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Sound financial management of a country's security sector is key to efficient and effective security forces capable of responding to the population's legitimate security needs. Deficiencies in the way the military budget and arms purchases are decided and controlled are likely to lead to higher levels of inefficient military expenditure and inappropriate weapons purchases, consuming often scarce resources that are needed to address the basic needs of the population.
Lack of transparency in particular creates high vulnerability for corruption, especially in arms procurement processes. In many countries, the military tends to be one of the most corrupt sectors of government, and arms procurement—domestic and international—is especially subject to corruption, in both developed and developing countries.
Avoiding excessive, wasteful and corrupt military expenditures and procurement thus requires high levels of transparency and accountability in military budgeting and procurement processes. Such processes should adhere to government-wide financial management and oversight practices, within a rigorously observed defence policy and planning framework. This includes adherence to public expenditure management (PEM) principles of comprehensiveness, discipline, legitimacy, flexibility, predictability, contestability, honesty, information, transparency and accountability.
These issues are pursued in detail in the SIPRI publication Budgeting for the military sector in Africa, which includes detailed case studies of eight African countries, discussing the problems and limitations of their military budgeting processes in relation to an overall framework of good practice.
The terms transparency and accountability can be used in varying ways. In particular, there is an important distinction between transparency in the context of inter-state relations, referring to the voluntary disclosure of information (especially relating to defence and security), which may be part of confidence-building measures, and transparency as an aspect of internal governance, referring to the ability of citizens to access relevant information on the activities of government.
Here, transparency is taken to include transparency of information and transparency of process. Transparency of information on military spending means whether information of the military budget and actual spending is readily available to the public, and the level of reliability, detail and comprehensiveness of this information. Transparency of process refers to whether budgetary decision-making is open and visible, with the reasons for spending clearly outlined.
Accountability includes accountability of the budget decision process, to parliament and to citizens; the implementation of expenditure, namely if spending—and especially procurement—are controlled by rigorous procedures and subject to civilian control; and auditing and parliamentary scrutiny of military spending, with improper practices investigated and prosecuted.
Key problems in transparency and accountability of military spending
There are many ways in which military budgeting and expenditure processes can fall short of best practice in terms of transparency and accountability.
Military budgeting and procurement should be clearly linked to established defence policy goals. However, many countries lack a well-defined defence policy that spells out the country's security needs, so that decision-making is carried out in a policy vacuum, wasting money on unnecessary systems while failing to meet genuine security needs, and with an enhanced risk of corruption. Even where defence policies are clearly elucidated, there may be a disconnect between policy and budgeting and procurement practice.
Many developing countries, even those with generally democratic governments, have very weak oversight of defence matters by parliament, due to a number of factors. Lack of capacity or interest by parliamentarians can be a major obstacle to proper scrutiny, as can lack of political will. This can result from an ingrained belief that the military sector is a 'no-go area'. The military itself may discourage 'interference' from parliament, or from the civilian government generally. The consequence is a deficient assessment of military needs against other priorities, often to the military's advantage. In some newly democratizing countries entrenched military privileges may restrict proper civilian control of the military, either by parliament or even by the Ministry of Defence.
These are often used as an excuse for secrecy, resulting in insufficient transparency in defence budgeting and procurement. The claim is that the military requires special treatment compared to other sectors of the government, since they deal with national security matters. The result is insufficient disclosure of the defence budget, with only very general headings publicly available. As a result, it is difficult for Parliament and civilian bodies to monitor and control the military.
Extra-budgetary spending is spending on the military from other sections of the state budget. This may include the science or infrastructure budgets, special Presidential funds, or loans whose repayments come from the Ministry of Finance. Such spending is often not clearly disaggregated and reported, making it hard or impossible to disentangle all elements of military spending.
Off-budget spending comes from outside the state budget altogether. This may include dedicated natural resource funds used for arms purchases, payments from the private sector for security, or military business activities. Off-budget finance may allow the military to conduct procurement without going through the Parliament or the Ministry of Defence, so that purchases are not assessed against strategic needs. Off-budget spending means that resources are allocated to the military outside of any general budget deliberations, and in many cases automatically, without relation to an overall assessment of defence needs, and without the possibility of weighing them against other possible uses.
Weak monitoring, controls and audits facilitate corruption and waste. Budgeting for the Military Sector in Africa found extremely weak capacity for controlling spending in many of its case study countries. Public scrutiny institutions, in particular audit institutions, anti-corruption agencies and Parliamentary public accounts committees may be reluctant to investigate the military, or be actively prevented from doing so. In Indonesia, when the Corruption Eradication Commission (KPK) was created, the military was specifically exempted from its purview.
Within military spending, a particularly problematic area can be arms procurement. Both the international arms trade and, more generally, arms procurement procedures-whether from domestic or overseas sources-are highly susceptible to waste and corruption. Even in the absence of dishonesty, poor processes can lead to purchases with high cost but questionable strategic purpose, severe delays and cost overruns.
Public procurement in general is frequently a source of corruption, in both developed and developing countries. The Organization for Economic Cooperation and Development (OECD) states that 'public procurement is one of the government activities most vulnerable to corruption'
Public procurement can offer extremely lucrative opportunities to domestic and foreign business, and when not conducted according to rigorous and transparent procedures, can equally provide opportunities for self-enrichment to public officials involved in the decision-making processes. In the case of military procurement, the risk of corruption is combined with the problems particular to military spending, including the tendency to secrecy, the lack of democratic scrutiny of the military sector, as well as the special status of the arms industry and the frequently high complexity of arms procurement deals.
There are numerous aspects of the procurement process where problems can arise. Many of these are shared with the problems discussed above in relation to military spending in general: lack of defence policy, or failure to match procurement to policy; lack of transparency in military spending (arms procurement in particular is frequently the subject of off-budget spending through natural resource revenues); lack of parliamentary scrutiny; and lack of scrutiny by audit and anti-corruption institutions.
Arms procurement decision processes may fall wholly outside regular frameworks for procurement, or otherwise fail to follow standards of good practice. For example, Guatemala's procurement laws explicitly exclude the military. Ad hoc exceptions to normal procedures, such as direct government-to-government arms deals made by the president are not uncommon. Arms procurement may display far greater tolerance for sole-sourcing of contracts, secrecy surrounding tender requirements, and preference for domestic suppliers.
A further concern can be political interference in tendering processes, as in the controversial 1999 South African Strategic Defence Procurement package, which has been the subject of severe corruption allegations. The persistent use of agents in arms procurement, a major source of corruption vulnerabilities, is another feature typical of the sector.
The procurement of major weapon systems in major arms-producing countries is perennially the subject of major delays and cost over-runs. This partly results from the enormous size and complexity of projects, especially those involving new technology, and partly from the close relationship between government and the arms industry. In the United States, a 2010 Government Accountability Office (GAO) report found that the 98 ongoing Major Defense Acquisition Programs were collectively $402 billion over budget. In the United Kingdom, the National Audit Office (NAO) similarly reports failures in procurement processes and escalating delays and overruns.
Corruption in the military is a major problem in many countries, including in the developed world, and the less transparent are military budgeting, spending and procurement, the greater the dangers. Military corruption is also often facilitated by the political power of the military, with a resulting tendency for them to enjoy impunity for corruption.
As discussed above, arms procurement can be a major source of corruption. However, the problem can extend to other aspects of spending as well. ‘Ghost soldiers’, whereby salaries supposedly paid to non-existent soldiers are diverted to senior officers or officials, the award of contracts for goods and services to cronies, or even the use of fake contracts for goods and services that are never provided, and—in the countries where oversight is weakest—straightforward embezzlement of funds intended for the defence budget are also common channels of corruption.
Angola has in recent years become sub-Saharan Africa’s biggest military spender, but there are accusations that a great deal of this money represents corrupt payments benefiting the elite. Angola buys few major arms, but corruption in personnel and operational spending is widespread, so that some observers claim that ordinary soldiers often go malnourished or lack basic clothing and equipment, as the money intended for these purposes is diverted to senior officers.
In Nigeria, government reports in 2015 have uncovered billions of dollars’ worth of alleged corrupt payments from funds intended for arms procurement; not so much bribes received from suppliers, as embezzlement of funds from arms contracts that were never delivered.
Corruption in the military is increasingly realized to be not just an economic problem, with the waste of resources involved, but also a security problem, severely damaging fighting capability. Soldiers that do not receive their pay or are poorly equipped because of corruption, may not fight when the need arises, as has been the case in Nigeria and Iraq. It may also lead to front-line troops lacking key equipment should conflict arise, as in Ukraine. Troops that are demoralized by corruption higher up may also be more likely to commit human rights abuses. These three countries are all stark examples of how military forces plagued by corruption can fail to perform effectively, or even collapse completely, in the face of armed opposition.
China, the world’s second-largest military spender, has in recent years initiated a major crack-down on military corruption, as it has become aware both of the huge scale of the problem in the People’s Liberation Army—one report found that corruption occurred in all aspects of military spending—and the potential for corruption to compromise China’s military capability, undoing the effects of their vast spending on military modernization. Several top generals and military officials were arrested in 2014 and 2015 on corruption charges.
Transparency International Defence published a Government Defence Anti-Corruption Index in 2015, assessing the vulnerability of the military to corruption in the majority of countries worldwide, based on a variety of indicators of transparency, accountability, laws, and institutional controls. The Index found that a majority of countries covered (63 out of 114) had a 'Very High' or 'Critical' risk of corruption.
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