US Troop Pullout Will Hit South Korean Economy

SEOUL - Pub owner Kim Gyo Min has been having sleepless nights since news about the United States pulling out one-third or 12,500 of its troops from South Korea broke last month. His joint in the entertainment district of Itaewon near the US Yongsan Garrison in Seoul is a popular hangout for US soldiers who make up 70 per cent of his regulars.

Mr Kim said: 'If so many soldiers leave, I may have to close down my business.'

Jitters about a security vacuum following the US troop pullout have spilled over to South Korea's economy, which is still reeling from low consumer spending, corporate investment and persistent unemployment.

The US said last month it planned to slash its 37,000-strong military contingent in South Korea, as part of Washington's ongoing Global Defence Posture Review, by the end of next year. A recent report released by the Korea Institute for International Economic Policy detailed the negative impact on the economy and financial market in the face of a shaky Seoul-Washington alliance.

It stressed that US financial services companies and institutional investors make investment decisions in South Korea after analysing reports on the political, financial and security situation from the US authorities.

As it is, investors are already wary of South Korea's militant labour and the North Korean nuclear issue.

Growing scepticism over the alliance may lead to decisions unfavourable to South Korea, the think-tank warned.

The US still accounts for a major proportion of South Korea's imports and exports, although Seoul's reliance on it has been declining with the emergence of the World Trade Organisation, said the report.

Analysts warned that the fallout would be a further setback for South Korea's wobbly economy.

Samsung Economic Research Institute researcher Peter Hwang pointed out that the economy, which will be strained from the planned administrative capital relocation and increase in defence spending, may not be able to absorb another blow.

South Korea intends to raise its defence budget from the present US$14.8 billion (S$25 billion) a year to US$82.5 billion over the next four years.

Over the past five decades, the security provided by US military presence has enabled the country to redirect to development its resources that would otherwise have gone to defence.

The massive troop pullout may also cause thousands to lose jobs, adding to South Korea's economic gloom and persistent unemployment.

Yongsan Garrison alone has 1,225 buildings spread over an area the size of 40 soccer fields complete with facilities that include hospitals, schools and restaurants.

Within it, the US military employs about 6,000 Korean employees on top of a support staff of more than 23,000, many of whom may lose their jobs after the pullout.

Businessmen such as brothel and cinema operators in the neighbourhood are apprehensive about the impending move, and some had even staged protests.

Mr Lee Myeong Seok, head of an association of 250 businesses near the garrison, said: 'Business is already bad, but after the US troops leave the local economy will collapse.'

To ease concerns over the troop pullout, the South Korean government has said that the timetable proposed by Washington is 'only a guideline', with 'plenty of room for negotiation'.

Businessmen like Mr Kim certainly hope that is true. While pouring beer into the mug of a US soldier, he said: 'To me, their presence is bread and butter.'