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If the government goes ahead with plans to boost defense spending to exercise sole operational control of Korean troops, it will cause more than W1 trillion (US$1=W964) in opportunity losses to the economy over the next five years, experts estimate. Opportunity loss is the value of lost chances when one available option is chosen over another. Since defense firms are less productive in terms of creating jobs or added value than other industries, increased defense spending reduces the amount of resources that could go to other, more productive investment areas and hamper growth. Experts say Korea has been able to spend less on its defense and put the money saved into developing the economy thanks to the U.S. military assistance.
The defense budget of W22.51 trillion will account for an estimated 2.57 percent of GDP in 2006. The government plans to increase the budget by 9.9 percent every year, spending a total of W151 trillion over the next five years so it can exercise sole operational troop control in 2012. That means the proportion of defense spending to GDP will rise from 2.62 percent in 2007 to 2.75 percent in 2009, 2.89 percent in 2011 and to the 3-percent range in the long term. Military experts say the rate peaked in the 6 percent range in the 1980s and has been declining since then. Now it is rising again.
Combined additional defense budgets over the next five years are estimated to reach W10.55 trillion. The Korea Institute for Defense Analyses (KIDA) says by injecting the sum into the defense sector instead of more productive civilian manufacturing, the economy will suffer W1.03 trillion in opportunity losses over the next five years. If the U.S. reduces military assistance on the peninsula and North Korea conducts more provocations, the Korean Peninsula could turn into a conflict area, the institute fears. In that case, defense spending would rise even further.
KIDA says the average ratio of defense budget to GDP stands at 6.1 percent in conflict areas like Israel and Syria in peacetime, some 2.4 times higher than Korea¡¯s. When wars erupt there, the percentage nearly doubles to 11.6 percent, with those countries concentrating much of their national capacity on defense. ¡°Considering that Korea is a potential conflict area, our defense spending would increase far more than government¡¯s estimate if North Korea shows off its nuclear power or a local provocation occurs,¡± a member of the National Assembly¡¯s Defense Committee says. ¡°That will deal a blow to Korea¡¯s finances.¡±
(englishnews@chosun.com )
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