6. Military expenditure and arms production

Summary

World military expenditure, which has been
declining since 1987, corresponded to roughly $740 billion in
1997. The decline has averaged 4.5% per year during the 10-year
period 1988-97, but the rate of decline has slowed down in recent
years and was only 1% in the past two years.

The deepest cuts over the 10-year period were
made by Russia and other successor states of the USSR. Their
combined military expenditure in 1997 was around one-tenth of
that of the USSR in 1988. Spending has also declined significantly
in Africa, North America and Central America, where there have
been cuts by around one-third over the 10 years.

The Middle East and Asia have been exceptions
to the trend. Military spending in the Middle East has increased
by 9% but there have been considerable fluctuations over the
period, with a peak around 1991 as a result of the Persian Gulf
War. In both South and East Asia, military expenditure increased
by around 25% over the 10 years. However, in several East Asian
countries the military budgets adopted for 1997 were cut as a
result of the financial crisis in the region, and future expenditure
plans are being revised downwards.

The arms industries in most of the 20 major
arms-producing countries have been forced to cut their capacity
in response to the sharp fall in domestic arms procurement expenditures.
This has led to an intensive restructuring of the industry. In
spite of the return to growth in the arms purchases of many countries,
this adjustment process is expected to continue. The rate of
concentration remained high in the US arms industry in 1996 and
1997. The restructuring process in Western Europe progressed
more slowly, but there were indications in 1997 that the process
of international concentration was speeding up in Europe.

No data exist on global arms production. SIPRI
estimates for the top 100 arms-producing companies in the Organisation
for Economic Co-operation and Development (OECD) and the developing
countries (excluding China) show that the value of sales in 1996
remained virtually unchanged from 1995, at $156 billion. Among
the top 100 companies in 1996 US companies accounted for 55%
of the combined arms sales, while 40 West European companies
accounted for 35%, and 14 companies in other OECD countries and
8 in non-OECD countries (India, Israel and South Africa) together
accounted for the remaining 10%.

Appendix 6A. Tables of military expenditure

ELISABETH SKÖNS, AGNÈS COURADES ALLEBECK, EVAMARIA LOOSE-WEINTRAUB AND PETTER STÅLENHEIM

Appendix 6B. Tables of NATO military expenditure

Appendices 6A and 6B contain
tables of military expenditure by region, country and income
group and for NATO countries by function.

Appendix 6C. Sources and methods for military expenditure data

Appendix 6C explains the sources and methods for the military
expenditure data.

Appendix 6D. The military expenditure of The USSR and the Russian Federation, 1987-97

JULIAN COOPER

Summary

It is possible to estimate Soviet and Russian military spending. The problems involved in making such
estimates include lack of transparency (particularly before 1992),
'military' items placed under other budget heads, and the huge
difference between adopted military budgets and actual expenditures
during the 1990s. Estimates are presented in current roubles,
as a proportion of GNP and in US dollars using purchasing-power
parity rates,
with an extended time series for the military expenditure of
Russia and the former USSR. The conclusion is that military expenditure has
fallen from an estimated $257 billion in the USSR in 1987 to
$24.1 billion in Russia in 1997, and as a proportion of GNP from
16.6% in 1987 to 3.8% in 1997.

Appendix 6E. The 100 largest arms-producing companies, 1996

ELISABETH SKÖNS, REINHILDE WEIDACHER AND THE SIPRI ARMS INDUSTRY NETWORK

Appendix 6E contains financial and employment
data on the top 100 companies in the OECD and developing countries
in 1996.