Defence Budget: Security or Liability?

Dawn, June 15, 2005
Enigma of the defence budget
By Sherry Rehman

ONE of the issues that surfaces every year for budget-makers in Pakistan is the search for fiscal space. This year the trillion-plus budget continues to be squeezed on both sides by two large, seemingly fixed liabilities: debt servicing and defence spending. Despite defence absorbing more than a quarter of the national wealth, the subject, unlike debt servicing, has become inured from public debate and exempt from any parliamentary accountability.

A milestone, in fact, was crossed this year in the National Assembly as the young finance minister of state chose to ignore the inexplicable escalation in the defence budget and shied away from even mentioning the actual figure. Given the constant talk of transparency and good governance emanating from the government, it is not just surprising but shocking that the defence budget in Pakistan remains above public scrutiny as well as the law.

If lawmakers in Pakistan cannot discuss, let alone question the allocations and management of this chunk of the country’s wealth, then it is clear that once again, almost 30 per cent of the budgeted amount will remain out of parliament’s purview. This in turn means that the army’s business interests will also remain outside the public accountability mechanism.

Without explanation, the formal defence allocation account appears as a two-line statement divided into defence administration and defence services in the federal consolidated fund in the demands for grants and appropriations every year. As it stands, this year’s official defence budget itself posts a price hike of Rs 30 billion at Rs. 223 billion over last year’s allocation for Rs 193 billion in absolute terms. No doubt, as in previous years, this amount too will be subject to a revised estimate. Last year, for instance, official defence expenditure showed a difference of Rs 23 billion between initial and revised estimates for 2004-5.

The first glaring problem that arises with this defence budget is that it does more to conceal the allocation made than to enable its disclosure. To start with, the actual amount presented does not cover many expenses that accrue to defence. This is an accounting trend that has emerged over the last few years, when the international donor community has insisted that the military budget be reduced.

When parliamentarians or donors read the allocation for defence over the next fiscal year, it will not include the military pensions, which now run into 35.6 billion rupees. Nor will the defence outlay include Rs 1.4 billion demanded separately for the combatant accounts of the defence division which include the Maritime Security Forces and others with dotted line or direct reports to the military, Rs 40, 723 million in salaries for defence production, Rs 7.2 billion spent on the civil armed forces, Rs 3.7 billion for the Pakistan Rangers, Rs 1.5 billion for the Frontier Constabulary, Rs 359 million for the Pakistan Coast Guards, nor the one billion rupees set aside for military schools, cantonments and other residuals.

The Atomic Energy Commission too, which falls under the control of the Strategic Plans Division, has been allotted separate funds, yet the two billion rupees demanded this year is charged to civilian expenses under the cabinet division. But while the arguments for guns-versus-butter continue to rage in many places, this year’s Rs 272 billion development budget gets squeezed into carrying a load for the defence division as development expenditure worth Rs 642 million.

So essentially, even if the amount for military pensions is restored to the overall defence account and all the expenses mentioned above are added up, a revised figure of Rs 277 billion emerges, which demonstrates a clear rise of 43 per cent over last year’s official figure and a 14 per cent hike on the ‘hidden’ budget for last year. For 2004-5, this hidden budget amounts to Rs 242 billion instead of the Rs 193 billion figure that conceals military expenditures in civilian accounts. After specific claims that that there would be no rise in the defence budget, no credible explanation was even offered about the compulsions that propel this jump of 14 per cent.

The second question being asked is why Pakistan now needs a huge defence budget that is close to four per cent of its GDP, when India is spending 2.8 per cent? When the entire justification for maintaining a high defence budget is negated by the welcome downturn in hostilities with India, the rationale for Pakistan remaining hostage to its Cold War garrison-state identity should also naturally be under review. For a country that has fallen behind all of South Asia in its human development index, including Nepal and Bhutan, an urgent redefinition of outdated concepts of national security is surely expected.

But that is not all. The question of maintaining the eighth largest standing army in the world, when huge undisclosed amounts on the nuclear option are disbursed, becomes critical, for the simple reason that the nuclear deterrent capability was meant to substantially reduce the need for such a large conventional force. As it stands, one of the many reasons for continued high defence spending remains a large percentage of wasted resources which has arisen out of lack of oversight from non-military sources. While purchases of bullet proof limousines by the cabinet division can be questioned because they fall under civilian oversight, no such queries can be directed at the luxury cars and goods purchased by the military, its appointment of surplus employees, nor the expenditure accruing from duplication of activities or wrongdoing. From 1977 onwards, when Ziaul Haq began the practice of maintaining funds by the corps commanders who were at liberty to use them at their discretion, many scandals over money being siphoned for political activities have surfaced.

The inter-services intelligence agencies remain above the law and unaccountable, even though they reportedly absorb seven to 11 per cent of the military’s budget and use secret funds and ghost bank accounts to destabilize civilian political parties and their governments. The Mehran Bank scandal is an example of such financial corruption, when bribes worth Rs 14 million were unearthed as paid out by the ISI to manipulate the 1990 elections, a fact which was admitted in court by General Aslam Beg, the former COAS.

The third problem with this budget is that despite public clamour about the military’s vast real estate holdings, no equation is factored in to provide for the creeping militarization of the mainstream economy. The issue which is now constantly questioned without any satisfactory response is the size and quantum of the military’s holdings in what are traditionally commercial sectors.

The military’s four major welfare foundations are increasingly the subject of growing public disquiet because they pay no direct taxes on their corporate activities, operate as virtual monopolies, and elbow out civilian private enterprise in their subsidized operations. They function as military welfare trusts but provide a haven for retired and serving military officers who run a multitude of corporate ventures ranging from sugar, cereal, fertilizer production to running airlines, real estate, education, advertizing and others.

The four military foundations — the Army Welfare Trust, the Fauji Foundation, Bahria Foundation and Shaheen Foundation — for instance, now run a parallel commercial empire, but end up leaving scant traces of the net financial burden they impose on the public sector, because large allocations are made from the opaque defence budget.

Despite the fact that most of the foundations were raised with initial funding from the public sector and the sale of evacuee properties after 1971, their profits remain sky high because they remain above scrutiny even in their tendering for contracts and other market activities. The Fauji Foundation’s recent and controversial sale of Khoshki Sugar Mill at a low bid of Rs 300 million against the highest bid of Rs 387 million damages the institutional reputation of the military. The fact that government service rules prohibit public servants from running private enterprises is often ignored, while the military control of Pakistan’s public sector continues unabated as retired generals and brigadiers pick up lucrative posts and double pensions to run everything from public utilities, universities and accountability and national reconstruction boards.

The military as a class does itself a disservice when it allows rumour to replace public disclosure. Perhaps many of its legitimate procurement and modernization demands will then not be eclipsed by the paper-trail of undocumented purchases and irregularities unearthed by the auditor-general for Defence if it develops an institutionalized mechanism of requisitioning public money for its needs.

Unsurprisingly, it becomes difficult to forego development funds, even if they are poorly managed and often under-utilized, for an institution that fiercely protects its privileges and political role in the country by demanding immunity for itself while advocating accountability for others.

We the people, as they say, are not opposed to the military’s spending money in principle. We don’t even mind occasionally upgrading the proverbial barracks, but only if we know where the money is going.

The writer is a member of the National Assembly.
srehman1@comsats.net.pk