South Korea will still give North Korea economic aid and even boost the amount it spends despite a shooting incident along their border this week, the South's budget and planning minister said yesterday.
Park Bong-heum, a veteran bureaucrat, also said the government planned to boost defense spending gradually but would not be able to meet the Defense Ministry's request for an increase of nearly 30 percent to 3.2 percent of GDP next year.
Asked whether Thursday's exchange of gunfire in the demilitarized zone would have an impact on aid, he said: "It is a separate issue which will be handled separately. The inter-Korean cooperation fund will be maintained and its focus is on providing humanitarian support and reuniting families."
South Korea has earmarked 2.7 percent of GDP, or 17.4 trillion won (US$14.77 billion), for defense this year.
The defense ministry wants to increase spending to make the South Korean military less reliant on US defenses.
The Korea Institute for Defense Analysis estimated last month the US forces in the South effectively reduce the South's defense costs by 2 percent to 3 percent of GDP, and that it would cost about US$20 billion to replace the US military assets.
The US has 37,000 troops in the South to ward off any attack by the 1.1-million-strong forces in the North, and the South Korean armed forces are 690,000 strong.
South Korean President Roh Moo-hyun is keen to increase the South's independent defenses, partly because the US wants to be relieved of some of the burden.
"We believe the national defense funds will increase higher than the nominal GDP growth, but we will not be able to increase the entire amount of national defense allocations to 3.2 percent of GDP through just one budget," Park said through an interpreter.
"We will have to look at our forecast for economic growth and our fiscal situation to gradually increase to reach that level," he said. "At the moment, we are at a very early level in formulating next year's budget so it is hard to tell exactly how much we are going to spend on national defense."
Park said the government would increase the size of its inter-Korean cooperation fund for humanitarian aid and to help close the gap between the near-moribund economy in the North and the South's -- the fourth-largest in Asia.
The South's central Bank of Korea estimated per capita GDP in the North at US$762 compared with US$10,013 in the South.
Park did not give figures for the fund increase. The government has allocated 1.4 trillion won for this year, down slightly from last year's 1.69 trillion.
"The inter-Korean cooperation fund, the size of the fund, will increase," Park said. "The unification costs will depend on what kind of form unification will take and how the North Korean economy will develop after unification."
South Korea does not expect unification any time soon, and has studied Germany's experience and the huge costs involved.
"In considering the costs of unification, we will have to help develop the North Korean economy from now and also help decrease the difference between the size of the North Korean economy and the South Korean economy, along with the help of the international community," he said.