowest explosive yield in recent years was19 kilotons, which came from the Pakistaninuclear testing in 1998, and that the nuclearbomb that destroyed Hiroshima on August 6,1945 was roughly 15 kilotons, a sub-kilotonyield cannot be considered successful. JungminKang and Peter Hayes, leading observers of theNorth Korean nuclear issue, make the followingevaluation: “The DPRK might believe that a halfkiloton ‘mininuke’ still provides it with ameasure o f nuc lear deterrence andcompellence; but it could not rely on othernuclear weapons states to perceive it to haveanything more than an unusable, unreliable,and relatively small nuclear explosivedevice.”29 However, its second nuclear testproved successful, and the North formallyannounced that it had become the ninthnuclear weapons state. While North Korea hasat present fulfilled three of the four criteria of anuclear state, specialists believe that it has notyet acquired the miniaturization technology tomount nuclear warheads on Nodong and/orSCUD missiles for effective use. Thus, it mightbe premature to treat North Korea as a full-

fledged nuclear weapons state. Nevertheless,it continues to pursue that goal in a methodicalway.

North Korea has generated concerns not onlywith its nuclear aspirations but with bio-chemical weapons as well. Although NorthKorea joined the Biological and Toxin WeaponsConvention (BWC) in 1987, the Defense WhitePaper 2008 estimates that the North has stored2,500 to 3,000 metric tons of chemical agentsin various facilities and that it has thecapability to produce biological weapons usinga n t h r a x , s m a l l p o x , a n d c h o l e r aagents.30 However, several experts havepointed out that the improper use of theseweapons could backfire against the North andlimit its combat effectiveness.31 Thus, atpresent, the nuclear threat seems more urgent.

South Korea’s Response

South Korea’s response to the nuclear threathas been two-fold. One is to seek an Americannuclear umbrella within the framework of theROK-U.S. alliance, and the other is to furtherenhance its overall conventional defensecapabilities. While the United States hasconsistently assured the former with theapplication of extended deterrence, the latterhas been undertaken through a moresystematic introduction and implementation ofRevolution in Military Affairs (RMA). It was theKim Dae-jung government (1998-2003) thatfirst officially adopted RMA. On April 15, 1998,immediately after its inauguration, the KimDae-jung government launched the Committeefor the Promotion of Defense Reform andestablished the Five-Year Defense Reform Planin accordance with the Basic Defense PolicyReport. The committee identified three goals:creation of the most capable standing army;expansion of an information technology-intensive military armed with cutting-edgeweapons; and construction of a rational,effective, and economical military.32

The Kim Dae-jung government introduced

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several initiatives to realize these goals. First,it pushed for organizational reforms bycreating new unified national commandsystems in the fields of transportation and bio-chemical and nuclear defense, as well asimproving acquisition systems in the JointChiefs of Staff (JCS). Second, increasedemphasis was placed on applying the latestinformation technologies to the defense sector.Finally, the Kim government began to expeditethe acquisition of defense assets closely relatedto network-centric warfare and surveillanceand strike capabilities, while the army, thenavy, and the air force concurrently began toacquire future-oriented, cutting-edge weaponssystems.33

The Roh Moo-hyun government continued suchefforts by drafting the Defense Reform 2020plan, which aimed at assuring a self-reliantadvanced national defense through the creationof a technology-intensive military structure andfuture-oriented defense capability.34 Twocritical factors affected the nature anddirection of the plan. One was the return ofwartime operational control from the UnitedStates to South Korea, which is scheduled totake place in 2012, and the other was SouthKorea’s improved science and technologycapabilities. Whereas the former emphasized”independence” or “self-reliance” throughSouth Korea’s take-over of operational controlover its forces during wartime, predicated onthe transformation of the current combinedforces command into two parallel commands ofSouth Korea and the U.S., the latter frameddefense reform around speed, stealth,accuracy, and networks. Four major tasks havebeen identified to carry out the plan: securingmilitary structure and defense capabilitiescorresponding to contemporary warfare;expanding the role of civilians in the defenseestablishment; innovation for a low-cost/ high-efficiency national defense management systemcongruent with a cutting-edge information-intensive military; and the improvement ofsoldiers’ military barrack life.35

The hallmark of Defense Reform 2020 was thequalitative transformation of the South Koreanmilitary. It aimed at reducing the currentnumber of armed forces from 650,000 to500,000 by 2020, while giving priority to theintroduction of new capital- and technology-intensive military structure. Although the armyfaced the largest manpower reduction, itscombat capabilities were expected to improveconsiderably with the acquisition of UAVs forreconnaissance, next generation tanks andinfantry fighting vehicles, attack helicopters(KHP), improved fire systems, and a simplifiedcommand structure. The navy and the air forcewere the plan’s principal beneficiaries. Thenavy would be able to extend its capabilitiesbeyond that of a coastal navy by securing botha submarine command and a naval aircommand. The navy acquired its first AEGISdestroyer in 2007 and will continue to upgradeits combat capability by securing the KDX-3(7,000 ton-class AEGIS destroyer) and middle-sized submarines (1,800 ton-class). The airforce will continue to upgrade its fightingcapability through the acquisition of F-15Ks,FA-50s, SAM-X, a wide array of airbornemissiles, including JASSM, and airborne earlywarning systems (E-X).

The most crucial aspect of the plan was themassive investment in battle managementassets focusing on command, control,communication, computer, intelligence,surveillance and reconnaissance (C4ISR), all ofwhich are essential for network-centricwarfare. Along with this, the Defense Reform2020 has mandated the acquisition of theateroperational command facilities, militarycommunication satellites, tactical informationcommunication networks (TICN), the JointTactical Data Link System (JTDLS), and theKorea Joint Command & Control system(KJCCS).36

North Korea most likely regards as threateningsuch an immense build-up of cutting-edgeweapons with lethal precision and advanced

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equipment related to C4ISR. However, wecannot detect any new movement on their partto acquire additional advanced weapons andequipment. An acute shortage of hard currencyand international isolation has prevented theNorth from improving its conventional defensecapabilities. Since the early 1990s, NorthKorea’s acquisition of foreign weapons hasbeen greatly constrained. In this context theNorth has embraced the logic of nucleardeterrence.

Accounting for Inter-Korean MilitarySpending and Arms Racing

What factors then account for the dynamics ofinter-Korean military spending and arms races? We believe that external threats, domesticpolitics, alliance effects, and macro-economicconditions have played a crucial role in shapingthe pattern of defense spending and armsraces.

Although South Korea has used the NorthKorean threat to justify its military spending,the pattern of defense spending in the Southdid not respond to threats from and/or militaryspending of the North. Regardless of thelatter’s spending pattern, South Koreacontinued to increase its defense spending withfew exceptions. The South tends to regard thethreat from the North as constant.37 As such, aroutine bureaucratic incrementalism hasbecome a major variable affecting the level ofdefense spending. In fact, most countries donot practice a zero-based budgeting system,which allows bureaucrats to enjoy discretionarypower for incremental budget increases. South Korea has not been an exception to thisinertia-driven defense spending pattern.

However, bureaucratic incrementalism cannotaccount for an abrupt rise or fall in defensespending. What appears to matter most indefense spending is overall macro-economicconditions. The Chun Doo-hwan governmentcut the relative share of defense spending,albeit an alliance obligation with the United

States, because of IMF conditionalitiesrequiring macro-economic stabilization. KimDae-jung had to trim the defense budgetbecause of the financial crisis that started in1997. Despite its emphasis on national security,the Lee Myung-bak government cut the defensebudget to cope with economic difficultiesfollowed by the global financial crisis in 2008.This implies that macro-economic conditionsdelimit the overall boundary of expansion andreduction. Generally good economic conditionshave accompanied an increase in defensebudget, and bad conditions have led to adecrease.

Alliance effects also appear to have profoundimpacts on defense spending.38 When there wasa strong U.S. security commitment, SouthKorea’s defense spending was minimal. Butwhen the United States showed signs ofd i sengagement or wan ing secur i t ycommitment, South Korea proceeded toincrease its defense spending. For example, thereduction of American forces in South Koreathrough the withdrawal of its 7th infantrydivision in 1971 prompted the Park governmentto increase rapidly its defense budget in theearly 1970s. The phenomenal rise in defensespending from 1976 to 1979 can also beexplained by alliance effects, as South Koreaallocated six percent of its GNP in compliancewith American demands of defense burden-sharing. The unexpected rise in defensespending during the progressive Roh Moo-hyungovernment was also closely related to allianceeffects. Roh’s efforts to seek greater militaryindependence from the U.S. led to an increasein military spending. Conversely, theconservative Lee government’s decision toreduce the defense budget is known to havebeen predicated on the restoration of strongalliance ties with the United States. Thus, thealliance factor has proven central to thepatterns of defense spending in South Korea.

Domestic political variables seem to have amixed impact. During normal and peaceful

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periods, bureaucratic inertia dictatedbudgetary outcomes, minimizing the scope ofannual sectoral variat ion. Given thepredominance of the army in the Korean forcestructure, a balanced allocation of defensebudget among three armed services is virtuallyinconceivable. Thus, there is no room forflexible adjustment, and rigidity characterizesthe budgetary process. In fact, the Lee Myung-bak government has decided to revise DefenseReform 2020 in which the primacy of the armyis reemphasized, whereas the navy and airforce are being marginalized. We also arguethat societal pressures on defense budgetshave been limited. This does not mean tosuggest that South Korea lacks elements of themilitary industrial complex. Military officers,the Agency for Defense Development (ADD),defense contractors, import agents, andconservative NGOs have been strongsupporters of increased defense spending andimproved defense capability. But their verticaland horizontal links are rather loose, and theirlobbying activities are banned by law. Thus,their influence seems rather minimal.Moreover, while liberal civic organizations thatoppose increased defense spending have beengaining political power since the democraticopening in 1987, their influence on the militarybudget has been limited. This is true for boththe progressive Roh and conservative Leeperiods. What counts most in the domesticpolitical landscape is executive leadership.Defense spending has by and large beenshaped by the political leader’s preference andsty le . Al though the overal l secur i tyenvironment and the nature of alliance tieswith the United States matter, Park Chung-hee’s commitment to over-spending and KimDae-jung’s preference for less spending can beaccounted for by leadership priorities andstyle.39

How about North Korea? The North did notrespond to fluctuations in South Korea’sdefense spending as expected under the logicof interaction effects. Nonetheless, its threat

perception has continued to shape its armsrace behavior, if not its defense spending. Inour view, North Korea’s decision to go nuclearappears to have been shaped by two factors: itsthreat perception of American nuclear andROK-US combined conventional forces, and theneed to seek the most economical way ofdealing with such threats. Protracted pooreconomic conditions and difficulties inacquiring advanced weapons and equipmentfrom foreign countries could have justified andfostered such behavior. The downsizing of thedefense budget in the 1980s and the 1990s wasclosely related to economic hardship.

Interestingly, North Korea has rapidlyincreased its defense spending since 1998, inspite of continuing economic hardship. Thiscould be explained in part by the interactioneffect, since South Korea began RMA at thistime. As noted before, despite new constraintsemanating from democratization, the end of theCold War, and the financial crisis, the SouthKorean government continued to upgrade thequalitative nature of its defense forces throughthe adoption of RMA. Moreover, the Roh Moo-hyun government initiated the Defense Reform2020 and began to strengthen its endogenousweapons development capability as well as tofoster the acquisition of advanced weaponsfrom abroad. North Korea had to respond tosuch changes in the South Korea by increasingdefense spending. Although shortage of hardcurrency fundamentally limited its efforts toimprove the qualitative nature of its defensecapability through the acquisition of advancedforeign weapons, an increase in defense budgetal lowed the North to not only make aquantitative response through the expansion ofexisting weapons stock but also address somechronic problems such as poor supply of partsand components of military equipment anddeteriorating welfare of soldiers.40

North Korea’s rapid increase in defensespending can also be explained in part by theadoption of “military-first politics” (seongun

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jeongchi) for the creation of “a strong andprosperous great nation” (gangseong-daeguk),both of which were initiated by Kim Jong Il. Themilitary in the North, including the secondeconomy (defense-related economy), has longbeen a principal beneficiary of preferentialbudget allocation not only because of themilitary’s power, but also because Kim Jong Ilelevated its status under the rubric of “military-first politics.”41 As matter of fact, the "military-first doctrine" has helped sustain a relativelylarge workforce in the defense sector as well asprop up military industries.42

Given that North Korea does not have anyalliance comparable to that of ROK-U.S., thealliance effects hypothesis may not beapplicable. Historically, however, NorthKorea’s defense spending used to be affectedby the varying nature of its security ties withChina and the Soviet Union. When militaryassistance from these two countries wasrobust, North Korea’s defense spending roseslowly, whereas it increased rapidly when suchassistance was withheld.43

IV. Conclusion

The two Koreas are sti l l engaged in aprotracted arms race, jeopardizing peace andstability on the Korean peninsula and in theregion. Such an arms race is no longer limitedto conventional forces. As North Koreadeliberates on a risky nuclear armament pathto manage a rapidly growing inferiority withthe South in defense spending and conventionalforces, the security situation is deteriorating.Failure to block North Korea’s full-fledgednuclearization could set off a nightmarishnuclear domino effect in the region, which noone wants. But denuclearization of North Koreacannot be realized without addressing andassuring its security concerns. In this regard,trust-building with North Korea through thelifting of economic sanctions should be the firststep, which should be followed by an Americanassurance of non-hostile intent and policy as

well as concrete measures for peaceful co-existence, a peace regime replacing thearmistice agreement, and diplomaticnormalization with Pyongyang. North Koreashould also show its sincere efforts towarddenuclearization.

But a peace regime on the Korean peninsulacan be seen as the ultimate path to a “nuclear-free Korea,” which should start with suchessential steps as inter-Korean militaryconfidence-building measures, arms control,arms reduction in conventional forces, and thetransformation of the armistice agreement intoviable peace arrangements including the easingof US-North Korean relations. Efforts todismantle the Cold War structure prevailing inthe region should be undertaken in tandem.U.S.-DPRK and Japan-DPRK diplomaticnormalization are the most critical elements.The formation of a multilateral securitycooperation mechanism in Northeast Asia canfacilitate such a process. The September 19joint statement of the Six Party Talksunderscores a l l o f these measures .Resuscitating the Six Party Talks andimplementing the agreements in the jointstatement are vital to sustainable peace on theKorean peninsula and in the region. Contrivedthreats, increased defense spending, and futileconventional and nuclear arms race can nolonger be justified.

Chung In Moon is a professor of politicalscience at Yonsei University. He served asDean of Yonsei 's Graduate School ofInternational Studies and as Chairman of thePresidential Committee on Northeast AsianCooperation Initiative. His many books includeHandbook of Korean Unification, Arms Controlon the Korean Peninsula, War and Peace inAsia, and Ending the Cold War in Korea. Heaccompanied the 2000 and the 2007 North-South Korean summit as a special delegate.

Sangkeun Lee is a Ph. D. candidate specializingin North Korean politics at Department of

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Political Science, Yonsei University. He was astaff reporter at the Chosun Ilbo newspaper inSeoul.

Recommended citation: Chung-in Moon andSangkeun Lee, "Military Spending and theArms Race on the Korean Peninsula," The Asia-Pacific Journal, 13-2-10, March 28, 2010.

See articles on related subjects

Peter Hayes, Extended Nuclear Deterrence,Global Abolition, and Korea

Peter Hayes and Michael Hamel-Green, ThePath Not Taken, The Way St i l l Open:Denuclearizing The Korean Peninsula AndNortheast Asia

Michael Yo, Sleight of Law and U.S.-NorthKorea Relations: Re-nuclearization and Re-sanctioning

Selig Harrison and Bruce Cumings, NorthKorea, the US and the Bottom Line inNegotiating the Future

Lee Jae-Bong, U.S. Deployment of NuclearWeapons in 1950s South Korea & NorthKorea's Nuclear Development: TowardDenuclearization of the Korean Peninsula

Notes

1 This article was originally published in AsianPerspective, Vol. 33, No. 4, 2009, pp. 69-99. Wewould like to thank the editors of AsianPerspective for permitting the reprint of arevised version in the Asia-Pacific Journal.

2 Stephan Haggard, Byung-kook Kim, andChung-in Moon, “The Transition to Export-ledGrowth Strategy in South Korea 1954-1966,”Journal of Asian Studies, Vol. 50, No. 4(November, 1991), pp. 850-873; ROK Ministryof National Defense, The History of NationalDefense, vol. 4 (in Korean) (Seoul: MND

Gunsapyeonchanyeonguso, 2002), pp. 378-387.

3 Hamm Taik-young, Arming the Two Koreas:State, Capital and Military Power (London:Routledge, 1999), p. 93.

4 Lee Pil Jung and Kim Yong-Hui, “TheInfluence of USFK Changes on ROK’s MilitaryBuild-up” (in Korean), Gukjejeongchinonchong,Vol. 47, No. 1 (2007), pp. 177-178.

5 ROK Ministry of National Defense, The Past,Present, and Future of the Yulgok Project (inKorean) (Seoul: MND, 1994), pp. 31-34.

6 Kim Dae-jung, Collection of Speeches, vol. 3(in Korean) (Seoul; the Office of the President,2001).

7 Yonhap News, June 21, 2003.

8 ROK Ministry of National Defense, NationalDefense Reform preparing for the 21stCentury, 1998-2002 (Seoul: MND, 1998), pp.16-21; ROK Ministry of National Defense,Defense White Paper 2006, p. 8; Roh Moo-hyun, Collection of Speeches, Vol. 3 (in Korean)(Seoul: The Office of the President, 2006), pp. 396, 475.

9 Yonhap News, June 26, 2009.

10 Kim Yeon Chul, “The Political Economy ofNorth Korea’s Industrialization” (in Korean),Bukhanyeonguhakhoe, ed., The North KoreanEconomy (Seoul: Gyeong-inmunhwasa, 2006),pp. 74-79.

11 This asymmetric pattern does not includeNorth Korea’s spending on the second economy(e.g., the defense industry-related sector) andthe development of nuclear weapons program.The inclusion of such spending could alter thepattern. But we could not come up with anyhard data on this spending.

12 The International Institute for StrategicStudies, The Military Balance (Various Issues);

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Stockholm International Peace ResearchInstitute, SIPRI Year Book (Various Issues).

13 Sung Chae-gi, “The Economic Base of NorthKorea’s Military Power: Historical and PositiveAnalysis of ‘the Military Economy’”(in Korean),in Graduate School of North Korean Studies,Kyungnam University, ed., Recasting theQuestion of the North Korean Military (Paju,ROK: Hanul, 2006), pp. 307-310.

14 ROK Ministry of National Defense, DefenseWhite Paper 2008 (Seoul: MND, 2009), p. 30.

15 Lee Jeong-yeon, North Korean Soldiers DoNot Have Crackers?: North Korea’s Militaryand Nuclear Weapons Written by a FormerNorth Korean Official (in Korean) (Seoul:Peullenitmidieo, 2007), p. 264.

16 Lee Gyu-yeol, Um Tae-am, Yu Ji-yong, andJung Ki-yeong. Military capabilities inNortheast Asia, 2007-2008 (in Korean) (Seoul:KIDA, 2008), p. 280.

17 The International Institute for StrategicStudies, The Military Balance 2009 (London:Routledge, 2009), pp. 396-398.

18 Im Jong-in, “Year 2004 Parliamentary Audit,Volume 1” (in Korean) (2004), p. 90.

19 Hankuk Ilbo, August 31, 2004.

20 Hamm Taik-young and Suh Jae-Jung, “NorthKorea’s Military Capability and the Balancebetween the South and the North” (in Korean),in the Graduate School of North KoreanStudies, Kyungnam University, ed., Recastingthe Question of the North Korean Military(Paju, ROK: Hanul, 2006), p. 354.

21 Ibid., pp. 376-410; Michael E. O’Hanlon,“Stopping a North Korean Invasion: WhyDefending South Korea Is Easier Than thePentagon Thinks,” International Security, Vol.22, No. 4 (1998), pp.153-156; Suh Jae-Jung,“Blitzkrieg or Sitzkrieg? Assessing a Second

Korean War,” Pacific Review, Vol. 11, No. 2(1999), pp. 151-176.

22 Yonhap News, Oct. 5, 2009.

23 David Albright, “North Korean PlutoniumProduction,” Science & Global Security, Vol. 5(1994), p. 78; Center for NonproliferationStudies at Monterey Institute of InternationalStudies, “North Korean Nuclear Capabilities,”link; Yonhap News, January 2, 2006.

24 Kyunghyang Shinmun, April 27, 2009. NorthKorean officials told Selig Harrison, who visitedNorth Korea in January, that the North“weaponized” enough plutonium for four to fivenuclear bombs. The New York Times, January18, 2009.

25 Jon. B. Wolfsthal, “Estimates of North Korea’sUnchecked Nuclear Weapons ProductionPotential,” Non-proliferation Project, CarnegieEndowment for International Peace, link; FredMcGoldrick, “The North Korea UraniumEnrichment Program: A Freeze and Beyond,”working papers of the Nautilus Institute forSecurity and Sustainability, No. 38 (June2003).

26 See David Albright, “North Korea’s AllegedLarge-Scale Enrichment Plant: Yet AnotherQuestionable Extrapolation Based on AluminumTubes,” ISIS Report, February 23, 2007, here;Lee Choon Geun and Kim Jong-seon, “NorthKorea’s Development of Nuclear and RocketTechnology” (in Korean), STEPI Insight, Vol. 22(May 15, 2009), p. 8.

27 See International Institute for StrategicStudies, North Korea’s Weapons Programmes:A Net Assessment (London: IISS, 2004), pp.63-84.

28 Lee and Kim, “North Korea’s Development.”

29 Jungmin Kang and Peter Hayes, “TechnicalAnalysis of the DPRK Nuclear Test,” NautilusInstitute, link, October 20, 2006., p.1. Also see,

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IISS, “North Korea’s Nulcear Test: ContinuingReverberations,” IISS Strategic Comments, Vol.12, No.8 (October 8, 2006).

30 ROK Ministry of National Defense, TheDefense Whitepaper 2008, pp.39-40; NorthKorea Advisory Group, “Report to the SpeakerU.S. House of Representatives,” (November1999).

3 1 O’Hanlon, “Stopping a North KoreanInvasion,” p. 165; Hamm and Suh, “NorthKorea’s Military Capability,” p. 373.

32 Ministry of National Defense, NationalDefense Policy 1998-2002 (in Korean) (Seoul:MND, 2002), pp. 25-31.

33 Ibid., pp. 39-46.

34 This section draws on Chung-in Moon andJin-Young Lee, “Revolution in Military Affairsand the Defense Industry in South Korea,”Security Challenges, Vol. 4, No. 4 (Summer,2008), pp. 117-134.

35 See ROK Ministry of National Defense, TheNational Defense White Paper 2006, pp. 36-37;ROK Min i s t ry o f Nat iona l De fense ,Implementation of Defense Reform 2020 (inKorean) (Seoul: MND, 2006).

36 ROK MND, Implementation of DefenseReform 2020.

37 Louis F. Richardson, Arms and Insecurity: AMathematical Study of the Causes and Originsof War (Pittsburgh, Penn.: The Boxwood Press,1960). In the Korean context, see Tong WhanPark, “Political Economy of the Arms Race inKorea: Queries, Evidence, and Insights,” AsianSurvey, Vol. 26, No. 8 (Aug., 1986), pp.839-850; Eun-kook Lee, Arms Race betweenSouth and North Korea (in Korean) (Seoul:Daeyeongmunhwasa, 2007).

38 Chung-in Moon and In-Taek Hyun, “Muddlingthrough Security, Growth, and Welfare: the

Political Economy of Defense Spending inSouth Korea,” in Steve Chan and Alex Minz,eds., Defense, Welfare, and Growth (London:Routledge, 1992), pp. 146-148.

39 Oh Won-chul, The South Korean-typeEconomic Development: Engineering Approach,Volume 5 (in Korean) (Seoul: the Kia EconomicInstitute); Moon and Hyun, “Muddling throughSecurity, Growth, and Welfare,” pp. 148-150;Lee Kyung Soo, “A Comparative Study on ‘Self-Reliant Defense’ Policy of Park & Rho’sRegimes” ( in Korean) , (Ph .D. d iss . ,Sungkyunkwan University, 2007), pp. 103-187.

40 Lee, North Korean Soldiers, pp. 261-265.

41 Hwang Jang-yop, The Truth and Falsity onNorth Korea (in Korean) (Seoul: Sidaejeongsin,2006), pp. 16-53; Hyun Sung-il, The NationalStrategies and Elite of North Korea: Focusingon Policies on Cadres (in Korean) (Seoul:Seonin, 2007), pp. 282-283.

42 See John Feffer, “Ploughshares into Swords:Economic Implications of South KoreanMilitary Spending,” KEI Academic PaperSeries, Vol. 4, No. 2 (February 2009).

43 Sung, “The Economic Base of North Korea’sDefense Capability,” pp. 323-335; Kim, “ThePol i t ica l Economy of North Korea ’sIndustrialization,” pp. 74-79.

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