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Annual Report on Military Expenditures, 1998 Submitted to the Committee on Appropriations of the U.S. Senate and the Committee on Appropriations of the U.S. House of Representatives by the Department of State on February 19, 1999, in accordance with section 511(b) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1993 |
INDIA MILITARY SPENDING REPORTING PERIOD: Indian fiscal year 1998-99 (April 1 - March 31). AMOUNT: Figures are expressed in USD, based on the exchange rate of 42.25 rupees per dollar. The rate of inflation factored by the wholesale price index is about 8 percent. Army 5.10 billion USD Air Force 1.35 billion USD Navy 0.69 billion USD Total defense spending as reported by the Indian government, is approximately 11.2 billion USD. In addition to the subtotal of 7.14 billion USD for the three military services, the 1998-99 budget reflects approximately 2.45 billion USD for capital purchases for all three services. PERCENTAGE OF GDP: Official defense spending accounts for about 2.5 percent of GDP. PERCENTAGE OF BUDGET: About 17.7 percent of total government spending. TRENDS IN REAL TERMS: In real terms, the Indian defense budget received about a 15 percent increase in 1998-99 after adjusting for an estimated inflation rate of approximately 8 percent. A significant portion of the increase--perhaps as much as 10 percent--is committed to meeting the recommendations of the fifth pay commission, a plan to increase salaries of government employees including military personnel. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: Army: 1.1 million Air Force: 150,000 Navy: 55,000 Paramilitary Organizations: Border Security Force: 174,000 Central Reserve Police Force: 160,000 Assam Rifles: 52,000 Rashtriya Rifles: 36,000 Coast Guard: 8,000 Indo-Tibetan Border Police: 30,000 Federal Security: 196,000 Home Guard: 55,000 State Armed Police: 400,000 Territorial Army: 40,000 COMMENTS ON ITS POLITICAL ROLE: The Indian armed forces (IAF) pride themselves on an apolitical tradition dating back to the creation of India in 1947. However, the army and paramilitary forces increasingly are concerned about the political dimension of their involvement in several ongoing insurgencies in the country. The armed forces continue to play a major role in humanitarian and disaster relief operations within India. Internationally, the IAF perform an important role in supporting UN peacekeeping operations. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? The armed forces continue to support the core national principle of civilian control over the military. Officer appointments traditionally are made on the basis of seniority. Removal procedures are subject to review by civilian authorities, including the court system. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: The BJP made national security a prominent issue in its coalition government which came to power in March 1998. An added factor in the use of increased visibility of the defense complex is India's nuclear tests in Pochran in May 1998. The defense budget likely will receive increases in the future. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: The U.S. continues to seek a security dialogue with India to address our concerns following nuclear tests in May 1998. U.S. policy continues to support reductions in military spending that would accrue through a reduction in tensions between India and China and between India and Pakistan. We continue to encourage Indian restraint regarding weapons of mass destruction and believe that the nuclear capabilities of the three countries-- India, Pakistan, China--have led to heightened tensions in the region. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: None reported. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? India is an active participant in the UN group of governmental experts on the UN Register of Conventional Arms. In 1998, India participated in the UN Register of Conventional Arms. India has never submitted a standardized MILEX report to the UN. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? Regional talks among the South Asian nations remain focused on trade, economic, and cultural issues. Multilateral talks on REDUCING MILITARY SPENDING have not been held in this region. India's relations with China were improving before the nuclear tests particularly with regard to implementation of confidence- building measures along their border. Since May, however, relations have stagnated. Relations with Pakistan remain difficult, although the governments in New Delhi and Islamabad are publicly committed to continuing their political dialogue which gained some momentum in 1997. Following nuclear tests in both countries, India and Pakistan have come under strong international pressure to resolve these differences to reduce tensions in the subregion. On the heels of a prime ministerial meeting on the margins of the UN General assembly (UNGA) in September 1998, foreign secretary level talks were held in Pakistan from October 16-18. They were followed by extensive talks on outstanding issues--Kashmir, border, economy, and security--on November 5-13 in New Delhi. The two foreign secretaries will hold further talks in February. To date the talks have resulted in small but promising agreements concerning cross-border transport and energy purchases and further agreements are possible. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? The Indian defense budget numbers, as reported in the Ministry of Defense annual report and available in the public domain, probably provide a fairly accurate overview of aggregate statistics such as the percentage of total government spending on defense. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? There is no transparency on the amounts spent on specific programs, particularly programs of proliferation concern. The government does frequently make supplemental appropriations during the fiscal year to augment its initial defense budget. INDONESIA Overview: Indonesia's overall military expenditures are far from transparent as funds have traditionally flowed to the military from business activities, private contributions, and off-budget government money. Based on the officially published budget alone, Indonesian defense expenditures traditionally have been low in comparison to the country's GDP and population. Since 1988, according to the U.S. Arms Control and Disarmament Agency's (ACDA) "World Military Expenditures and Arms Transfers, 1996," Indonesia's officially published military budgets have generally been characterized by low comparative ratios in all areas, including percent of total budget, percent of GNP, and in per capita spending per annum (in the latter Indonesia has averaged between USD 10 and 12 over the last decade). According to ACDA's statistics, in recent years arms imports have also been comparatively low, generally amounting to less than one percent of total imports. During 1997-98, Indonesia's severe financial crisis, and its unstable currency, have made accurate assessment of Indonesia's military expenditures even more problematical. It is probable, however, that military spending has declined, perhaps as much as 30 percent in dollar terms. Most major arms import deals have been shelved, with the exception of a 400 million dollar purchase of HAWK aircraft from the UK. In 1995, Indonesia ranked 107 in the world in GNP per capita, and its ranking in (officially published) military expenditure per capita was 115. MILITARY SPENDING REPORTING PERIOD: Indonesian Fiscal Year, April 1998 to March 1999. AMOUNT: Estimated USD 1.0 billion. PERCENTAGE OF GDP: 1.3 percent. PERCENTAGE OF BUDGET: 7.9 percent. [Note: In light of the economic turmoil gripping Indonesia, the budget from which the above figures are drawn must be viewed as a work in progress, with major revisions likely as the Indonesian government continues to negotiate with the International Monetary Fund (IMF). The drastic depreciation of the rupiah (from rp2,400/USD in mid-1997 to rp15,000/USD in mid-1998) and its subsequent partial recovery (to the 7-8,000/USD level in late 1998), can make defense spending comparisons based on U.S. dollar amounts very misleading. Indonesia's high inflation rate (75-80 percent in the first 11 months of 1998) will reduce the buying power of the defense budget. In terms of buying power, most observers here believe that the Indonesian defense budget has declined by as much as 30 percent in the past year. Given the instability of Indonesia's economic situation, the percentage of GDP given above is a very rough estimate at best, and is based on the assumption that both the economy as a whole and the defense budget will be declining in real dollar terms with the result that the relationships between them will remain more or less the same. In terms of the military's share of overall government spending, it is likely that greatly increased spending on social safety net items eventually will push down the military's percentage of total government outlay.] TRENDS IN REAL TERMS: Prior to the financial crisis, officially published Indonesian defense spending, including police expenditures, had been falling in relation to GNP, from a peak level of 3 percent of GNP IN 1981 to levels of about 1.5 percent in the 1990's. Defense spending had experienced similar declines in relation to overall government outlay. Real growth in the military budget from 1988 to 1997 paralleled the steady expansion of the Indonesian economy during that period. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: The total manpower complement of the Indonesian armed forces, including police is 451,000. The breakdown by service is: Army: 216,000 Navy: 26,000 Air Force: 27,000 Marines: 12,000 Police: 170,000 Indonesia has contributed peacekeeping forces abroad under the auspices of the UN a total of 17 times since its first deployment, to the Sinai in 1957, and to Bosnia most recently. COMMENTS ON ITS POLITICAL ROLE: The armed forces (ABRI) exercises a socio-political role under the concept of "dual function." "Dual function" means that active duty officers are posted to jobs in all levels of government, from the cabinet to the smallest village, in the legislatures at all levels, and also in commercial and state corporation areas. For example, 14 of Indonesia's 27 provincial governors are active duty or retired military officers, and a significant percentage of local district chiefs are military men. The military also retains 75 appointed seats in the National Assembly. In 1998 there were growing calls for an end to ABRI's political role especially concerning the military's seats in the parliament. ABRI's leadership said it would only consider gradual reduction of the military's political role. Armed Forces Chief/Defense Minister Wiranto has said that in the future all military officers assigned to civilian positions must be in retired status. ABRI's primary roles are to maintain internal security and to protect the country from external threats. The police are under military command [although scheduled to be separated in April 1999], and ABRI units are stationed in every province and district. Continuing serious unrest throughout the country in 1998 resulted in significant military involvement in internal security. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? Under former President Soeharto, appointments, transfers, and dismissals of high-ranking officers were approved personally by the president. While President Habibie retains the formal ability to appoint and dismiss high-ranking officers, he is in a much weaker position vis-a-vis the military than his predecessor. Most military personnel decisions are taken within the military itself and the Ministry of Defense and Security whose current minister is also the chief of the armed forces. However, in regard to key military assignments, it appears that the armed forces chief continues to be subject to pressure from cabinet members as well as from within ABRI. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: See classified annex. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: U.S. efforts to reduce arms spending in Indonesia and elsewhere in the region are indirect and focus on our support of regional confidence-building, especially through the ASEAN Regional Forum (ARF). In the long term, regional initiatives such as the ARF, and the Indonesian-sponsored informal workshops on reducing tension in the South China Sea, are the hopes for reducing tensions, addressing long-term security threats, and ultimately removing or ameliorating the potential causes for a regional arms race. The U.S. is also encouraging efforts to reach a settlement in East Timor, in part through a reduced ABRI presence in the province, which could result in a minor reduction in overall defense spending. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: See classified annex. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? Indonesia has submitted standardized MILEX reports to the UN three times--1980 to 1982. Indonesia has provided accurate and timely information to the UN Register of Conventional Arms. In 1998, Indonesia participated in the UN Register of Conventional Arms. The U.S. Embassy is unaware of any other Government of Indonesia obligation to provide data on military spending to international organizations. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? At present, no regional forum or ongoing dialogue is specifically addressing REDUCING MILITARY SPENDING. Indonesia is a founding member of the ARF (see above), which is addressing the general topic of confidence-building measures. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? See classified annex. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? See classified annex. ISRAEL MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: 1996 1997 1998 Nominal (in NIS bn) (a) 30.0 32.2 34.4 Exch. rate (NIS/USD)(b) 3.19 3.45 3.77 Notes: (a) actual for 1996-97; budgeted for 1998. (b) actual annual average rate for 1996-97; estimated for 1998. PERCENTAGE OF GDP: 1996 1997 1998 Pct. of GDP 9.9 9.6 9.0 PERCENTAGE OF BUDGET: 1996 1997 1998 Pct. of budget 20.6 19.5 19.8 TRENDS IN REAL TERMS: In real terms, total Israeli military spending increased slightly in CY-98, primarily because of higher personnel costs and increased R&D expenditures. Despite some efforts to reduce personnel costs by trimming reserve forces, eliminating redundancies, and reprogramming funds to priority projects, Israeli defense spending likely will increase in the medium term, especially given expensive modernization and procurement plans, as well as projected Wye-related expenditures. Long-term savings in Israeli defense spending would be fostered by regional political normalization and concomitant arms control efforts. [Note: Estimates of Israeli defense spending must take into account the inclusion of dollar-based U.S. defense assistance to Israel and fluctuations in the shekel/dollar exchange rate.] The following is an index of defense spending in real (constant-shekel) terms, as estimated by Israel's Central Bureau of Statistics: Index of real defense spending (1990 = 100) (billions of constant 1990 shekels) Real NIS ('90) pct. Year bn. chng. Index 1990 14.2 8.4 100.0 1991 14.7 3.5 103.5 1992 13.7 -6.5 96.8 1993 14.7 6.7 103.5 1994 13.4 -8.7 94.5 1995 12.8 -4.7 90.1 1996 13.6 7.8 97.1 1997 13.9 2.4 99.5 1998 14.1 1.4 100.9 ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: According to the best estimates available, the Israeli Defense Force (IDF) maintains standing forces of approximately 175,000 and reserve forces of approximately 400,000. COMMENTS ON ITS POLITICAL ROLE: By law, the IDF is apolitical. However, senior officers often speak publicly on national security issues, and their professional judgments inevitably bear on the ongoing Israeli debate over Peace Process issues. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? Civilian control over the military is a firmly established and respected principle in Israel. The IDF is under the control of a civilian defense minister who makes key appointments in it. While he can also remove officers, such disciplinary action usually is carried out within the IDF. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: For now and the foreseeable future, a reduction in Israeli military expenditures in absolute terms is highly unlikely. Long-term trends in military spending reflect increasing personnel costs, an ambitious modernization program aimed at maintaining Israel's "qualitative edge," continued subsidies to Israeli defense industries, and spending related to the Wye Agreement. Absent further progress in the Peace Process overall, especially in the Syrian and Lebanese tracks, substantial IDF expenditures on the continuing low-intensity conflict in Lebanon and protecting settlements in the Golan, West Bank and Gaza will be required. Threats of terrorist activity in these and other areas, and Israeli defense efforts to counter regional proliferation of weapons of mass destruction and related delivery systems, will also work against reductions in military spending. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: Continuing U.S. efforts to advance regional peace remain the best way to reduce Israeli and other military expenditures in the Middle East over the longer term. Israel generally has been skeptical of multilateral efforts to limit arms exports to the region, viewing them as inadequate in scope and unduly influenced by commercial interests. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: The IDF is chronically short of the funding needed to match its ambitious procurement, R&D, and other programmatic spending requirements, including its support to defense industries and redeployment commitments under the Wye Agreement. In keeping with Prime Minister Netanyahu's 1996 pledge before the U.S. Congress, the Government of Israel (GOI) is following up with the United States concerning phasing out Economic Support Funds (ESF) and allocating a portion of the money saved to FMF. In addition, new U.S. assistance to Israel for its long-term defense modernization program, as well as aid expected under the Wye Agreement, means that overall defense spending will not decrease but in fact will rise over the next 8-10 years. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? Government officials state that Israel has provided all required arms transfer data to the UN Register. In 1998, Israel participated in the UN Register of Conventional Arms. Israel has submitted standardized MILEX reports to the UN four times--1988 to 1991. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? Israel was an active participant in the Arms Control and Regional Security (ACRS) working group of the Middle East peace talks until the work of the group was suspended due to problems in the Peace Process and differences over nuclear/NPT issues. Israel sees ACRS as an important part of multilateral regional cooperation and views these discussions, coupled with political and economic normalization, as offering some hope for eventually reducing overall military spending by Israel and other countries in the region. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? As part of the regular budget of the GOI, the Israeli defense budget is in the public domain. It includes broad functional breakdowns of military spending (e.g., salaries, procurement, pensions, etc.) and specific policy changes for the new budget year and their estimated budgetary effects. We have no reason to doubt these estimates. Supplemental military appropriations in the Knesset are not uncommon. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? The overall military budget and its major components are approved by the Knesset. Its relative transparency also is enhanced by press reporting. In addition, the Office of the State Comptroller serves as an internal control mechanism by overseeing all government ministries and presenting an annual report to the Knesset. KENYA MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: Actual spending by the Kenya Department of Defense (KDOD) during the 1997/98 fiscal year (July-July) was Kenya shillings (Kshs)10.79 billion or USD 174.3 million. The KDOD budget estimate for the 1998/99 Fiscal Year is Kshs 11.56 billion or USD 197 million. In addition to KDOD, the 1998/99 budget appropriates Kshs 8.93 billion or USD 149.6 million for non- military security forces. The average exchange rate for 1997/98 was Kshs 61.9 equals USD 1.00; The projected rate for 1998/99 is Kshs 59.7 equals 1.OO. Table I: 1997/98 Kenyan Security Budget Expenditures (millions of Kshs) Total Recurring Development Department of Defense: Initial Estimate 12,094.8 11,412.8 682.0 Approved Expenditures 10,789.5 10,668.9 120.6 --DOD Administration 34.3 34.3 0.0 --Armed Forces 10,755.2 10,634.6 120.6 - Army - - 118.6 - Air Force - - 2.0 - Navy - - 0.0 Non-military security: 9,088.4 8,669.7 418.7 General Service Unit 951.2 881.1 70.1 National Police 5,434.6 5,318.8 115.8 Administrative Police 1,656.2 1,655.2 1.0 National Youth Service 1,046.4 814.6 231.8 Source: Kenyan Ministry of Finance. Table II: 1998/99 Kenyan Security Budget Estimate (millions of Kshs) Total Recurring Development Department of Defense: 11,759.0 11,558.0 201.0 DOD Administration 32.5 32.5 0.0 Armed Forces 11,726.5 11,525.5 201.0 - Army - - 128.1 - Air Force - - 54.4 - Navy - - 18.5 Non-military Security: 8,933.3 7,555.7 1,377.6 General Service Unit 995.1 907.2 87.9 National Police 5,090.1 5,003.4 86.7 Administrative Police 897.3 892.9 4.4 National Youth Service 1,950.8 752.2 1,198.6 Source: Kenyan Ministry of Finance. Table III: Other Date (millions of Kshs) 1996/97 1997/98 1998/99 est. Total GOK approved budget 201,454 272,481 241,742 Recurring budget 156,439 231,871 203,476 Development budget 45,015 40,610 38,266 Fiscal Year GDP 564,699 605,766 614,496 Ave. Exch. Rate (Kshs/USD) 55.3 61.9 59.7 Sources: Kenyan Ministry of Finance, Central Bureau of Statistics, and the Central Bank of Kenya. PERCENTAGE OF GDP: The KDOD budget amounted to 1.8 percent of GDP in 1997/98 and is projected at 1.9 percent of GDP in 1998/99. PERCENTAGE OF BUDGET: The KDOD budget amounted to 4.0 percent of the total budget in 1997/98 and a projected 4.9 percent in 1998/99. Budget totals include debt service and other statutory obligations. TRENDS IN REAL TERMS: Due to a Government of Kenya (GOK) budget shortfall in mid-1998, the Ministry of Finance imposed an across-the-board 10 percent spending reduction. In 1997/98, the Department of Defense spent 11 percent less than Parliament appropriated, primarily because the armed forces only spent 18 percent of its USD 11 million development (procurement and construction) budget. The 1998/99 development budget is only USD 3.4 million. KDOD uses procurement funding to modernize Kenyan forces by replacing existing weapons systems, rather than to expand the overall military establishment. For 1998/99, the recurrent (operating) budget is up 1.3 percent above original 1997/98 projections and up 8.3 percent above last year's austerity program expenditures. The armed forces have very little money available for operations and maintenance. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: The armed forces include about 22,000 personnel, including the army (18,000), the navy (1,000), the air force (3,000), and KDOD headquarters staff (200). A number of Kenyan military personnel participate in international peacekeeping operations in Angola, Bosnia, Croatia, Western Sahara, and the Kuwait/Iraq border. In addition to the armed forces, Kenya employs up to 40,000 police and paramilitary personnel. The national police, which report to the Commissioner of Police in the office of the president, field about 18,000 officers. The General Service Unit (GSU) has around 5,000 paramilitary personnel. In addition, Administrative Police (AP) report to local district commissioners, who in turn report to the office of the president. Finally, the National Youth Service (NYS), which is administered by the office of the president, provides some paramilitary training to young job trainees. COMMENTS ON ITS POLITICAL ROLE: The Kenyan military is a professional, apolitical force that supports existing civil authorities. Its main mission is defense of the country's borders in a notoriously unstable region. Military commanders resist pressure to become involved in politics, including intervention in tribal clashes. The police or GSU are generally used for politically sensitive missions. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? President Daniel Arap Moi also holds the GOK defense portfolio. KDOD, like the police, is part of the office of the president. All but senior military officers are appointed, promoted, and, if necessary, removed by the military's professional personnel system. The president appoints and retires senior military officers. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: It is unlikely that the GOK will reduce its military budget in the near future. The cost of carrying out the military's mission is increasing. Armed groups of pastoral tribesmen periodically move across the Somalia, Ethiopia, and Sudan borders and challenge GOK security forces. Chronic instability in Somalia and the ongoing civil war in southern Sudan also pose threats to Kenya's national security. The GOK is devoting some funds to needed modernization programs. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: The U.S. and Kenya enjoy a close military relationship. Kenya has long been a force for regional stability, and actively participates in international peacekeeping operations. Kenyan military spending levels are in the normal range. Nevertheless, the U.S. has consistently encouraged the Kenyan military to make more efficient use of its resources. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: GOK budget shortfalls forced the military to adopt austerity measures and defer some modernization programs. The current armed forces high command is making inroads against institutional corruption and reducing traditional officer perks. Major spending reductions are unlikely, however, as the military already lacks financing to sustain the current force. The armed forces is unable to maintain adequate training levels or replace aging equipment. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? As presidential discretionary spending is not included, the accuracy of GOK security-related budget figures is unknown. The GOK provides arms transfer data to the UN Register of Conventional Arms. In 1998, Kenya did not participate in the UN Register of Conventional Arms. In the past, Kenya has participated. Kenya has never submitted a standardized MILEX report to the UN. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? Through the Commission on East African Cooperation (EAC), Kenya is developing a closer security relationship with Tanzania and Uganda. EAC talks are likely to result in increased regional military coordination, but not a reduction in Kenyan military expenditure. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? Official budget allocations may be reduced due to austerity measures. On the other hand, KDOD can benefit from the discretionary funds of the office of the president. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? There is little factual information available about GOK military spending other than the parliament appropriation bills. The GOK does not normally make supplemental appropriations to augment the defense budget. The appropriation process enhances the accountability of the armed forces to the civilian political authorities, particularly the office of the president. The lack of open debate on the budget or mission of the armed forces, however, limits their accountability to the public. KUWAIT MILITARY SPENDING REPORTING PERIOD: July 1, 1997 to June 30, 1998. AMOUNT: $2,703,237,900 ($1 equals .303 Kuwait dinars). This amount includes the budget for the Ministry of Defense and the National Guard, as well as a supplemental budget for military rebuilding. PERCENTAGE OF GDP: Approximately 9 percent of GDP. This reflects a projected drop of roughly 11 percent in GDP for 1998 due to the fall in oil prices. PERCENTAGE OF BUDGET: Approximately 19 percent of budgeted government expenditures. TRENDS IN REAL TERMS: Although military spending stayed at relatively the same level for 1998, the projected drop in GDP due to the fall in oil prices may cut the amount projected for 1999. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: Approximately 21,000. These forces are dwarfed by those of Iraq and Iran, Kuwait's northern neighbors. Kuwait's huge oil reserves (96 billion barrels, more that the United States and all of the former Soviet Union combined) represent both a strategic asset to the West and a temptation to Kuwait's neighbors. COMMENTS ON ITS POLITICAL ROLE: Kuwait's military commanders have never taken a political role in governing the country, and there are no indications they will do so in the future. In fact, members of Kuwait's armed forces are not allowed to run for public office or to vote, although legislation is being considered to grant military personnel the vote. Although most of the officer corps is Kuwaiti, enlisted military personnel are a mixture of Kuwaitis and third-country nationals. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? The civilian leadership has complete control over the appointment and dismissal of military officers. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: See classified annex. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: See classified annex. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: The cost of rebuilding its armed forces has strained the budget and forced Kuwait to look for ways of reducing defense expenditures. Spending levels are of great interest to the National Assembly, the only freely elected parliament in the GCC (Gulf Cooperation Council). However, given its strategic situation, the government has decided that defense spending will remain a high priority--and we agree completely. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? In 1998, Kuwait did not participate in the UN Register of Conventional Arms. Kuwait has never submitted a standardized MILEX report to the UN. Kuwait has expressed a willingness to provide spending data and arms transfer information to the UN or regional organizations, but has not, to our knowledge, done so yet. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? Kuwait is a strong proponent of regional cooperation, and has been involved in joint exercises with GCC and Damascus Declaration elements. Those forces are not, however, at a high level of readiness, and Kuwait must still look to its own resources and outside allies for security. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? The military budget is generally accurate and complete, particularly on the procurement side. Although it has not done so thus far in the Kuwaiti fiscal year, the government has on occasion submitted supplementary appropriations requests to the National Assembly for unforeseen expenses ( for example, a supplemental appropriation was authorized in 1995 to pay for the costs of the U.S. response to the Iraqi buildup in October 1994). TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? The overall Government of Kuwait budget is made public, and must be approved by the National Assembly, but details are vague and opportunities for off-budget spending significant. The National Assembly is playing an increasingly important role in the entire budget process, and its scrutiny of the budget may lead to greater details in the breakdown of expenditures, which are currently divided into only five major categories: salaries, goods and services, transport equipment, construction projects, and miscellaneous expenditures and transfer payments. On the revenue side, Kuwait has stringent financial secrecy laws which cover government-owned assets, including the Fund for Future Generations (FFG), managed by the Kuwait Investment Authority (KIA). KIA's assets are estimated to be about USD 60 billion, and have, in the past, been used to help defray the deficit and cover reconstruction costs from the Iraqi invasion. MALAYSIA MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: Amount in Malaysian ringgit and U.S. dollar: 5.346 billion ringgit or 1.364 billion U.S. dollars. The estimated operating expenditure is 3.064 billion ringgit; the estimated development expenditure is 2.282 billion ringgit. (The dollar/ringgit exchange rate fluctuated widely in 1998. We are using the 1998 average exchange rate of 3.92 ringgit to the dollar.) PERCENTAGE OF GDP: The U.S. Embassy calculates that the 1998 combined operating and development defense budget represents 1.9 percent of GDP. PERCENTAGE OF BUDGET: The Malaysian armed forces (MAF)'s operating expenditure budget for CY 98 is estimated to represent 6.6 percent of the Government of Malaysia (GOM)'s operating expenditure budget. The MAF's development expenditure budget is estimated to represent 11.8 percent of the government's total development expenditure budget. The defense budget, including expenditures for both operating and development costs, is estimated to be 8.1 percent of the government's total budget. TRENDS IN REAL TERMS: According to the Ministry of Finance's budget figures, since 1994 the MAF received the following amounts in billions of ringgits: Year Operating Development 1994 3.399 2.166 1995 3.647 2.474 1996 4.030 2.061 1997 4.063 (estimated actual) 1.814 1998 3.064 (latest estimates) 2.282 ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: B. ROLE OF ARMED FORCES The MAF structure calls for 110,000 personnel, but actual strength is perhaps twenty percent less. The MAF is planning to rebalance the personnel numbers among its three services as part of its modernization program for the year 2020, which it hopes to substantially complete in three years. -- The army officially has 90,000 billets, but its actual strength is around 75,000. The MAF proposes to reduce the army's billets to 80,000. -- The Royal Malaysian Air Force (RMAF) is supposed to have 10,000 personnel, but its actual strength is around 8,000 plus. The RMAF is seeking to have 11,500 billets under the modernization program. -- The Royal Malaysian Navy is supposed to have 10,000 personnel, but it is similarly understaffed. Under the new program, the navy hopes to have 11,000 billets. Malaysia has been a major contributor of military personnel to UN peacekeeping operations and has participated in 15 peacekeeping operations and observer missions under the auspices of the United Nations. In July 1998, however, the Minister of Defense announced that Malaysia would no longer engage in any peacekeeping missions at its own expense because of national austerity measures. The Royal Malaysian Police, which reports to the Ministry of Home Affairs, is primarily responsible for maintaining internal security. COMMENTS ON ITS POLITICAL ROLE: The MAF refrains from engaging in either partisan activities or making politically-charged pronouncements. The GOM civilian leadership sets the MAF's overall policy orientation and determines the size of its budget. The MAF's primary mission is the protection of the nation and EEZ (exclusive economic zone) from external threats, and the MAF's leadership focuses on these narrowly interpreted professional responsibilities. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? The civilian leadership appoints and removes all senior military officers. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: Until mid-1997 Malaysia, along with some other ASEAN (Association of Southeast Asian Nations) countries, was in the process of an ambitious defense modernization program. The GOM has viewed its force modernization program as a prudent, modest and, until recently, financially sustainable enhancement of its conventional deterrent capabilities. However, the economic turmoil which struck the region in the second half of 1997 led Malaysia to slash its defense budget by 21 percent. To implement this cut, the Ministry of Defense cut the armed services' operating budgets, capped salaries, downgraded the operational readiness of military units, scaled back joint exercises with other countries and deferred big-ticket defense purchases. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: U.S. efforts are indirect and focus on our support of regional confidence-building, especially through the ASEAN Regional Forum (ARF) process. In the long term, the continued success of ASEAN and regional initiatives such as the ARF are the best hopes for reducing tensions, addressing long-term security threats, and ultimately removing or ameliorating any potential causes for a regional arms race. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: Even at the height of the defense modernization efforts in Southeast Asia, the GOM dismissed arguments that there was an arms race underway in the region. Pointing to ASEAN's record of resolving regional problems through diplomatic means, the GOM maintained there was little necessity for ASEAN members to engage in regional discussions to reduce military spending. However, the financial crisis which struck the region starting from the second half of 1997 has forced the GOM to unilaterally cut military spending. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? The GOM values the ARF as a potentially useful mechanism for promoting defense transparency and confidence-building diplomacy in the larger East Asia region. The ARF has endorsed the UN Register of Conventional Arms to which the GOM has regularly submitted data on its latest arms acquisitions. In 1998, Malaysia participated in the UN Register of Conventional Arms. Malaysia has submitted standardized MILEX reports to the UN two times--1987 and 1990. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? At present, no regional forum or ongoing dialogue is specifically addressing REDUCING MILITARY SPENDING. Malaysia is a founding member of the ARF (see above), which is addressing the general topic of confidence-building measures. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? Malaysia does not release details of its military budget, and the actual magnitude and composition of GOM defense spending is not clear. The MAF's budget has some flexibility. There have been cases in the past when the MAF's budget was revised upward rather quickly to achieve a GOM policy goal - such as providing airlift to Malaysian troops in Bosnia. On the other hand, economic problems in 1997 led the GOM to slash the defense budget. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? It is unclear whether portions of the civilian budget are used for military spending. However, as mentioned above in our comments on the MAF's political role, the GOM civilian leadership determines the size of the military budget. The overall budget, including military spending, is debated in Parliament. MOROCCO MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: 1997: 1322.7 million dirham. $1450.8 million. (exchange rate: 9.1 dirham = $1 U.S. dollar.) PERCENTAGE OF GDP: 4.2 (1997). PERCENTAGE OF BUDGET: 17.8 (1997). TRENDS IN REAL TERMS: Military budgets in real terms in Morocco have fallen slightly over the past decade. However, the military budget as a percentage of GDP actually increased in 1997 due to the fall in GDP. With a forecast GDP growth rate of 6.8 percent in 1998, the military budget's share of GDP should fall back to about 3.8 percent. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: 198,500 Army: 175,000 Air Force: 13,500 Navy: 10,000 Gendarmes: 12,000 The armed forces have, and do, participate in international peacekeeping operations including IFOR, SFOR, and Somalia. COMMENTS ON ITS POLITICAL ROLE: The Moroccan military does not play a significant political role in the Moroccan government. After surviving two military coup attempts in the 1970's. King Hassan II goes to some lengths to prevent the military from becoming a power center. For example, the king has ensured that the three military services remain separate. While the king has some close associates in the military, the military does not have significant political power. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? Civilians have virtually no authority in military appointments or removals. The king is the supreme commander-in-chief and makes essentially all important policy decisions. Officer appointments, promotions, and retirements are handled by elite power groups within the military--with the king's approval, and according to the king's schedule. A civilian was recently appointed to lead the National Defense Administration, the successor agency to the Ministry of Defense, which was abolished after the coup attempts. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: With the current size and deployment of the Moroccan military, reduction in spending is unlikely, since the services are considered underfunded as it is--particularly with regard to spare parts. The only real prospect for a military spending reduction would be for a corresponding reduction in forces to occur. The Moroccan armed forces currently has 50-60 percent of its forces in the Western Sahara--a huge drain on resources. If an eventual successful conclusion to the dispute there occurs, a reduction of forces and budget would then be possible in theory. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: In 1994 FMF was eliminated, after averaging $43 million a year in the proceeding decade. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: Morocco's efforts appear to be limited to reducing acquisitions. There have been no force reductions or base closures of which we are aware. Instead, several military installations have opened in recent months. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? Morocco has never submitted a standardized MILEX report to the UN. In 1998, Morocco did not participate in the UN Register of Conventional Arms. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? No. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? The military budget is not generally considered to be always accurate and complete. Also see classified annex. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? Morocco's audit office is responsible for monitoring and auditing the expenses of all government offices, including the military. The military's budget is provided from the general budget of the state through the minister delegate for defense administration, a civilian. NICARAGUA MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: The 1998 defense budget is approximately 25.49 million dollars (268.4 million cordobas) at the 1998 average exchange rate of 10.53 cordobas per dollar. PERCENTAGE OF GDP: 1.28 percent. PERCENTAGE OF BUDGET: 4.12 percent. TRENDS IN REAL TERMS: As anticipated, military spending declined in 1998, both in nominal and real terms. Much of the real decrease resulted from the Government of Nicaragua's (GON) one percent per month crawling peg devaluation of the official exchange rate. The proposed budget for 1999 is 294 million cordobas. At an average exchange rate of 11.7 cordobas per dollar (assuming continued devaluation), this would put the 1999 budget at approximately 26.7 million dollars--up 9.5 percent from 1998 levels, but still lower than the 29.83 million dollar 1997 budget. 1999 figures are subject to adjustment; the National Assembly is expected to postpone considering the 1999 budget until February of 1999, in order to take better account of new expenses related to Hurricane Mitch. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: The size of the army is officially 14,143, which includes 1,374 civilians. COMMENTS ON ITS POLITICAL ROLE: The Nicaraguan army has evolved from a Sandinista-dominated, revolutionary army in the 1980's to a downsized, relatively apolitical professional army officially answering to a civilian Ministry of Defense. In September 1994, then-President Chamorro signed into law a new military code which was an important step forward for the democratic process. It provided a framework for institutionalizing civilian control of the armed forces. As stipulated in the code, then-army commander General Humberto Ortega stepped down on February 21, 1995. The President named General Joaquin Cuadra to replace him. Upon taking office in January 1997, President Arnoldo Aleman appointed Liberal Constitutional Party legislator Jaime Cuadra, to be the first incumbent of the newly-created civilian defense ministry--the first in Central America. In September 1997, Jaime Cuadra was replaced as defense minister by Pedro Joaquin Chamorro, son of former President Violeta Chamorro. Joaquin Cuadra remains the army commander. Initially, the new Ministry of Defense focused exclusively on encouraging the demobilization of "re-armed groups" in the North. With the completion of the disarmament process in December 1997, the ministry shifted its focus towards transforming itself into an institution that could exercise effective civilian control over the military. Legislation enacted in 1998 defining the Ministry of Defense's relationship was helpful. The Nicaraguan army's central role in responding to the aftermath of Hurricane Mitch served as a catalyst to improved civilian/military coordination. The army carried out orders from the civilian-led National Emergency Committee for helicopter deliveries of food and medicine, and rescue of stranded and injured persons--including some U.S. citizens. Defense Minister Chamorro coordinated the army's role. The Nicaraguan military demonstrated through its response to the disaster a high degree of professional competence, an increased willingness to accept civilian direction, and a desire and capability to coordinate effectively, including with U.S. military personnel and resources sent to assist in the relief effort. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? Under the military code, the civilian president may appoint and remove the commander-in-chief of the army. The president names a new commander of the army based on nominees submitted to the "Military Council," which is composed of the top several dozen military commanders. The president can also reject the slate of candidates and ask the military council to provide other names. The commander-in-chief of the army can be removed by the civilian president only for cause, which the military code defines as insubordination, mental or physical deficiencies, violation of the apolitical nature of the commander's duties, or conviction for a crime requiring punishment beyond the equivalent of a military letter of reprimand. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: In the short term, the Nicaraguan army's role in rebuilding after Hurricane Mitch will make further spending reductions difficult. The army provided disaster response capabilities no other GON entity has. In the areas of disaster response, and in combating armed criminal bands in remote rural areas, the Nicaraguan army has unique capabilities. For 1999, the army is seeking increased funds to repair and upgrade navy patrol craft, and to install new, more fuel-efficient engines in its aging fleet of trucks. It seeks a larger role in combating drug trafficking along the Caribbean coast and in protection of natural resources, and has a legal mandate to perform those functions. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: The U.S. supports the policies of international financial institutions, such as the IMF's Enhanced Structural Adjustment Facility (ESAF), which requires cuts in overall Nicaraguan government spending. The Nicaraguan government signed a three-year ESAF in January 1998, and to our knowledge was in compliance at the time Hurricane Mitch hit. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: Nicaragua has greatly reduced military spending in conjunction with the downsizing of its army. Since 1990, the size of the army has been reduced from about 90,000 - 95,000 to the current level of 14,143. The number of military facilities was 496 in 1990, and has been reduced to a current total of 168 military installations/facilities. Moreover, direct foreign military assistance from the Former Soviet Union and Soviet Bloc countries has ended. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? Nicaragua makes public basic national budget information. Nicaragua has never submitted a standardized MILEX report to the UN. In 1998, Nicaragua did not participate in the UN Register of Conventional Arms. In the past, Nicaragua has participated. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? In December of 1995, Nicaragua signed the "Central American Democratic Security Treaty," which strengthens regional democratic norms and creates a fuller framework for regional cooperation. The National Assembly ratified this treaty in July 1996. It has not entered into force because the required ratification by at least three Central American countries has not occurred. The treaty contains some military cooperation and confidence-building commitments, but they have not formally been implemented. It also contains provisions on law enforcement, the environment, and drug trafficking. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? The Nicaraguan army operates businesses whose income goes into a military welfare and retirement fund, the "Institute of Military and Social Welfare." The army does not publicly report this income, though it says the funds are not used to augment its operational budget. The civilian comptroller-general has oversight responsibilities for the administration and finances of the institute. The minister of defense participates as a member of the institute's board. No information on finances of the institute is available publicly. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? The overall military budget is published as part of the government's national budget. However, the submission on the military contains far fewer details than are provided in the budget submissions of other government ministries. NIGERIA Note: This report on Nigeria updates information provided in last year's report, covering CY 1997 and CY 1998 expenditures. MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: Nigeria's total published military budget allocation for CY 1997 was 17.91 billion naira, equivalent to USD 210 million at the market exchange rate of 85 naira per USD 1.00. Of the total, 72 percent (12.97 billion naira) was budgeted for recurrent expenditures, while 28 percent (4.94 billion naira) was allocated for capital expenditures, However, Nigeria made an undetermined amount of foreign procurements at an official exchange rate of 22 naira per USD 1.00. Thus, USD 210 million is an underestimate of Nigeria's publicly acknowledged military expenditures. Nigeria's published military budget for CY 1998 is 23.07 billion naira, with 66 percent (15.13 billion naira) allocated for recurrent costs and 34 percent (7.94 billion naira) for capital expenditures. At the market exchange rate, the total military budget would equal USD 271 million. The government has indicated that in 1998 it will approve fewer instances in which its purchases will be made at the official (22 naira to USD 1.00) dollar rate. However, USD 271 million should still be concerned an underestimate. Also see classified annex. PERCENTAGE OF GDP: In 1997, acknowledged military spending, at a market exchange rate, represented 0.4 percent of Nigeria's estimated GDP of USD 51.4 billion. This is an underestimate, for reasons cited above and below in the military budget accuracy assessment. PERCENTAGE OF BUDGET: In 1997, publicly acknowledged military expenditures represented 12.6 percent of total recurrent expenditures, and 5.6 percent of capital expenditures. Overall, publicly acknowledged military expenditures accounted for 9.4 percent of the 1997 budget. In the 1998 budget, acknowledged military allocations make up 13 percent of recurrent expenditures, 5.7 percent of capital costs, and 9 percent of total allocations. TRENDS IN REAL TERMS: Between 1996 and 1997, acknowledged military expenditures rose 16.6 percent in nominal terms. In real terms, this represents an increase of 8.1 percent. From 1997 to 1998, acknowledged military spending is slated to rise 28.8 percent in nominal terms. However, reduction in use of the official exchange rate for military purchases would result in a less of an increase in acknowledged military spending. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: Estimated total personnel - 76,500, consisting of: - Army 62,000 - Air Force 9,500 - Navy 5,000 Nigeria's armed forces participate in regional and UN peacekeeping deployments. Also see classified annex. COMMENTS ON ITS POLITICAL ROLE: Nigeria has been under military rule for all but nine years since independence in 1960. A military coup overthrew the country's last elected civilian president in 1983. After a protracted program to return to civilian rule, the former military government of General Babangida annulled results from the June 1993 presidential elections. General Sani Abacha took power in a palace coup in November 1993. In 1995, Abacha began a return to civilian rule program seemingly designed to maintain himself in power. Upon Abacha's death in June 1998, General Abdulsalami Abubakar became head of state. The military regime rules through select use of a previous constitution supplemented by decrees, which may not be challenged in court. Military administrators function as governors of Nigeria's 36 states. The Abubakar administration is conducting a transition to civilian rule scheduled to culminate in a hand over to an elected civilian government in May 1999. Following the turnover to civilian leadership, the Nigerian military will continue to play an important, albeit unofficial, role in the country's political life. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? Under the current conditions of military rule, civilian authorities are not able to appoint or remove military officers. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: Significantly reducing Nigeria's military spending is very unlikely until after the establishment of civilian government. Even under a civilian administration, the military will remain a powerful political force that can effectively lobby for a significant budget allocation. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: U.S. ability to engage Nigeria on military issues has been minimal since the imposition of sanctions on Nigeria following annulment of the 1993 elections and subsequent events. As a result of these sanctions, bilateral military contacts were very limited. However, bilateral contacts have significantly improved since General Abubakar came to power in June 1998. Because of sanctions in place, the U.S. does not sell or service military equipment in Nigeria, nor does it provide military training such as IMET. However, this has not prevented Nigeria from acquiring equipment from suppliers in some other nations. Also see classified annex. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: Led by a military government, Nigeria has not been inclined to reduce military spending. Additional factors also provide Nigerian leaders with arguments against reducing military expenditures. Nigeria has on-going border disputes with neighboring Cameroon which has led to periodic military clashes. Nigeria also has demonstrated its desire to project its influence in West Africa in part through its military forces under the banner of the Economic Community of West African States (ECOWAS) and its Cease-fire Monitoring Group (ECOMOG). A military force less than 80,000 strong is not excessive, Nigeria believes, for a country of 110 million people. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? Nigeria has never submitted a standardized MILEX report to the UN. In 1998, Nigeria did not participate in the UN Register of Conventional Arms. In the past, Nigeria has participated. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? None. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? The formal budget figures presented above do not present an accurate or complete picture of Nigeria's military spending; they are underestimates. As noted above, some military purchases employ an artificially low naira/dollar exchange rate. In addition, major portions of Nigeria's participation in ECOMOG and military procurement traditionally have been off-budget. A portion of Nigeria's oil revenues are deposited in what are termed dedicated accounts which provide the government with funds to finance projects and programs not subject to fiscal oversight. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? Due to the factors listed above, Nigeria's military budget cannot be considered transparent. Under current conditions of military rule, the military is not accountable to civilian authorities and the public. PAKISTAN Under the terms of the "Pressler Amendment," USG military and security assistance, FMS, and new economic assistance were cut off in 1990 when the President determined that he could no longer meet the legal requirement to certify that Pakistan did not possess a nuclear explosive device. In January 1996, the President signed legislation (the "Brown Amendment") that provided one-time relief from Pressler sanctions by releasing USD 358 million worth of materiel that, while paid for by Pakistan, had been blocked in the pipeline. By the end of 1998, that pipeline had been almost completely emptied. The 1996 legislation, however, did not unblock 28 F-16 fighters that Pakistan paid for, but which remained undelivered. In December 1998, this issue was resolved by a bilateral agreement. Pakistan withdrew its claim for the aircraft in return for a payment of $326.9 million from the U.S. Treasury Judgement Fund, a fund used to settle legal disputes that involve the U.S. Government. In addition, the U.S. Government agreed to use all available means to provide Pakistan with goods and benefits up to a value of $140 million. The 1996 legislation also removed International Military Education and Training (IMET) and Overseas Private Investment Corporation (OPIC) from Pressler sanctions, but resumption of these programs was blocked by sanctions under the Symington Amendment. In October 1998, further legislation (the "Brownback Amendment"), gave the President authority to waive certain sanctions on Pakistan, including programs under the Foreign Assistance Act (including IMET and TDA [Trade and Development Agency], loans by private banks, loans by international financial institutions, and credits, such as those of the Export-Import Bank and OPIC. In November, President Clinton decided to exercise that authority. MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: FY 97/98 revised budget (millions of Pak rupees) Total military expenditures: Rs 133,834 or, converted at USD 1 = Rs 42.4, USD 3.16 billion. Note: Converted at mean interbank floating rate for 1997. FY 98/99 budget (millions of Pak rupees) Total military expenditures: Rs 145,000 or, converted at USD 1 = Rs 50, USD 2.90 billion. Note: Converted at mean interbank floating rate for year to date. PERCENTAGE OF GDP: FY 97/98 revised budget: 4.7 percent. FY 98/99 budget: 4.4 percent. PERCENTAGE OF BUDGET: FY 97/98 revised budget: 29 percent. FY 98/99 budget: 29 percent. TRENDS IN REAL TERMS: 1998/99 spending is a nominal 9 percent increase over 1997/98 revised expenditures in Pak rupees. Inflation is running at approximately 6.5 percent, which means that military expenditures have a real increase of roughly 2 percent. This is reduced somewhat by the fact that the Pak rupee has depreciated nearly 14 percent against the U.S. dollar over the past year, raising the cost of goods purchased with hard currency. In contrast to recent years, 1998/99 military purchasing power has remained roughly equivalent with that of the previous year. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: Active-duty Pakistan armed forces are estimated to number about 775,000 personnel, including auxiliary units, divided as follows (essentially unchanged from last year's report): Army: 550,000. (19 infantry divisions, 2 armor divisions, and 1 artillery division.) Air Force: 35,000. (15 fighter squadrons and 3 training squadrons that are combat capable.) Navy: 23,000. (12 surface combatant ships, 6 submarines, 4 Atlantiques, and 3 P-3C aircraft.) Paramilitary: 150,000. Coast Guard: 1,000. Marine security: 1,000. Marines: 120. COMMENTS ON ITS POLITICAL ROLE: The armed forces of Pakistan--particularly the army--play a significant political role, albeit a lesser one than that they played as recently as ten years ago, when Pakistan was under martial law. During 1998, the military demonstrated its respect for Pakistan's democratic institutions, most notably when General Jehanghir Karamat, the army chief of staff and highest-ranking military officer, resigned over differences with Prime Minister Nawaz Sharif over public criticisms he had leveled against the government for mismanaging the affairs of state and failing to consult. Although his criticisms reflected unhappiness within the military over government mishandling of the economy and other issues, his resignation, following a meeting with the prime minister, demonstrated a continuing military commitment to respecting constitutional norms. The military appears unwilling to insert itself directly into the political process except in dire circumstances. In November, however, the army was itself tasked to establish military courts in Karachi to support governor's rule. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? Civilian authorities appoint the most senior officers of the military, i.e., the chief of each of the three services and the chairman of the joint chiefs of staff committee. Effective April 1, 1997, Prime Minister Nawaz Sharif amended the constitution, removing the president's power to make these senior military appointments at his own discretion. Generally, senior military officers serve out their appointed terms and then retire. While political leaders normally do not try to remove senior military leaders in advance of their scheduled retirements, when the prime minister expressed unhappiness over the public criticisms of his government by General Karamat, the general decided to resign. Appointments to lower levels in the military are approved by the political leadership, but only after consulting the chiefs of the three services, who play the central role in determining who serves in the critical subordinate ranks. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: As noted above, Pakistan's officially-declared military expenditures have declined in dollar terms and only slightly increased in real rupee terms (they have remained roughly the same as proportions of both the budget and GDP). Realizing that the weak Pakistani economy cannot provide additional resources for badly-needed equipment modernization, Pakistan's military leadership is assessing means to reduce manpower and training costs without undercutting fighting capability. That said, significant reductions in Pakistan's military spending are not likely. Although there is some discussion in the media, the military, and among intellectual elites of the trade-off between military spending and funds available for desperately needed social and economic development, major political parties do not publicly advocate reducing military expenditures or the size of the armed forces in the existing security context. There is a broad political consensus on the need to maintain an effective defense. In light of the current imbalance between the military capabilities of Pakistan and its greatest perceived external threat--India--Pakistan is not likely to make unilateral military reductions that could exacerbate an already unfavorable military equation. There is little domestic pressure for such reductions. U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: In general, U.S. efforts to influence Pakistan's defense structure have focused on nonproliferation goals rather than the size of Pakistan's defense budget. Specifically, the U.S. has urged that Pakistan avoid a nuclear weapons or missile race with India, the results of which would be disastrous for the Pakistani economy. In 1990, Pressler Amendment sanctions were imposed on Pakistan following the President's inability to certify that Pakistan did not possess a nuclear explosive device. The Symington Amendment (1976, amended 1994) imposed further sanctions. Although the Brown Amendment in 1996 removed some of these sanctions, the nuclear tests carried out by Pakistan in May of this year in response to tests by India automatically triggered further sanctions under the Glenn Amendment (1977, amended 1994). Subsequent negotiations between the U.S. and Pakistan aimed at securing adherence to global nonproliferation objectives produced a Pakistani commitment to sign the Comprehensive Nuclear Test-Ban Treaty (CTBT), the removal of Pakistani objections to the Conference on Disarmament's (CD) establishing of an ad hoc Committee in Geneva to negotiate a Fissile Material Cutoff Treaty (FMCT), and ongoing meetings with U.S. experts on steps to improve export controls. Progress in these talks, which are ongoing, coupled with Pakistan's dire economic straits, prompted the President in November to exercise the waiver authority granted him under the Brownback Amendment to ease a number of sanctions against Pakistan. On the military side, this includes the resumption of IMET. In addition, realizing that any progress Pakistan makes towards nonproliferation goals will depend largely on similar action by India, the USG continues to encourage both governments to engage in a serious bilateral dialogue on the range on contentious issues between them, including Kashmir. The U.S. was encouraged by the resumption of official, senior-level talks between the two countries in late 1998. By strongly encouraging India and Pakistan to engage in bilateral dialogue aimed at reducing tensions, the U.S. seeks to create conditions that make it possible for both nations to reduce their military expenditures. The virtual elimination of U.S. assistance to Pakistan and the reduction of military-to-military cooperation since the original imposition of Pressler sanctions have diminished our ability to influence the government on these issues. By allowing resumption of the IMET program, Brownback is a potentially important step toward expanding our mil-to-mil relationship in response to progress on our nonproliferation agenda. COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: The euphoria that immediately followed Pakistan's nuclear tests was followed, in turn, by growing concern about how Pakistan's already-fragile economy would weather post-test international sanctions as well as an expensive arms race with India. These concerns have strengthened the growing realization, in civilian as well as military circles, that there are very real limits on the national resources Pakistan can devote to military spending. While high-profile initiatives to cut military spending are unlikely to be announced, many national decision-makers are increasingly attuned to the need to keep military spending in check. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? Pakistan has provided official military expenditure data to the World Bank (its accuracy is in question for reasons explained below). Pakistan provides arms transfer data to the UN every year. In 1998, Pakistan participated in the UN Register of Conventional Arms. Pakistan has never submitted a standardized MILEX report to the UN. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? There have been no official talks in South Asia focused on reducing regional military spending. However, Pakistan's dialogue with India, which resumed at the foreign secretary level during 1998, has been aimed at resolving contentious issues (namely, Kashmir) and identifying possible avenues of cooperation, including negotiation of confidence-building measures. This dialogue offers the promise of lowering mutual threat perceptions, with lower military expenditures on both sides of the Indo-Pak border a possible result. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? Official military expenditure figures do not fully reflect reality. An undetermined amount of military expenditures are hidden elsewhere in the budget (for example, in spending on communications infrastructure). Certain sensitive programs, such as nuclear weapons and missile development, are not identified in any published budget figures. Given the secrecy that envelops military spending, it is difficult to tell whether supplemental appropriations are made to augment official budget figures. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? The military budget is not transparent. Only two line items in the official budget ("Defense Administration" and "Defense Services") represent all military expenditures. There is no explanation of what these line items stand for, or how the funds are spent. Parliamentary consideration of the budget traditionally has not shed any light on military expenditures. This lack of transparency leads to impressions that kickbacks and other forms of corruption take place at the upper levels of the national defense establishment, among civilians as well as members of the military. For example, three naval officers were recently convicted for taking money in connection with submarine construction. PERU MILITARY SPENDING REPORTING PERIOD: January 1 to December 31, 1998. AMOUNT: 1998: USD 913.3 million (2,676 million soles; 1998 average exchange rate 2.93) Projected 1999: USD 882.5 million (2,772 million soles; estimated 1998 average exchange rate 3.14) (figures do not include significant off-budget expenditures). PERCENTAGE OF GDP: 1998: 1.42 percent; projected 1999: 1.35 percent (Note: Off-budget expenditures not included). PERCENTAGE OF BUDGET: 1998: 9.1 percent; projected 1999: 8.5 percent. TRENDS IN REAL TERMS: Given forecasts of 6 percent inflation, 7.2 percent depreciation of the sol versus the U.S. dollar, and 3 percent growth in overall GDP, U.S. Embassy expects 1999 defense spending will drop about 2 percent in real terms. ROLE OF THE ARMED FORCES SIZE OF THE ARMED FORCES: 122,000 (army, air force, and navy); 100,000 (national police). COMMENTS ON ITS POLITICAL ROLE: According to the Peruvian constitution, the president presides over the system of national defense made up of the armed forces (the army, navy, and air force) and the national police. The armed forces are primarily tasked with guaranteeing the independence, sovereignty, and territorial integrity of Peru. The armed forces also "assume control of internal order" in accordance with article 137 of the constitution dealing with states of emergency and states of siege. In 1998, the president continued states of emergency in a number of departments comprising over 10 percent of Peruvian territory and over 20 percent of the Peruvian population. These emergency zones were established previously in response to two terrorist insurgencies which continue to operate in certain areas of Peru. CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS? The constitution established the president as the supreme commander of the armed forces, but in practice, the degree of civilian control depends entirely on the president's relationship with the military leadership. In August, the Peruvian president dismissed the president of the armed forces joint command who had headed the joint command for over six years, and replaced him with the defense minister. The current president of the joint command and the new defense minister are both active duty army generals. There has never been a civilian minister of defense in Peru since the defense ministry was created in 1986. The president must approve the promotions and retirements of all flag rank officers of the three armed services and the national police. REDUCING MILITARY SPENDING FEASIBILITY OF REDUCING MILITARY SPENDING: In the wake of the October 26 signing of a global and definitive peace agreement between Peru and Ecuador, the Government of Peru (GOP) is likely to curtail projected increases, and perhaps reduce, its defense spending. President Fujimori announced in November that Peru will suspend the purchases of military aircraft and missiles in order to shift resources to education and health care. He also noted that the defense budget will undergo a progressive annual reduction resulting in the savings of "tens of millions of dollars." U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING: The U.S. Government--along with the other three Guarantors of the 1942 Rio de Janeiro protocol (Argentina, Brazil, Chile)--helped Peru and Ecuador conclude in 1998 a global and definitive settlement of their long-standing border dispute. Peru and Ecuador reached an agreement on confidence- and security-building measures as part of that comprehensive accord. In addition to its role as a Guarantor of the Peru-Ecuador peace process, the USG also continued to work toward a multilateral agreement on transparency and confidence in conventional arms acquisitions at the Organization of American States (OAS). COUNTRY EFFORTS TO REDUCE MILITARY SPENDING: Peru engaged in successful substantive negotiations with Ecuador to resolve their long-standing border dispute. The Peruvian president has publicly indicated that a substantial reduction in defense spending will be one of the benefits of reaching a peace accord with Ecuador. HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO THE UN REGISTER OF CONVENTIONAL ARMS? Peru has submitted standardized MILEX reports to the UN three times--1992 to 1994. Peru did report arms transfer data to the UN Register of Conventional Arms in 1998. HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY SPENDING? Peru promotes bilateral military commissions to build confidence with each of its five neighbors. Peru, like other OAS members, is engaged in discussion of the USG-proposed OAS resolution on transparency and confidence in conventional arms acquisitions. ASSESSMENT OF MILITARY BUDGET ACCURACY IS THE MILITARY BUDGET ACCURATE AND COMPLETE? Military budget figures are not considered definitive and spending on the military includes significant "off budget" items. The extent of this additional spending is unclear as the military, citing security reasons, does not reveal a breakdown of military expenditures. The Interior Ministry maintains separate budget items for defense and national security and for maintenance of internal order. TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT? The military budget is not transparent. This lack of transparency significantly diminishes the accountability of the military to civilian authorities and the public. President Fujimori did announce in July 1998 that Peru had acquired 18 MiG-29s at the cost of "hundreds of millions of dollars." The GOP has never revealed the exact cost of its MiG-29 acquisitions or the extent of other close air support aircraft purchases, however.[End of section]