THIRD WORLD MILITARY AND ECONOMIC AUSTERITY: IMPLICATIONS FOR POLITICAL STABILITY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00443R000200310002-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 86
• Document Creation Date: December 22, 2016
• Document Release Date: October 5, 2010
• Sequence Number: 2
• Publication Date: November 1, 1984
• Content Type: REPORT

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Intelligence
Directorate of ~5~~
for Political Stability
Third World Military
and Economic
Austerity:. Implications
-seefer-
DI 84-10337
November 1984
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Intelligence
Directorate of Secret
Third World Military
and Economic
Austerity: Implications
for Political Stability
This paper was prepared by analysts in the
Directorate of Intelligence. Comments and queries are
welcome and may be directed to the Research
Director, Office of Global Issues
Secret
DI 84-10337
November /984
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Third World Military
and Economic
Austerity: Implicatio
for Political Stability
? Summary Many military establishments in debt-troubled Third World countries face
Irllormation availab/e financial constraints. In many instances, military-expansion programs have
as of 12 October /984 been cut back or postponed, and planned equipment purchases have been
was used in this report.
reduced, in some cases sharply. Our limited information on how individual
services are faring suggests that all of the services are being hit. For
example, total Third World purchases of surface ships have been cut to
only about one-third of the level that prevailed during the 1970s. LDC jet
fighter purchases have also declined sharply in recent years.
ratio of military spending to total government outlays. From 1980 to 1983,
the military share of government spending declined in Argentina, Indone-
sia, Nigeria, and Panama. In Brazil, the military share-about 7 percent-
In general, Third World countries ruled or tightly controlled by the
military are witnessing military budget austerity as often as those under
civilian governments. A rough indication of how the military is faring is the
iv~c aii~iiuy vu~ is yivuaviy ~~iii
countries. Among major debtors,
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Peru's share almost tripled to. 25 percent, one of the highest.
Although military concerns about morale and readiness are growing, the
defense-spending cutbacks thus far have not resulted in regime-threatening
instability. We have not observed much, if any, connection between
military austerity measures and coup attempts The only 25X1
military coup to occur in adebt-troubled country since t e nancial crises
surfaced in mid-1982 has been in Nigeria. In that case, the coup resulted
from broader military dissatisfaction with the civilian-government
performance ratifier than attempts to cut or change the military program.
This is not to say that recent budget cuts have not concerned the military in
key Third World countries:
? In the Philippines, low military sales have resulted in moonlighting and
increased military abuses among the civilian population.
? In Chile, there is some discontent among junior Army officers over low
pay and inadequate housing.
? In Nigeria, the military government is trying to placate junior- and
middle-grade officers to forestall coup attempts.
? In Argentina, budget issues have heightened military criticism of the
administration, especially among middle- and lower-ranking officers.
? In Morocco, military officials are concerned about dissension among
junior and noncommissioned officers over basic problems such as pay and
housing.
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DI 84-10337
November 1984
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It is not possible to determine whether or when this kind of military
disgruntlement would lead to military actions against existing government
authorities. We believe that the military by and large has been willing to
accept austerity measures as part of a broader program aimed at economic
stabilization. In our view, the military cuts most likely to trigger political
instability would be those to military salaries and perquisites-moves that
so far have been avoided or kept to a minimum.
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Table 1
Third World Military: Reaction to Economic Difficulties
MiBtary Ruled
Brazil
Status of Impact of Economic Adjustment on Military a Military's Response
Economic Adjustment
Program Budgeted Military Defense
Outlays b Imports Industries 1
i
IMF-supported economic adjust- Up slightly Remain low Expanding exports The military's concern about being held responsible for the failure of the current adjustment
ment program program has strengthened its commitment to return power to the civilians in March 1985.
IMF-supported economic adjust- Down from 1980 Some reductions Expanding exports Some discontent among junior Army officers over low pay and inadequate housing. Tight
ment program control of defense expenditures has not provoked a backlash in the armed services.
Widespread government-imposed Sharp increase Some increase Delayed or cut back Plans to streamline the military have caused some grumbling by young officers who see their
measures ~ prospects for advancement reduced.
Widespread government-imposed Slightly down Some reductions No change The military government is concerned about placating junior- and middle-grade officers to
measures and delays forestall a coup attempt. Numerous sources report growing perceptions among junior officers
that the leadership is corrupt.
Limited government-imposed Slightly increased Increased signifi- No change Morale in the armed forces is generally good. Pakistan's officers and enlisted personnel live
measures candy better than most of their civilian counterparts.
South Korea Limited government-imposed Down very slightly No significant Scaled back Reductions in defense expenditures have not been as significant as in other sectors of the budget
measures effect and do not appear to have prompted any discontent within the military.
Thailand
Turkey
CiriBan Dominant
Some government-imposed Sharp increase Reductions since New emphasis on Budget issues have heightened military criticism of the Alfonsin administration, especially
measures 1982 Falklands exports among middle- and lower-ranking officers. There are indications that senior officers are making
war the required cutbacks to maintain operational capabilities.
Limited government-imposed Increased sharply Some increase No change I Low pay for enlisted personnel has forced many servicemen to hold second jobs. Cairo is
measures enhancing perquisites to maintain military morale.
IMF-supported economic adjust- Significant in- Unaffected Not applicable
ment program crease from 1980
Has not prompted any bad reaction from the military because it has not experienced budget cuts
and relies on other sources for its income. Moreover, through Noriega, the defense forces are ac-
tually promoting economic adjustment measures.
IMF-supported economic adjust- Up sharply Recent reductions Development slowed Military has repeatedly warned the President over the past two years against drastic cuts in the
ment program and delays in ~ military budget. Many officers hold second jabs.
procurement
IMF-supported economic adjust- Slightly reduced Significant reduc- Not applicable I The military perceives that a lack of key pieces of military equipment is hampering its fight
ment program lions ~ against southern Sudanese dissidents.
Limited government-imposed
Significant in-crease Same increase
Unaffected
measures
j
IMF-supported economic adjust-
Small increase
Unchanged
Development de-
ment program
laved or scaled~back
]MF-supported economic adjust- Large reduction
ment program
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Widespread government-imposed Down sharply Some reductions Not applicable Low military salaries have resulted in moonli?htin? and increased militarv abuses against the
]MF-supported economic adjust- Cut sharply
ment program
]MF-supported economic adjust- Sharply reduced Significant reduc- Not applicable
ment program lions
e Comparison between early 1980s and present.'
Real terms.
The military has been unaffected by the economic adjustment program. It continues to receive
much of the equipment and materials it wants.
The military has been generally supportive of the economic adjustment program. No significant
discontent among military personnel.
Economic problems affecting the flow of materials, a reduction in living standards, or political
or military setbacks in Western Sahara may lead to disaffection in the military. Military
officials are concerned over dissension among junior and noncommissioned officers over basic
Some disgruntlement among armed forces stationed outside the capital because of reductions in
wages, food, and clothing. 25X1
Budget was only recently released. [f historical patterns are repeated, supplemental appropria-
tions will be made to satisfy the military's demands.
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Contents
Page
Summary
iii
Scope Note
ix
The Role of the Military in the Third World
1
The Strongest Institution
1
The Unifier of the Country
2
The Guarantor of Political Order
2
The Protector of Internal and External Security
2
Economic Crisis and the Military
4
Military-Ruled States
4
Military-Dominant States
5
Civilian-Dominant States
6
Outlook for US Interests ~
6
Third World Prosperity
7
Third World Stability
7
Third World Democracy
7
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Scope Note This research paper is part of the Directorate's ongoing study of Third
World political instability. This report examines the role of the military in
determining economic policies and performance in key Third World
countries as well as the impact of economic austerity on the military in
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Third World Military
and Economic
Austerity: Implications
for Political Stability
The Role of the Military in the Third World
i
fect their political stability.
After two decades of generally creditable economic
performance, the Third World has fallen upon hard
times. Unlike previous downturns, when certain LDCs
such as the oil producers or the newly industrializing
countries (NICs) were able to buck the trend, almost
all major Third World countries are suffering. Al-
thou hthe de ree of economic deterioration differs
from Brazil to the Philippines to
Nigeria, most Third World countries must contend
with economic problems that could substantially af-
instability in its own right.
The interrelationship between economic developments
and the military in many of these Third World
countries will play a key role in determining whether
or not political stability will be sustained. In some
cases the armed forces are the only defense against
revolt and external subversion. The power that de-
fends the state, however, also can be a source of
The military, typically the strongest of many weak
institutions in a Third World country, can often make
or break an economic austerity program. Since World
War II, Third World states under direct military rule
have usually been better able to establish and enforce
unpopular economic policies. States in which the
military is dominant but does not rule directly gener-
ally have the poorest record for maintaining austerity.
States in which civilian governments-either demo-
cratic or authoritarian-are dominant have a mixed
record. Those with well-established authoritarian par-
ties, such as Taiwan, Singapore, and Mexico, general-
ly are able to enforce austerity, whereas effective
democracies such as Venezuela and personalist dicta-
torships such as Haiti have much more difficulty.
The Strongest Institution
In most Third World countries, the military is the
strongest institution. Governments, whether nominal-
ly democratic or dictatorial, are typically high-wire
acts trying to fend off domestic and foreign interest
groups. The typical Third World president, with much
of his energy devoted to remaining in power, has
neither the time nor the authority to lead the nation.
Similarly, political parties, labor unions, and profes-
sional groups are typically vehicles for the aggran-
dizement of a dominant person or small group and can
have exceedingly shallow roots and little staying .
power. Such organizations frequently lack ideology or
constant principles; as mere reflections of their lead- 25X1
ers' ambitions, they seldom outlast their founders. _ __ _ ,
The military, by contrast, almost always transcends
its leadership. Often (as in Algeria) it was formed out
of a guerrilla army that had the prestige of having
defeated the colonial power. In other cases (as in India
and Pakistan), the military reflects the discipline,
efficiency, and service tradition instilled by the colo-
nial power. In Latin America the military often has a
tradition of over a century in countries where the life
of a political party is measured in months or years. 25X1
Moreover, unlike most other Third World institutions,
military establishments enjoy the reputation of mili-
tary heroes and victories. Most important, the mili-
tary heroes tend also to be the heroes of the nation.
In most Third World countries, the military considers
itself-and is viewed by most of the population-to be
more unified, disciplined, and honest than the country
as a whole. This perception is usually accurate. In
Egypt and India, for example, the military is consider-
ably less corrupt than the rest of society. The military
also stands out as the most disciplined and unified
element in undisciplined and divided societies. This is
the case in most Latin American countries as well as
elsewhere in the Third World.
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The final element in the military's institutional
strength is its near monopoly on the use and threat of
force. Despite the potential opposition of police forces
and labor or party militias-and, in some cases, the
presence of guerrilla or terrorist groups-the military
generally has the muscle to win contests with other
domestic groups. In most LDCs this is not true of any
other actor, including the chief of state. The ability of
the military to get its way is reflected in budgetary
decisions as well as broader political decisions. In half
of the 19 states we examined, for example, the
military accounts for approximately 20 percent total
budget outlays. (See table 2.)
The Unifier of the Country
Most LDCs have little geographic or ethnic unity, and
many lack religious and linguistic unity as well. In
such countries the military is often the most potent
unifying force. Political parties, by contrast, usually
reflect ethnic, linguistic, or class differences, and tend
to divide rather than unite the nation. Although the
military is not completely free of ethnic bias-in
Guatemala, for example, the largely Indian Army has
few if any Indian officers-they generally downplay
ethnicity in favor of a broader patriotism and profes-
sionalism. Draftees are taught the national language,
and, by being stationed away from their native village,
gain some knowledge of the country as a whole.
Moreover, an attempt is made to instill loyalty to the
military-and therefore to the nation-at the expense
of more parochial loyalties.
At the same time the military is often the only means
of social and economic mobility in stratified societies.
In most Third World countries, the army officer corps
is lower middle class-the sons of village shopkeepers,
small-scale ranchers, and the like. For those few.
officers with sufficient courage, intelligence, ruthless-
ness, or luck, the military offers wealth, social stand-
ing, and political power. Even less talented officers
usually manage to raise their status by a notch or two.
Moreover, in countries such as Indonesia and Argenti-
na where the military controls much of the industrial
sector, profitable positions are found for relatively
large numbers of officers and NCOs.
Most military coups are not simply power grabs by
ambitious generals. Rather, they are attempts to
"save the country from its government" by military
men who consider themselves to be more patriotic,
capable, and honest than the civilians they wish to
replace. The generals usually believe that, unless they
move, the country will fall prey to anarchy, civil war,
gross corruption, or civilian dictatorship. Since coups
are rarely staged against popular and capable govern-
ments-the move against Bhutto in Pakistan was a
partial exception-they are usually supported by most
civilians. An initially popular military government
may soon lose much of its popularity, however, as in
Chile, Brazil, and Argentina. Other coup leaders,
such as Nasir, may maintain their popularity for
decades.
The military sees itself as the obvious guarantor of
political order because of its relative unity, discipline,
and honesty; its continuity and ties to past glory; and
its relative indifference to ethnic, class, and other
divisions. Among LDC institutions, only the church
(or mosque), the university, and-on rare occasions-
the monarchy, the press, or a political party have the
self-confidence to rival the military as an alternate
"conscience of the nation." Despite exceptions such as
Iran and Nicaragua, the military usually defeats all
comers.
The Protector of Internal and External Security
Although strong military establishments often disrupt
political stability, the military is also the main line of
defense that a Third World government has against
subversion, revolt, or foreign attack. A weak military,
therefore, can also contribute to instability when it
fails to perform these defense functions. The Mexican
Revolution of 1910 was successful in part because
President Diaz had deliberately weakened the Mexi-
can Army to guard himself against coups. Similarly,
one team of Latin American scholars attributes the
Sandinista victory to Somoza's unwillingness to fi-
nance the Nicaraguan National Guard at a level
commensurate with the demands placed upon it.
Costa Rica's elimination of its armed forces, a move
that effectively protected the nation from coups, could
leave it open to Nicaraguan aggression.
The Guarantor of Political Order
As self-appointed "guarantors of political order,"
LDC military establishments can threaten stability.
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Table 2
Third World Governments:
Military Budget Estimates
1981
1.8
35.0 1
2.2 e
1983
1.1
22.2
7.3
Nigeria
1980
1.7
9.7
1.8 a
1984
1.5
9.3
1.8
Pakistan
1980
1.3
23.2
5.4 e
1984
1.9
26.5
6.2 e
a Share of GDP.
n Excludes or undercounts purchases of military equipment from
abroad and expenditures associated with military-production
companies.
Military expenditures.
n Does not include any US military assistance.
Fiscal year.
Military Budget Share of Share of
(billion US $) Government GNP
Budget (percent)
(percent)
Peru
1980
1981
1984
0.8
0.3 a
4.4
4.3
37.0
33.2
2.2
1.6
1979 0.244 11.0 3.2 a
1983 0.222 9.5 3.18 25X1
Thailand
1980
1983
Zaire
1980
1983
Zimbabwe
1980
1983
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Although the military is by far the dominant institu-
tion in the Third World, in some countries it is
challenged, or even eclipsed, by other actors. Success-
ful institutional challengers to the military usually
share at least some of the characteristics that explain
military dominance in other countries. For example,
like the military, the challenging institutions tend to
be less personalistic than other elements of society;
they have continuity and tradition and are often heirs
to past glory; in many cases they provide advance-
ment in stratified societies; and they may maintain
their own armed units-secret police, party militia,
or revolutionary guards
The religious establishment, especially in Islamic
and some Catholic countries, is often the strongest
rival. In Iran, revolutionary Islam has eclipsed all
other groups, and Islamic groups are strong political
factors in countries ranging from
Egypt to Indonesia. In the Philippines the Catholic
Church is an important political player. In Latin
America, the Church has lost most of the political
power it held in earlier periods, largely because of a
series of successful attacks by anticlerical govern-
ments in the 19th century but also because in many
countries it is split between radical and conservative
wings. Nevertheless, it is an important political actor
in some countries, such as Nicaragua, or regions,
such as Brazil's Northeast.
The monarch remains the dominant political actor
in Morocco, as it was recently in
Iran and Ethiopia. In some other countries, such as
Thailand, the monarchy is an important, but not
dominant, force. Although political parties are not
generally well developed in the Third World, they
dominate the scene in democracies such as Costa
Rica, Venezuela, Colombia, and India.
Most LDC governments, although well aware of the
coup danger, opt for a strong military. Few Third
World regimes believe this to be the waste of money
that it is considered among some Western critics.
Wars, skirmishes, and border disputes that could
escalate have been frequent: India-Pakistan, Iran-
Iraq, Argentina-United Kingdom, Egypt-Libya,
Peru-Ecuador, Thailand-Kampuchea, and Guatema-
la-Belize, to name just a few. Some Third World
nations, such as Pakistan, India, Turkey, and South
Korea, share borders with Communist powers or
surrogates. Others, such as Nigeria, Sudan, Peru, and
the countries of Central America face or have faced
internal war. Still others, such as Brazil and Uruguay,
faced terrorist/urban guerrilla threats that were be-
yond the capabilities of civilian police. In all of these
cases, a strong military was seen as a necessity.
To understand the dynamics between economic crisis
and the military, it is useful to divide Third World
countries into three groups-military-ruled states,
military-dominant states, and civilian-dominant
states. The relative differences in the power of the
military among these three categories cause different
reactions to similar external or internal economic
pressures. In several Third World countries, however,
the military establishment has shared in the economic
austerity that these countries are experiencing. Al-
though the cutbacks have not resulted in regime-
threatening instability, military concerns about mo-
rale and readiness are growing. (See table 2.)
Military-Ruled States
States under direct military rule have one great
advantage when facing severe economic problems-
they do not have to worry about keeping the armed
forces happy. Such regimes feel free to hold down
military budgets, if they believe such action is neces-
sary for economic health.' This was clearly the case
when the military took over in Chile and Brazil. It
should be noted that Argentina and Peru increased
their military budgets after the civilians came to
' Of course, military-ruled countries that face clear military threats
from their neighbors-such as South Korea and Pakistan-must
balance the need for economic austerity with the need for armed
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power, while the military government of Nigeria is
spending less on the armed forces than the civilian
government it ousted. The military also can force
unpopular but necessary economic measures on other
elements of the population. In this instance, Brazil in
the late 1960s presents the best example.
of several examples
coups require a particular 25X1
political environment. Most or all of the following
factors are present: a fragmented society; major
policy dlfjerences between the government and the
armed forces; a perceived government assault on
corporate military interests or dignity; widespread
complaints over pay, benefits, or career changes; and
public or private military complaints to the govern-
ment.
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Military governments are not intended to be perma-
nent, however, and problems arise during transitions
to civilian rule. Once a transition has begun, even if
nominal military power still has years to run, the
military can no longer knock heads with customary
abandon; it must cajole rather than control the, civil-
ian population. Thus, while it can still cut back _
defense spending, it may have lost the ability to raise
taxes on businesses or to hold down workers' wages
without strong political backlash. Moreover, any steps
to reimpose military authority over the civil econo-
my=no matter how necessary-would be seen at
home and abroad as attempts to block the restoration
of democracy. Brazil in the 1980s is perhaps the best
Under certain circumstances, military regimes must
also fear their companions in arms. The issues in-
volved in a military coup against a military govern-
most common explanations given by the leaders of
military-against-military coups are that the military
government: has not kept its promises, such as ending
civilian corruption or establishing domestic peace; is
seeking to perpetuate itself in power; is forcing the
army to take "police type" actions against civilians;
has become corrupt; or is kowtowing to foreign forces
such as aid donors, banks, or the IMF. Coups in
Argentina, Peru, Guatemala, and throughout Sub-
Saharan Africa are good examples.
Military-Dominant States
Governments in states where the military does not
rule but has the capacity-and precedent-to inter-
vene at any time tend to be weaker than either
military regimes or governments in civilian-dominant
states. These governments must constantly avoid of-
fending any important part of the military establish-
ment to prevent triggering a coup. Often they lean
over backwards to give the military benefits. When
Military establishments, however, can survive ex-
tended periods of political environments conducive to
coups. Coup plotters generally act only csfter a series
of precipitating events such as a political crisis; a
major public demonstration; an impending or recent
election; a major purge or reorganization of the
military; the arrest of a key military or civilian
leader; the assassination of a major government
.figure; or the absence of the chief' of state.
Although background factors and precipitant events
determine whether or not a coup will be attempted,
the success of the attempted coup depends on the
plotters. Most succes~'ul groups of plotters have
cohesion developed through long experience together.
other things (such as the level of external threat) are
equal, such governments tend to have much higher
military budgets than governments run directly by the
armed forces. Their fear that domestic disorder may
become an excuse for a coup can lead them to take
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much harsher action against civilian dissidents than a
purely military regime would be likely to take. Such
regimes are also prone to try to buy domestic peace
through expensive subsidies, wage increases, and simi-
lar measures. The outlook for effective action against
economic problems is generally poor in these states;
Peru is an example.
The military, which often shows great responsibility
and self-restraint when governing- directly, may be
notably irresponsible and unrestrained when dominat-
ing acivilian regime. Under these conditions, it is
largely concerned with purely military requirements
and desires. Moreover, individual services or even
individual officers may vie with each other for ever
larger shares of the resource pie. Nationalistic officers
with no direct responsibility for the economy may find
government dealings with foreign banks or the IMF to
be a "betrayal of national sovereignty." At the same
time, populist officers may find government wage
restraints or devaluation to be "crimes against the
people.'
In military-dominant states, the bottom line is often
that no one is willing to take responsibility for the
economy. The civilian government sees survival as its
highest duty to itself and to "democracy." Thus it is
highly unlikely to take economic measures that could
offend the military or cause domestic turmoil. The
military, on the other hand, usually is not united on
economic policy at this stage and thus exerts contra-
dictory pressure or gives no direction at all to the
government on economic policy. Only when economic
disaster is at hand is the military likely to seize power
and establish its own economic policy.
Civilian-Dominant States
The civilian-dominant states of the Third World have
much less in common than do either the military-
ruled or the military-dominant countries. They in-
clude democracies like Venezuela, authoritarian party
states like Mexico, monarchies like Saudi Arabia
quasi-dictatorships like the Philippines, and theocra-
cies like Iran. They may be as well run as Singapore,
as bureaucratic as India, or as brutal as Haiti. They
may be as prosperous as Taiwan or as poor as
Guyana. Military budgets are rarely immune from
budget cuts. In the Philippines, for example, the
military budget has decreased appreciably in real
In general, the civilian-dominant states cope poorly
with economic difficulty. In a few cases-such as
those of Iran and some civilian-dominant states in
Sub-Saharan Africa-this is because they are wedded
to an economic ideology that is inappropriate. But in
most cases, poor economic performance is related to
the political weaknesses of the civilian governments.
These governments are afraid to establish and perse-
vere in unpopular economic policies because they
depend on the votes of a grasping or unsophisticated
electorate-in effective democracies such as Costa
Rica and Colombia-or because they must buy off
interest groups or powerful individuals-in less-than-
democratic states such as Kuwait and Morocco
Those civilian-dominant states that are able to en-
force austerity-Taiwan, Singapore, Mexico, and per-
haps afew others-have strong political machines
that dominate the country's political life. These ma-
chines are typically authoritarian parties with demon-
strated legitimacy and staying power and with anear-
monopoly on the distribution of benefits within the
society. Such parties, despite their authoritarian cast,
are usually reasonably popular because they are open
to talented newcomers and are recognized as having
brought stability and economic progress. Where popu-
larity is not enough, such parties are generally willing
to use force. In this respect authoritarian party gov-
ernments tend to resemble the governments of mili-
tary-ruled states.
It is in the US interest to have the Third World
prosperous, stable, and democratic. Given the present
state of the world economy, few LDCs will be charac-
terized by all three conditions. Many-perhaps
most-will be neither prosperous, stable, nor demo-
cratic. Those with a strong military or civilian leader-
ship will be in the best position to implement the
economic policies needed to assure long-term prosper-
ity. We also believe that cuts in military or civilian
budgets can be accomplished in these instances with
the least danger of sparking political instability. Weak
governments or governments in transition face much
higher instability risks when attempting to impose .
stiff belt-tightening measures on society.
terms over the past several years.
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source bases.
Third World Prosperity
To some extent, the economic success of Third World
countries depends upon factors over which they have
little or no control. Even the wisest and most self-
sacrificing of economic programs can be thwarted by
a steep rise in interest rates, a fall in commodity
prices, a series of droughts, or a recession in the
developed world. Moreover, the various LDCs are far
from being equal in human or natural resources,
infrastructure, or geographic location. Given these
caveats, the countries with the most suitable economic
policies will have the best chance of solving their
economic problems. Economic policies must be both
formulated and implemented, and some countries,
because of ideological blind spots, appear incapable of
formulating sound policy. Bad policy, no matter how
forcefully implemented, will not work even in coun-
tries, like Iran and Tanzania, which have good re-
but there are frequent exceptions.
As often as not Third World governments have
formulated sound economic policies. The difficulty
has been that they frequently are too weak to imple-
ment them over the long term. We believe that this is
most often the' case with military-dominant and some
civilian-dominant states. Third World states ruled
directly by the military or by established authoritar-
ian civilian parties have the best chance of staying
with economic policies even when they are unpopular
with important segments of the population. Govern-
ments ruled directly by the military or by established
authoritarian civilian parties also generally do a bet-
ter job than the others in formulating sensible policies,
result is achieved
Third World Stability
Austerity programs-involving elimination of food
subsidies or price hikes for basic commodities, for
example-almost always undermine short-term politi-
cal stability. The argument is frequently made that
such programs are usually stabilizing in the long run;
the counterargument raised by Third World political
leaders is that a country that succumbs to instability
in the short run never gets to the long run. Only the
most secure governments can afford to take major
short-term risks for long-term benefits. Others must
temporize, hoping that half-measures will both keep
the political lid on at home and encourage some
loosening of international pursestrings. Often neither
In the absence of public consensus favoring auster-
ity-rare in the Third World and even in the devel-
oped world-the greatest risk is run by those coun-
tries where voting, legislative approval, and public
opinion are crucial to the political process. This
category includes such countries as Brazil, which is in
transition from direct militar;~ rule; Argentina," a
military-dominant state in which the military is
abashed and a large populist political party is playing
an obstructive role; India, where awould-be authori-
tarian ruler still depends on votes; and democracies
such as Venezuela where political parties are of near-
equal strength. The nature of their economic problems
will eventually force these countries to take significant
austerity measures that, because of the hard political
divisions within the state, could trigger popular un-
rest.
Military-ruled states and states with established au-
thoritarian parties stand the best chance of enforcing
austerity while avoiding serious unrest. The danger is
that these states may trust their strength too much
and demand more austerity than the public is willing
to tolerate. In extreme cases, such a course could lead
to severe instability or even revolution. We believe
that states such as Mexico, Indonesia, South Korea,
Taiwan, and Pakistan have governments that are
strong enough to enforce the required degree of
austerity and sensitive enough not to go too far.
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Third World Democracy
Economic crisis is not good for democracy in the
Third World. States that maintain democratic institu-
tions in good times may bypass these institutions when 25X1
times are hard. Labor unions or local governments
may be intervened by the central government. Martial
law or a state of siege may be declared. Elections may
be postponed. Real or imagined "economic criminals"
may be punished with little regard for human rights
or legal niceties. Strikes, demonstrations, and food
riots may be put down brutally. If an elected govern-
ment appears unable to cope with the crisis, there may
be a public demand that the military take over. This
has happened repeatedly in Argentina as well as in
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Brazil in 1964. Inability to solve economic problems
was a factor in coups in Indonesia, Pakistan, Chile,
Bolivia, Nigeria, and a host of other LDCs.
Sometimes, however, severe economic problems may
push a country toward democracy. Military or au-
thoritarian regimes may find themselves so over-
whelmed with economic problems that they will insti-
tute elections to rid themselves of the problems of
government. Economically inept military governments
have repeatedly used this tactic in Argentina.
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Zimbabwe's Military:
The Impact of Economic
Austerity
negotiations between Harare and the IMF
spread out, or forgo some foreign procurement, de-
fense expenditures in fiscal year 1985 (July
1984-June 1985) probably will exceed allocations,
increase friction within the government, and hinder
Despite the foreign exchange crunch and significant
cuts in the defense budget, the Zimbabwe Defense
Force continues its modernization program. Although
we expect that the armed forces will have to reduce,
anti-South African capability.
Since independence in 1980, the military has been
tasked with both defending against foreign threats
and helping the understrength national police to
maintain internal security. Recently, however, Harare
appears to be reevaluating its futile pursuit of an
probably will con-
combating antiregime dissidents.
vince Harare to spend less on conventional defense
over the next year or two and to strengthen forces
the expense of defending against a con-
ventional attack from South Africa is a prime element
3,000 troops in Mozambique.
The Army assumed a third mission in November 1982
by sending three battalions into Mozambique at the
request of President Samora Machel. These units-
the first deployed outside Zimbabwe-were to protect
the critical Beira-Mutera oil pipeline from Mozambi-
can insurgents, and to patrol the border with Mozam-
bique's Tete Province. Zimbabwe increased its com-
mitment in Mozambique this year when a fourth
battalion was sent to replace ineffective Mozambican
forces escorting truck convoys from Malawi to Zim-
babwe. We believe that Zimbabwe now has about
The civil war yielded two tribally based and compet-
ing guerrilla armies, an expanded white Rhodesian
security.force, and the general militarization of Zim-
babwean society. At independence, all these armed
.forces were combined into a national Army. Deeply
rooted tribal and personal rivalries were often only
papered over, however, and have resurfaced as several
units have mutinied.
Mugabe moved to strengthen discipline and.firmly
control the Army, initially by retaining the defense
portfolio for himself and by restructuring the.forces.
As the Army shrank from over 60,000 to about
42,000 troops today, Mugabe attempted to create a 25X1
force that would be dominated by those,former
guerrillas loyal to the ruling party. The government
also created two Army units composed of party 25X1
loyalists and trained by North Koreans: a 5,000-man 25X1
5th Brigade and a 3,000-man Presidential Guard. 25X1
Moreover, the North Korean- trained People's Mili-
tia, organized in 1982 to help control dissidents and 25X1
ultimately to include 20,000 members, is intended to 25X1
be the ruling party's "eyes and ears,'
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Mugabe has tried to give senior military o.~icers a 25X1
vested interest in his continued rule by involving
several of them in party affairs,
tiers are closely connected with the Zimbabwean
defense establishment. He has also allowed several
top civilian o,~cials to share responsibilitieslor
defense and security policy.
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Zambia
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payments.
Prime Minister Robert Mugabe's stated goal is to
transform Zimbabwe into aone-party socialist state.
Financial realities have slowed Mugabe's progress
toward this goal and his economic reforms so far have
been cautious. Zimbabwe now faces its worst econom-
ic crisis since independence. Three years of devastat-
ing drought and the continuing effects of worldwide
recession have caused a slowdown in real GDP growth
from annual rates of 12 percent in 1980 and 1981 to
only 2 percent in 1982, and a decline of about 3
percent last year. Harare has reacted by cutting back
on social spending and food subsidies, imposing wage
controls, increasing taxation, and restricting foreign
for overseas purchases
Zimbabwe's budget for fiscal year 1985 is aimed at
slowing the rising government deficit. Expenditures
are set to increase by only 7 percent, although the
prevailing rate of inflation is 19 percent. Nevertheless,
the planned deficit of $560 million represents 11
percent of projected national income-substantially
above the IMF's guideline of 5.5 percent-and may
hinder negotiations between Harare and the IMF.
Harare's last standby agreement with the IMF col-
lapsed when it could not meet the Fund's targets, and,
as a consequence, little foreign exchange is available
To resume the growth it enjoyed in 1980 and 1981,
Zimbabwe must resolve its foreign payments prob-
lems-including a ratio of debt service to exports
exceeding 25 percent-and reduce government expen-
ditures. Foreign exchange difficulties will worsen in
fiscal year 1985 because Zimbabwe needs to import
up to 400,000 tons of corn and wheat. Short-term
opportunities to improve export performance are lim-
ited by the drought and by continued soft markets for
Zimbabwe's mineral exports. Longer term prospects
hinge on Harare's ability to attract foreign invest-
ment. Zimbabwe's investment policies, however, re-
main ambiguous; Harare welcomes investment, but
manages the economy through controls that diminish
private-sector incentives. We expect foreign exchange
constraints to plague Zimbabwe for several years.
Zimbabwe: Defense Expenditures
as a Share of Total Budgetary
Expenditures, 1980/81-1984/85
Original
budget
~ Actual
Military expenditures, particularly foreign purchases,
will be targeted to narrow the budget deficit. The
military's share of government expenditures has de-
clined steadily since fiscal year 1981, even though
defense spending in the past three fiscal years has
exceeded allocations. The postindependence demobili-
zation of one-third of the large national Army slowed
the rate of increase in defense spending, while new
social programs spurred increases in nondefense allo-
cations.
An important trend has been the increased demands
by the military on Zimbabwe's scarce foreign ex-
change. Whereas over 75 percent of the fiscal year
1982 defense budget was devoted to personnel costs,
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emphasis has shifted recently toward foreign equip-
ment and training of blacks to take over from white
officers who are emigrating. Moreover, although total
defense spending in terms of local currency has
grown, the declining value of the Zimbabwean dollar
has reduced the overseas purchasing power.
The demands of the military for more modern equip-
ment have irritated some Zimbabwean Cabinet mem-
bers. Finance Minister Chidzero, a moderate in the
has pushed for cuts in
~Chidzero
was particularly angered by the Army's recent pur-
Britain was supplanted as the major source of foreign
military assistance following a 1980 North Korean
commitment of military equipment to outfit the 5th
Brigade. Although Harare reportedly reduced the
number of North Korean instructors from over 100 to
about 30 in mid-1982 and has turned instead to the
British for armor training, it has maintained the
North Korean,connection, presumably to demonstrate
nonalignment.
China also has become an important source of mili-
tary equipment and training. About 30 Chinese in-
structors have been training Zimbabwean armored
units since late 1983.
Harare has ordered for delivery next year 20 Chinese
F-6 'et fi hters. Moreover
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The defense allocation has been cut 16 percent in
nominal terms for the fiscal year 1985 budget, an.
almost 36-percent cut in real terms on domestic
purchases and 60 percent in real terms on equipment
purchased abroad. Much of the reduction in foreign
purchases represents the transfer of expected fiscal
year 1985 funds into fiscal year 1984 to cover the
accelerated purchase of the Brazilian armored cars.
Funds for operation and maintenance of the Air Force
are scheduled to be cut from $19 million to $12
million
Zimbabwe relies on Britain, North Korea, China,
Pakistan, and Brazil for military training and over 90
percent of its equipment purchases. After independ-
ence, aBritish Military Advisory and Training Team
(BMATT) arrived to assist with the transition to a
national Army. The BMATT's services were funded
entirely by London, and several British firms sold
military equipment to Zimbabwe. The most notable of
these purchases were the jets from British Aerospace.
Zimbabwe's Air Force suffered a serious loss in July
1982, when sabotage of the Thornhill Base destroyed
or damaged a dozen of these aircraft. The subsequent
trial of several senior white officers accelerated the
departure from the Air Force of other white person-
nel.
.Zimbabwe's Air Force suffers from shortages of
skilled pilots and navigators, maintenance equipment,
and repair skills. Last year, Zimbabwe signed an
agreement with Pakistan for three years of training
and logistic support for the Air Force.
Zimbabwe's recent purchase of 90 Cascavel armored
cars from Brazil is the largest defense acquisition by
Harare since independence. The deal, part of a five-
year program announced in early 1983 to replace
obsolete Army vehicles, includes spare parts as well as
training _for gunners, drivers, and maintenance per-
sonnel. The purchase almost triples Zimbabwe's in-
ventory of armored cars. The new relationship with
Brazil further diversifies Zimbabwe's sources for
arms but complicates training and logistic support.
Although Zimbabwe will remain incapable of defeat-
ing adetermined South African invasion, foreign
training and deliveries of military equipment are
strengthening Zimbabwe's forces to deal with lesser
and more likely threats. Most notably, improved
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Zimbabwe: Major Arms Deliveries and Training, 1980-84
1981
22 T-55 tanks, fourteen 122-mm artillery
and rocket launchers, 30 mortars, and over
4,000 rifles
Included in grant, North Korea
1981
Two Canberra bombers, five Hawker
Hunter fighters
$2 million, Britain
1982
107 trucks and 32 other vehicles
$7 million grant, North Korea
1982
8 Hawk ground attack and trainer jets
$72.3 million, Britain
1983
Training
xn, China
1983-84
Advisers and training
xn, Pakistan
1983
Small arms and ammunition
$4 million, USSR
1983
17 SF-260 turboprop trainers and two Bell
412 helicopters
$12.5 million, Italy
130 instructors reduced to
60 in 1983
50 to 140 instructors for 5th
Brigade and Presidential
Security Unit
60 officers, and logistics
specialists for Air Force
$17 million deal includes
four more aircraft to be
delivered
Largest arms deal since
independence
mobility will enhance antidissident.operations in Mat-
abeleland and perhaps enable more effective protec-
tion of truck convoys in Mozambique. But the Air
Force is largely nonoperational because most of its
aircraft have Pakistani pilots who cannot participate
in combat operations.
Although we expect a supplemental defense allocation
and overspending this fiscal year, in our judgment, the
military will have to restrain its modernization pro-
gram. Defense funding probably will become an in-
creasingly contentious issue in the Zimbabwe Cabi-
net, as well as in negotiations between Harare and the
IMF.
The military continues to explore other possibilities
for acquiring major defense items. Such plans are
likely to depend on concessionary financial terms,
which many West European and Third World suppli-
ers are increasingly reluctant to provide. As a result,
Zimbabwe's financial problems might provide an
opportunity for the Soviet Bloc to expand its incipient
arms relationship, something that Harare has so far
resisted.
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The Argentine
Military: Impact
of the Economic Crisis
more responsive to civilian authority
The Argentine military, traditionally insulated from
fluctuations in economic performance, faces severe
budget cuts over the next several years as President
Alfonsin tries to reorder the country's shattered econ-
omy and bring the military under closer civilian
supervision. As a result, after considerable hesita-
tion-inspired partly by concerns over the military's
reaction-Alfonsin has reduced armed forces expen-
ditures to about 60 percent of 1983 levels. In this way
he hopes to increase the funds for economic reactiva-
tion and social programs while making his economic
policies more palatable to foreign creditors. In addi-
tion, Alfonsin has implemented other reforms to
promote interservice cooperation, which he believes
will lead to further economies and make the services
military capabilities.
During the first four months of 1984, the cuts ap-
peared to have little impact on military operations.
Since then, however, constraints have exacerbated
interservice rivalries, reduced morale, and diminished
ers are likely to rally
Moreover, the budget cuts have been a major cause of
growing military dissatisfaction with the government.
Disgruntled noncommissioned officers have formed
organizations on several military bases, and some
senior officers from all three services have done so as
well, despite ongoing interservice rivalries. Such oppo-
sition, however, is still relatively isolated and no clear
figure has emerged around whom dissident command-
difficult.
We estimate that any major near-term confrontation
between the government and the armed forces would
be preceded by a sharp deterioration in the economy,
which would generate widespread social unrest and
renewed terrorism. Executive or legislative policies
that appear to threaten the military, especially in the
area of human rights investigations, could also spark a
showdown. Even then, in our view, divisions between
and within each of the services and the current lack of
broad popular support would make a successful coup
Argentine military officers tend to be fiercely nation-
alistic and in general share a deep distrust of civilian
government. The armed forces have moved against
elected officials, however, only when civilians, them-
selves concerned about economic political instability,
have convinced the military that the majority of
Argentines backed intervention. Thus, with civilian
connivance, the military has overthrown elected gov-
ernments six times since 1930, most recently in 1976.
c
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Until the 1976 intervention, military officers played
the role of arbiter, holding power only long enough to
assure a smooth return to civilian rule. Following the 25X1
1976 coup, however, the armed forces were not only
guarantors of peace, but became reformers bent on
rooting out what they saw as the source of Argentina's 25X1
chronic instability-leftist subversion, a corrupt labor
and political leadership, and economic mismanage-
ment.
The military assumed office in 1976 amid 400-percent
inflation and widespread terrorism. The regime adopt-
ed measures to stabilize the economy and restore
international investor confidence. Exports increased,
the public deficit as a share of the GDP dropped, and
soaring inflation was slowed dramatically. The eco-
nomic measures, however, were at a high cost to
workers, who saw their living standards drop sharply.
At the same time, the security forces defeated the 25X1
leftist guerrillas in the so-called dirty war, during
which thousands of suspects were detained and subse-
quently killed.
By 1981, pressure for a return to civilian rule had
started to build. Economic mismanagement and rap-
idly accumulating foreign debt, combined with the
onset of the worldwide recession, led to an economic
downturn. This, combined with the growing realiza-
tion of the widespread abuses of human rights, had all
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but discredited the military. The 1982 Falklands war
further damaged the economy and convinced many
senior commanders that they should return to the
barracks and focus on correcting the serious military
deficiencies highlighted during the conflict. Left with-
out civilian support, the armed forces scheduled elec-
tions for October 1983. By mid-1983, the inflation
rate had surpassed 300 percent, and an IMF program,
negotiated only months earlier to stave off default on
the foreign debt, unraveled.
Following the 1976 coup, the military undertook a
major weapons modernization program that was
largely unaffected by variations in overall economic
performance. The share of the national budget
claimed by defense and internal security climbed
steadily between 1976 and the onset of worldwide
recession in 1982. At its peak in 1981, military
expenditures were 2'2 percent of the budget, slightly
less than the combined outlays for health, education,
and social welfare. Moreover, these figures exclude
the massive expenditures by the vast network of
military-owned industries that expanded during this
period and include such diverse businesses as steel
mills, arms factories, nuclear research facilities, lum-
ber mills, resort hotels, and gambling casinos. Some
academics and other observers estimate that the
military's holdings may produce nearly half of GDP.
The massive purchases of weapons began after the
Argentines narrowly averted war with Chile in 1978
over the disputed Beagle Channel. Buenos Aires was
determined to maintain a large margin of strength
over Santiago in preparation for any confrontation.
The US Defense Department estimates that during
1978-81 the Argentine armed forces contracted for
slightly more than $3 billion in arms.
Raul Alfonsin captured the presidency last October
largely because of his antimilitary campaign plat-
form. Although reaffirming his commitment to a
strong defense establishment during the campaign, he
called for an end to the political role of the military
and vowed to slash defense spending to provide more
funds for social programs and public works. Alfonsin
argued that savings could be achieved without dimin-
ishing capabilities by improving interservice coopera-
tion, ending redundancy in purchasing, and reducing
manpower levels. He also hinted
that reducing tensions with Chile over the Beagle
Channel and with the United Kingdom over the
Falklands would diminish the need for additional
arms purchases.
The new President moved quickly in the weeks follow-
ing his inauguration to subordinate the military to
civilian authority. He decreed changes in the high-
command structure that placed the three service
chiefs under the civilian defense minister and created
a joint-chiefs system to centralize control. Moreover,
he moved the intelligence and internal security serv-
ices and many of the military-owned industries under
civilian control.
Despite his campaign promises to cut deeply into
defense spending this year, Alfonsin was reluctant to
make massive reductions during the first few months
of his administration. Evidence suggests he realized
that military leaders, though weak and divided, posed
the most serious long-term threat to his government.
Moreover, Argentine officials told US Embassy per-
sonnel that they saw little room for significant sav-
ings, given the large portion of the military budget
that went for fixed items-personnel costs and the
completion of outstanding contracts. Other evidence
indicates that the administration lacked the expertise
and staff to dissect defense-related expenditures.
Some $3 billion in foreign debt incurred by the
military, for example, went undiscovered until late
February.
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Argentina: Selected Deliveries of or Contracts Signed
for Major Equipment, 1978-83
Quantity
Approximate
Value
(million US $)
Quantity
Approximate
Value
(million US $)
France
587.2
United Kingdom
187.0
Exocet missiles
13
7.0
Type-42 destroyers e
2
70.0
Mirage III fighters
6
70.0
Blowpipe SAMs
Unknown
4.0
Antisubmarine warfare frigates
3
120.0
Unspecified equipment
Unknown
107.0
Panhard armored vehicles
127
112.0
Lynx helicopters
2
6.0
Super Etendard naval jets
14
160.0
Austria
58.0
Roland I SAMs
12
50.0
PJK self-propelled antitank guns
58
58.0
Exocet missile system
Unknown
8.2
PJK self-propelled antitank guns
57
Unknown
Crotale SAM unit
1
10.0
(including ammunition)
Mirage V fighters
14
50.0
Israel
270.3
Italy
115.9
Patrol boats
7
5.3
Mamba antitank missiles
500
0.5
Mirage V fighters (with air-to-
37
265.0
105-mm towed howitzers
10
1
2
surface missiles)
.
A-109 helico
ter
unshi
s
9
30
0
Peru
50.0
p
g
p
.
105-mm howitzers
Unknown
1
2
Mirage V fighters
10
50.0
.
MB-339 jet aircraft
10
30
0
Brazil
75.0
,
.
Albatross missile system (with
4
3.0
Xavante jets
19
75.0
Aspide missiles)
Netherlands
6.6
35-mm antiaircraft guns (with
18
50.0
Flycatcher antiaircraft defense
4
6.6
associated fire-control radars)
system
West Germany ~
1,872.2
Switzerland
Unknown
Submarines
6
464.0
Skyguard air defense system
1
Unknown
MEKO destroyers/escorts
10
1,286.0
Skybat air defense system
6
Unknown
Cobra antitank missiles
780
1.0
Patrol boats
20
110.0
20-mm antiaircraft artillery guns
40
11.2
the process would take years.
As a result, Alfonsin decided to implement cuts
gradually-relying on attrition, for example, to re-
duce manpower costs. The Defense Minister in Febru-
ary openly admitted that attacking the military bud-
get was akin to moving a mountain and controlling
By April, however, it had become apparent that
Alfonsin's efforts to curb soaring inflation were not
succeeding. Crucial negotiations with the IMF were
stalled on, among other issues, the size of the public
deficit. Alfonsin, loath to make politically sensitive
cuts in social spending, reexamined the military bud-
get and decided to proceed with much larger reduc-
tions to reduce the deficit. The decision reportedly
followed intense debates within the government be-
tween the Defense Minister, who was intent on as-
suaging officers' concerns about Alfonsin's attitude
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toward the military, and the Minister of Economy,
who was equally intent on using the cuts as a central
part of his formula for meeting Western bankers'
lending criteria without reducing social expenditures
or slowing economic reactivation. Ultimately, Alfon-
sin opted for reduction of about 40 percent in military
expenditures below 1983 levels.
The budget cuts have aggravated traditional rivalries
between the services as competition for scarce funds
has intensified. In March, for example, a senior Air
Force officer was retired and then arrested for criti-
cizing the new command structure, which he claimed
gave the Army and Navy too much of the budget.
More recently, the Navy and Air Force have been
squabbling over control of a squadron of A-4 fighter
aircraft purchased from the Israelis but not yet
delivered because of US arms sales restrictions.
Moreover, the cutbacks have driven sizable segments
of the officer corps firmly into the antigovernment
camp.
among officers over a range of government policies. In
early September
nearly 100 active duty and retired officers rom
all three services had set aside their differences to
form a grouping to discuss the internal situation,
including the impact of the economic crisis on the
military. Noncommissioned officers, severely affected
by the cuts, have organized on several military bases.
They have carried out printed propaganda campaigns
against government and have criticized their officers
for not presenting their case more forcefully to the
administration.
Alfonsin is keenly
aware of the economic difficulties facing the services
and has tried to assuage their concerns. He has, for
example, assured officers that the military is not
being singled out for cutbacks and that funds will be
restored as the overall economic situation improves..
To demonstrate good will he has granted special wage
increases to officers, especially in the lower ranks.
Further, according to press reports, he has agreed to
continue funding the Air Force's costly advanced
missile research program, and he has allowed the
military to maintain direct control over a number of
key defense industries. Indeed, a variety of evidence
suggests that he is encouraging arms exports from
these plants to reduce their drain on the treasury.
steadily eroding morale in all
the services and consequent increases in discipline
problems, including absenteeism and poor perform-
ance. By June, largely as a result of the services'
growing economic difficulties, nearly 10 percent of
the Army's NCOs had requested retirement. The
Navy was losing petty officers and technicians at a
similar rate. Many officers have been compelled to
take extended leave to reduce operating expenses,
resulting in what one senior commander called a
"nine-month military." Applicants for the Argentine
Air Force and Naval academies have significantly
slackened. Conscription has been sharply reduced,
with draftees, who have accounted for nearly 50
percent of the Navy's and 80 percent of the Army's
manpower, serving only abbreviated portions of their
normal one-year requirement.
Training has also been affected.
that schedules have been cut back and
that a shortage of basic equipment, including uni-
forms, has further slowed training. In the Navy, fuel
shortages have arisen, forcing reductions in time at
sea, and naval pilots are having difficulty maintaining
proficiency. Many of those who have left the Navy
were instructors, thus slowing the integration of new
manpower. Most recently, the Argentines almost had
to postpone naval joint maneuvers with Brazil because
of shortages of funds. Air Force pilots and trainees
face similar difficulties.
There are mounting indications that the funding
cutbacks are taking their toll on operational capabili-
ties. hat shortages of
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onry, and giving pilots more realistic training.
inventories, including expanding air refueling capa-
bilities, enhancing onboard avionics, improving weap-
Although the Army's Falklands war performance was
the worst ojthe three services, commanders have been
embroiled in the transition to civilian rule and have
taken only tentative steps to address shortcomings.
An enhanced air defense capability has been identi-
fced as a major need and has been partially fulfilled 25X1
with the purchase of several Skyguard and Skybat
fire-control units and French-made Roland antiair-
exercises to enhance operational readiness.
The three services have tried to learn from the 1982
Falklands defeat. The Navy, shocked by the sinking
of the cruiser Belgrano and its inability to counter the
British exclusion zone around the islands, has
worked the hardest to improve capabilities. The
addition ojeight previously ordered ships will en-
hance antisubmarine warfare capabilities, and deliv-
ery of the last ojthe Super Etendards will improve
the Argentines' ability to challenge war vessels. Other
Navy measures include: expanding air refueling capa-
bilities, reconfiguring commercial aircraft for mari-
time patrol missions, and more frequent and realistic
investment, research, and development costs.
craft missiles.
The inability to obtain needed armaments during and
cjfter the war reinforced the military's determination
to produce domestically some essential equipment.
Senior officers hope to improve in-country manufac-
turing capabilities and to move forward with current
and new coproduction and development agreements
with West European firms. The military believes 25X1
enhanced manufacturing capabilities are critical to
increasing export sales that would help offset capital
Air Force commanders have made no major aircraft
purchases other than the $110 million worth of
Mirages acquired from the Israelis and Peruvians in
1982. Last year the Air Force publicly announced it
would not buy any advanced fighter aircraft, ostensi-
bly because of the national.financial crisis. Neverthe-
less, they have requested A-4 fighter aircraft from the
United States-now that the arms embargo has been
Ilfted-to replace those lost during the,fighting. Like
their naval counterparts, commanders have focused
on upgrading the capabilities of aircraft already in
We expect the new economic realities to continue to
cause near-term difficulties for the services. As the
impact of funding cutbacks spreads, interservice rival-
ries are likely to continue and may intensify, dimin-
ishing prospects for implementing more cost-effective
administrative and procurement practices. Maintain-
ing manpower levels is also likely to be difficult as
ongoing cutbacks in funds discourage enlistments and
prompt more key personnel to retire. Foreign ex-
change restrictions will continue to complicate pur-
chases of spare parts, reducing maintenance opera-
for payments to suppliers.
technicians, and spare parts have considerably re-
duced the readiness of Air Force and Navy combat
aircraft. The Air Force is unable to purchase more
advanced fighter aircraft to replace its rapidly aging
inventory. For its part, the Navy has sharply reduced
flight time in its Super Etendard strike aircraft
because of the cost-$40,000 per hour-of operating
them. The Navy reportedly is also considering selling
most of its new surface combatants and submarines
because it cannot provide adequately trained crews or
afford maintenance. All three services, while continu-
ing their post-Falklands equipment upgrading, have
been forced to stretch out the programs, and there
have been reports of difficulties in meeting deadlines
tional capabilities.
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There are some signs of efforts by military leaders to
adjust to the cutbacks. Many recently appointed
senior commanders are sympathetic to Argentina's
financial plight and appear willing to make sacrifices.
Moreover, most commanders agree that considerable
room exists for eliminating waste.
the services are making cuts in nones-
sential areas to devote more funds to maintaining
capabilities. As a result, key programs to upgrade
equipment started after the Falklands war are likely
to continue. the Army,
at least, is assuming that Simi ar u get constraints
will persist next year, and commanders are planning
accordingly. Further, the government's arms exports
drive could help compensate for planned cutbacks.
We do not believe that budget cuts alone will prompt
a coup. Nevertheless, they will continue to serve as a
useful rallying point for military opponents of Alfon-
sin. The greater threat to the Alfonsin government by
the military, both this year and over the longer term,
in our view would be a further sharp decline in the
domestic economy that sparked widespread labor
unrest and rekindled terrorism. Alfonsin has commit-
ted himself to preventing a revival of mass worker
unrest and insurgency. Should the military believe
him incapable of maintaining order, officers could
begin to reassert themselves to force the President to
quell the unrest or face removal from office.
Implications for the United States
Argentina's current economic difficulties will have
little impact on potential arms transfers from the
United States. Buenos Aires had been unable to make
purchases from the late 1970s until late last year
because of restrictions imposed for human rights
violations. Certification on human rights last Decem-
ber did not significantly change our military relation-
ship with Buenos Aires. US support for the United
Kingdom during the Falklands war only reinforced
Argentine beliefs that Washington could not be
counted on to fulfill arms contracts. Instead, the
military found what it believes are more reliable
suppliers in France, West Germany, Italy, and Israel.
Should Alfonsin be overthrown as a result of the
economic crisis, we believe a successor military gov-
ernment will be far more nationalistic. Such a govern-
ment-whether of the right or left-is likely to blame
the United States and other Western countries for
failing to provide Argentina with sufficient support
and will be difficult to deal with on bilateral issues.
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Egypt's Military: Impact of
Economic Difficulties
are becoming increasingly limited.
Egypt's tight foreign financial situation has led to a
guns-versus-butter debate within the Cabinet, and
President Mubarak already has requested bilateral
debt relief on military loans from the United States.
Foreign payments difficulties and a debt crisis could
threaten Egypt's longer term military modernization
program and restrict benefits for armed forces person-
nel. Should Egypt ultimately be forced to take auster-
ity measures-perhaps under IMF auspices and as
part of a debt rescheduling exercise-the government
would risk urban unrest that might test the military's
loyalty to Mubarak. Cairo is trying to avoid these
difficulties by deferring hard decisions, but its options
Israeli peace treaty.
The Egyptian military remains the most important
political force in Egypt. Its direct involvement in
decisionmaking, however, has declined since the late
1960s, when military officers constituted over half the
Cabinet. Now the officer corps exerts influence main-
ly as a powerful silent partner whose opinion limits
the extent to which any President can redirect Egyp-
tian policy. Mubarak-an Air Force officer before
becoming Sadat's Vice President-seems inclined to
follow the policies that have the broadest support
within the military: a nonradical approach to domestic
problems, a generally pro-Western albeit still non-
aligned foreign policy, and adherence to the Egyptian-
Peace with Israel and an emphasis on economic
development have altered the status and objectives of
the armed forces. We believe the military's present
goals include:
? Replacing worn-out and obsolete Soviet equipment
with new Western weapons.
? Restructuring the armed forces into smaller, more
mobile units.
? The military is the ultimate guarantor olpolitical
order and the source o.J~ most of the country's top
leadership. The military also backs up the police
and Ministry oJ'Interiorforces in the event of
serious domestic unrest.
? By Middle Eastern standards, the Egyptian o,~cer
corps is a stable and professional Jorce. Its middle-
class composition contributes to this stability by
imparting a degree of untlormity to its social,
economic,. and political goals.
? The military is the most disciplined institution in
Egypt and has a strong sense orcorporate identity.
? Restoring the prestige enjoyed by the armed forces
following the 1973 war. Many Egyptians now ques-
tion the need for a large army in the absence of a di-
rect military threat from Israel.
? Regaining economic and social status for military
personnel. Under Sadat's "Open Door" economic
policies, goods available for top military officers and
only a few others in society-good housing, cars,
and television sets-are now more widely available.
The Military and the Economy
The Military Budget. Official budget data for Egyp-
tian FY 1983-84 (July-June) show military expendi-
tures of $2.5 billion-about 13 percent of government
expenditures and nearly 9 percent of GDP. These
percentages are well below the peak in 1972, when
military spending was 33 percent of government
outlays and 15 percent of GDP. As in most Third
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World countries, however, military spending data are
incomplete. The available data are not broken down
into specific categories, and they annear to omit
purchases of foreign equipment.
Cairo's attention in recent years has swung away from
the military toward domestic economic concerns. The
military's share of the budget has been shrinking
because of the importance placed on public-sector
investment and provision of consumer subsidies.
Nonetheless, the government's budgetary decisions
have not affected imports of weapons, and the mili-
tary appears to have considerable freedom to set its
own spending levels
~a select group of Cabinet members each year
"examines" the military budget; by implication, these
ministers have little power to influence military
spending directly.
Foreign Military Purchases. The Egyptian armed
forces have depended on foreign credits or grants to
finance major arms purchases. In the 1960s and early
1970s, the USSR provided about $4 billion in low-
interest loans for weapons purchases. As relations
with the Soviets deteriorated, Egypt began to receive
assistance from oil-rich Arab states to fund procure-
ment of weapons from Western countries. Starting in
1979, the United States provided long-term credits or
grants under the FMS program. Most purchases from
other Western countries, particularly France, appear
to be financed by medium-term credits.
Defense Industries and Sales. Military factories pro-
duce small arms, ammunition, spare parts, vehicles,
and other equipment for the Egyptian armed forces
and for export. The factories receive operating subsi-
dies from the government. Cairo is pursuing copro-
duction arrangements with foreign firms to produce
fighter aircraft and tanks, but the lack of funding is a
major problem
Civilian Projects. Since the mid-1970s, the Egyptian
military has become involved in a wide range of
economic endeavors in an effort to increase its self-
sufficiency and to justify its continued large size
during peacetime. In 1979 the Ministry of Defense
created the National Service Projects Organization
(NASPO) to organize, administer, and implement
these civilian projects. Official Egyptian reports and
press accounts claim, for example, that NASPO has
done significant work on sewer lines and the telephone
system. The military reportedly now supplies 65 per-
cent of its own food, prints school textbooks, treats
civilians at military hospitals, operates a pharmaceuti-
cal factory, and is building apartments for military
personnel. President Mubarak's frequent visits to
projects have assured wide publicity.
Although military conscripts and noncareer officers
appreciate the opportunities to gain skills and earn
pay bonuses, senior offiicers believe that military
participation in agriculture and construction lessens
the prestige of the armed forces, lowers the morale of
professional soldiers, and diverts attention from the
primary mission of defense. These activities probably
will retain popular support, however, as long as they
remain free of corruption, are perceived as benefiting
the public, and continue to be viewed as more efficient
than the public sector.
The government has tried to use enhanced perquisites
to maintain military morale in the face of reduced
peacetime promotion prospects, the scarcity of hous-
ing, the failure of pay to keep pace with inflation, and
the decline in the economic status of the military
25X1
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I
25X1
e.
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80 percent of Army officers with the rank 25X1
of major or above pursue some form of outside
commercial activity. Many enlisted men hold second
jobs despite formal prohibitions against this practice,
and absenteeism is a major problem. Many officers
Trade balance
-5.0 -5.5 -5.8
Exports, f.o.b.
3.6 3.5 3.6
Oil
2.3 2.2 2.3
Imports, c.i.f.
8.6 9.0 9.4
Net Services
2.6 3.2 3.2
Receipts
5.4 ~ 6.3 6.5
Remittances
2.1 2.8 3.0
Suez Canal
0.9 1.0 1.0
Tourism
0.6 0.7 0.7
Other
1.8 1.8 1.8
Payments
2.9 3.1 3.3
seek hardship or overseas postings to receive the
associated bonuses.
the provision of automobiles
and low-cost housing is particularly irritating
members of the People's Assembly would like to
discontinue such perquisites, which they view as De-
fense Minister Abu Ghazala's way of enhancing his
popularity in the military at public expense. We
believe, nonetheless, that the government will try to
maintain, and perhaps expand, the special benefits as
long as economic circumstances permit
relative to other Egyptians. These perquisites include:
? New apartments for officers on favorable financial
terms.
? A subsidized vehicle purchase program offering
officers new Mazdas or Fiats with no downpayment,
no import taxes, and 1-percent interest on loans.
? Half fare on commercial transportation, and a
proposed shuttle bus system to provide military
personnel free transportation throughout Cairo.
pay alone
Despite these benefits, we believe most officers and
enlisted men consider themselves undercompensated
in comparison with their civilian colleagues. Accord-
ing to US Embassy reporting, the armed forces have
had difficulty recruiting and retaining highly skilled
personnel because much more money can be made in
the private sector or abroad. Many servicemen have
great difficulty supporting their families on military
Egypt's foreign finances are tight. Official nongold
reserves of about $800 million would cover barely one
month of imports, but Cairo so far has been able to
avoid debt rescheduling and recourse to the IMF. The
government has limited imports, adjusted exchange
rates to attract more worker remittances, and in-
creased both oil production and the volume of oil ,
exports to offset the impact of lower prices. Moreover,
Egypt has benefited from lower import prices, partic-
ularly for food, and from US economic and military
aid. We project Egypt's current account deficit in
1984 will be about $2.5 billion-close to the level of
the past two years.
With limited foreign exchange reserves and a debt
service ratio already exceeding 30 percent of foreign
earnings, Cairo will have difficulty putting off an
economic adjustment program much longer. Imports,
particularly of food, will continue to rise, while slower
growth is expected in earnings from remittances, the
Suez Canal, and tourism. An adjustment program
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Egypt: US Foreign Military
Sales Financing
Million US $
Fiscal Year
Loans
Grants
Total
4,575
2,225
1979-81
1,500
0
1981 supplement
550
0
1982
700
200
1983
900
425
1984
925
425
1985 proposed
0
1,175
would entail reductions in government spending and
probable hikes in prices of subsidized energy and food.
The Mubarak government fears-with good reason-
that these steps would produce negative political
repercussions; memories remain fresh of the 1977
riots in Cairo sparked by bread price hikes.~~
An end to the Iran-Iraq war probably would hurt
Cairo's immediate economic interests. Cairo could
lose profitable arms sales to Iraq. Moreover, peace
between Iran and Iraq would enable these countries to
boost oil exports, further depressing world oil prices.
Conversely, Egypt would benefit from sharply higher
oil prices should the fighting spread and reduce oil
exports from the Persian Gulf.
We believe economic problems will make it increas-
ingly difficult for Cairo to simultaneously modernize
the military, maintain benefits for military personnel,
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loyalty to Mubarak.
pursue an ambitious economic development plan, and
retain generous consumer subsidies. There is already
an intense debate on military versus economic priori-
ties within the Cabinet between Prime Minister Muhi
al-Din and Defense Minister Abu Ghazala. Mubar-
ak's sympathies probably lie with the military, but we
believe he will expect the military to accept spending
cutbacks more readily than urban consumers. Mu-
barak tends to rely on Muhi al-Din on economic
issues, and the Prime Minister's opposition to rapid
and extensive economic reforms reinforces the natural
caution of Mubarak, who has no chief economic
adviser and who approaches economic decisions prin-
cipally in terms of the short-term political risks
involved. Moreover, civilian economic austerity mea-
sures would risk disturbances that the military might
be reluctant to quell and could test the military's
politics.
Mubarak and the Egyptian leadership have a consid-
erable stake in keeping the guns-versus-butter debate
confined within the government. Egypt is expanding
political participation-parliamentary elections are
scheduled for next month-and opposition politicians
will exploit any opportunities to cite economic mis-
management. Apublic debate could raise disturbing
questions over the military's role in the economy and
Should economic difficulties generate discontent with-
in the military or the general population, we believe
Mubarak will have even greater incentive to resist
Washington's recommendations on economic reforms.
In such circumstances, strong pressure for reform is
apt to be counterproductive; Mubarak will seek to
avoid charges that he is subservient to a foreign
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Brazil's Armed Forces:
The Impact of Austerity
Brazil's four-year recession has taken its toll on the
military. Budget cuts and reduced foreign exchange
allocations have meant:
? Dwindling stocks of fuel and ammunition.
? Inadequate training.
? Reduced equipment purchases, especially from for-
eign sources.
As a result, combat readiness has deteriorated, and
Brazil's armed forces have had to emphasize improve-
ments-such as the expansion of troop strength-that
do not involve significant hard currency costs. In
addition, Brazil's need to boost exports has caused
local defense industries to look to foreign markets,
particularly in the Middle East. As military industrial
cooperation with the United States increases, the
secrecy, export orientation, and clientele of the Brazil-
ian arms industry could pose technology transfer
Despite extensive frontiers and a continuing rivalry
with Argentina for regional dominance, Brazil has not
had a border conflict in more than 80 years, and its
military planners regard the threat of external attack
as remote. Instability in neighboring Suriname, how-
ever, has motivated the armed forces to take an
uncharacteristically visible role in promoting military
cooperation as a means of displacing Cuban influence.
problems for the United States.
politicians
Economic troubles have strengthened the armed
forces' commitment to return power to civilians by
1985. The military hopes to avoid further damage to
its prestige by ceding responsibility for resolving the
country's economic woes. In addition, the armed
forces leadership seems eager to concentrate on pro-
fessional matters and leave government to civilian
are concentrated.
Historically, the Brazilian armed forces have served
as the guarantor of internal security and the arbiter of
politics. External security has received less emphasis
because of the country's relatively safe geographic
position. Although it shares borders with every nation
in South America except Ecuador and Chile, Brazil is
largely protected on its frontiers by jungles, moun-
tains, and swamps. The few modern roads near the
borders usually are on the Brazilian side. Only the
southern borders with Uruguay, Argentina, and Para-
guay provide relatively suitable terrain for military
operations, and it is here that Brazil's strongest forces
Brazil is set apart from its Latin American neighbors
not only by a different language, culture, and history,
but also by the ambition to become a world power in
the 21st century. This aspiration influences the coun-
try's approach to force modernization. Unlike the
other regional military powers-Argentina and
Peru-which have sought to increase their military
strength by importing advanced weapons, Brazil has
emphasized investment in defense industries and ac-
quisition of modern technology. Although, as a short-
term cost of this policy, Brazil has fewer advanced
weapons-such as supersonic fighter aircraft-than
its neighbors, the military prefers to build a substan-
tial arms capacity.
After presiding over more than a decade of extraordi-
nary economic growth (1968-79), the Brazilian armed
forces are preparing to leave government with the
country's most severe economic crisis unresolved.
Since 1980, recession and inflation have reversed
Brazil's historic rapid rise in living standards. Last
year, prices tripled, GDP fell 5 percent, and industrial
output dropped 8 percent. Private business failures
have accelerated, and Brazil's middle and lower class-
es have been hard hit by high unemployment and real
wage declines. An austerity program to stabilize
prices and reduce foreign indebtedness has put a
premium on production for export while requiring
sharp cuts in imports and government spending.
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Although a minority of military officers caution
against returning to civilian rule while the economic
crisis persists, the US Embassy reports that most
continue to favor a return to the barracks. The
prevailing view within the military holds that the
armed forces can only further lose prestige the longer
they run the government.
Impact of Austerity on the Military
The 20-year period of military rule did not greatly
benefit the armed forces professionally. In terms of
equipment, they were relatively better off in 1964
than they are today. Even during the boom years of
the "Brazilian miracle," military regimes interpreted
national security more in terms of promoting econom-
ic growth and internal order than in terms of acquir-
ing the latest military hardware or modernizing the
armed forces. The Anglo-Argentine conflict over the
Falklands in 1982 alerted the Brazilian military to the
inadequacy of its materiel, doctrine, and training, but
severe foreign exchange shortages have hindered any
modernization plans requiring significant hard cur-
rency
Although large by regional standards, the Brazilian
armed forces are moderate in size, considering the
country's population and size. A military force of
280,000 for a country of some 134 million represents
some two-tenths of 1 percent of the population, a
significantly smaller share than in either Argentina
(0.5 percent) or Peru (0.7 percent). Moreover, despite
rapid population growth, Brazil's armed forces have
not expanded in the last 10 years. Plans to boost
Army strength from 183,000 to 296,000 by 1993, for
example, have been deferred for at least two years
because of funding constraints.
Even when the Army's proposed troop increase begins
in 1986, it will be undercut by continuing financial
stringency. With 1984 inflation projected to be about
200 percent, the recently announced doubling of the
Army's annual budget will mean a decline in the
Army's real purchasing power.
that the lack of funds is resulting in
inadequate basic and weapons training, serious re-
strictions on field exercises, and improper equipment
maintenance.
reductions in rifle training ammunition
and war stocks. Likewise, training for tank and truck
drivers and artillerymen is hampered by fuel con-
straints and severe shortages of artillery shells. Atta-
che reports indicate that proficiency in crew-served
weapons in one airborne infantry battalion is now so
severely limited by ammunition shortages that the
unit may soon revert to a battalion of riflemen with no
sustained combat capability. Although Brazilian unit
commanders have learned to cope with minimal bud-
gets-using such practices as sending troops home
early to save food, selling food to buy gasoline, and
parking vehicles for half the year to save fuel for
maneuvers-the situation is serious enough to strain
even the Brazilians' talents for improvisation.
Training on advanced weapons has been particularly
affected. The Air Force reportedly has never fired
either of its two types of air-to-air missiles. The few
test firings of the Navy's Exocet antiship missiles have
revealed serious training deficiencies, which cannot be
remedied soon because funds are not available.
Austerity has meant a reduction in foreign weapons
acquisitions. Only two classes have been exempted:
? Those that have no domestically produced counter-
part, such as submarines, torpedoes, A-4 carrier-
based aircraft, helicopters, and air-to-surface
missiles.
? Those that are cheaper to buy abroad than to
produce domestically, such as used 105-mm and
155-mm howitzers.
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Brazil's Projected Domestic
Military Production (Major Systems),
1986-90
Army
EET-1 Osorio 35-ton tanks
50
Air Force
AM-X subsonic ground attack fighters
48
T-27 Tucano turboprop trainers
100
Brasilia medium transport aircraft
25
Navy
Corvettes
4
on an agreement to transfer technology.
Even in these cases, the decision to buy depends
largely on the vendor's willingness to transfer technol-
ogy-a requirement that Brazil attaches to most
foreign defense acquisitions. The Navy purchase of a
submarine from a West German firm, for example,
required that the firm help assemble a second subma-
rine in Brazil. Selection of an antiship missile for
Brazil's domestically produced frigates also depended
Brazil plans to rely on its expanding defense indus-
tries for most of its needs. According to US Embassy
reporting, the Army will buy small arms and ammuni-
tion, armored personnel carriers, and at least 50 newly
designed 35-ton tanks from domestic producers in the
next few years. Brazil's aviation industry will supply
the Air Force with 168 new Tucano light trainers,
about 80 AM-X subsonic ground attack fighters, and
at least 25 medium trans orts over the next decade,
according to press Navy plans are
less certain because of inadequate funding; the pro-
jected run of 12 Niteroi frigates appears to have been
halted at seven, including one training ship, and plans
for 12 corvettes appear to have been cut back.
Brazil's emphasis on developing its own defense indus-
tries instead of buying weapons abroad has some
drawbacks. The Air Force, for example, has been
Brazil's Projected Foreign Military
Acquisitions, 1986-90
Sikorsky 5-70 medium helicopters 12 to 90
105-mm howitzers (used) 48
155-mm howitzers (used) 16
Navy
T-A4 jet trainers
ASW helicopters
Maverick AGM 65 air-to-ground missiles
unable to modernize its Mirage III and F-5 intercep-
tors. Despite having the largest Air Force in Latin
America, Brazil is behind Argentina and Peru in
advanced fighter aircraft. The domestically produced
AM-X fighter, scheduled to enter Brazil's inventory
in the mid-1980s, is designed as a subsonic ground 25X1
attack fighter and thus will do little to improve the
Air Force's declining interceptor capability. Never-
theless, Brazil's focus on defense industries has en-
hanced its independence from foreign suppliers and
expanded the range of Brazilian exports, earning vital
foreign exchange.
Brazil's economic difficulties will hinder the armed
forces from undertaking any thorough modernization
over the near term. Nonetheless, they will be able to
replace some outdated equipment, and they probably 25X1
will push for a greater share of the budget once out of
office.,A civilian president might support a higher
military budget, according to the US Embassy, both
to accommodate the military's legitimate need to
upgrade its forces and to keep the high command
content and on the political sidelines.
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Keeping the military focused on professional pursuits
and modernization, however, will require political
stability. If social tensions generate widespread un-
rest, the military could be drawn back into the
political process.
Implications for the United States
Brazil's economic crisis and the armed forces' post-
Falklands emphasis on professionalism have contrib-
uted to a gradual improvement in bilateral military
relations. The US-Brazilian memorandum of agree-
ment on military-industrial cooperation, signed fol-
lowing President Reagan's visit in December 1982,
reflects the Brazilians' goal of acquiring US weapons
technology and improving professional training and
doctrine.
A minority within the military advocates a more
nationalistic economic policy, a confrontational atti-
tude toward multinational firms, and repudiation of
the country's debt, according to the Embassy. These
views are voiced primarily by retirees, however, and
carry little weight with active-duty officers
at the m~-
grade level, older o cers ten to a well disposed to
the United States, while their younger colleagues are
generally neutral.
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Peru's Military: Impact
of the Economic Crisis
Peru's civilian government is struggling to impose
fiscal discipline without antagonizing a politically
powerful military establishment unaccustomed to lim-
its on arms expenditures. Military leaders have al-
ready seen spending guidelines delay some arms
purchases, limit the expansion of counterinsurgency
capabilities, and slow the development of domestic
arms industries. We believe the military eventually
could fear that its ability to suppress domestic insur-
gents and maintain its superiority over armed forces
in Chile and Ecuador is being jeopardized. This year
the government already has yielded to military pres-
sure and violated IMF budget guidelines by authoriz-
ing amajor purchase of fighter aircraft from France.
Nevertheless, concerns by the armed forces over
President Belaunde's declining popularity, recent left-
ist electoral gains, increasing strikes and civil disor-
der, and perceived restrictions on military autonomy
in counterinsurgency operations remain a constant
threat to Peru's fragile, democratic experiment
from about 7,000 to 40,000.
The armed forces are primarily responsible for de-
fense against external attack. Strategic planning has
long been based on a perceived need to field forces
capable of fighting simultaneously against Chile and
Ecuador, countries with which Peru has continuing
border disputes. Periodic clashes with Ecuador's bor-
der forces and Peru's enduring Irredentist designs on
northern Chile have kept defense high among national
budgetary priorities. Heavy spending by both military
and civilian governments over the past 15 years has
enabled Peru to emerge as the predominant Andean
military power. We estimate that between 1971 and
1980 Peruvian military purchases totaled $2.2 billion.
With over $1 billion of this going for Soviet arms, the
USSR emerged as Lima's largest supplier in the
period. The size of the armed forces has increased as
well. Since 1973 the Army's strength has almost
doubled to 75,000, while the Air Force has grown
The military assists the underequipped and poorly
trained police in maintaining internal security, and
the level of its involvement increases with the serious-
ness of the threat. The armed forces played a major
role in defeating an insurgency in the 1960s, and since
late 1982 they have become heavily involved in the
struggle against the Sendero Luminoso (Shining Path,
or SL)-a rural Maoist insurgent group of approxi-
mately 1,500 armed members. At present about 2,500
Army, Marine, and Air Force troops are deployed
against the SL in the 12 south-central Andean prov-
inces that constitute the government's original Zone
of Emergency. In addition, another 1,500-man force
recently was deployed in a new Emergency Zone in
north-central Peru. This threat also has forced the
military to boost purchases of equipment more suit-
able for counterinsurgency operations.
By tradition, the military has been the dominant voice
in determining who governs Peru, intervening against
civilian regimes it considered inept, ideologically sus-
pect, or threatening to its institutional interests. Since
World War II, the military has assumed power four
times and ruled for a total of 22 years, most recently
from 1968-80. During the early phase of this 12-year
stint in power, the armed forces were dominated by a
leftist high command, which implemented a "progres-
sive" style of military government unique in Latin
America. The regime nationalized foreign oil compa-
nies, fostered extensive.state intervention in the econo-
my, implemented social reforms, and pursued a non-
aligned foreign policy. By the late 1970s, the military
returned to the more moderate, and even conservative,
views that still predominate and in 1980 restored full
civilian democratic rule.
Given the military's record of direct intervention in
politics, the government of President Belaunde has
allocated substantial resources for weapons purchases,
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salaries, and other military needs. In December 1983,
the US Embassy estimated that military expenditures
had claimed almost 25 percent of the government's
1983 budget, and that defense outlays as a percentage
of GNP had risen from 3.4 percent in 1979 to 5.1
percent in 1983. however, states that
the 1983 military budget-excluding new equi ment
purchases-accounted for 7.3 percent of GNP.
Major weapons purchases approved since the return
of civilian rule in 1981 include a contract in 1981 for
14 Soviet-made MI-24/25 attack helicopters worth
$91 million and a contract in 1982 for 26 Mirage
2000 fighters valued at $700-800 million. To our
knowledge, the civilian leadership has never turned
down any major purchase insisted upon by the armed
forces.
The troubled economy and the persistent insurgency
remain the government's two major problems. The
unprecedented 12-percent decline in real GDP last
year-the result of natural disasters, weak foreign
demand for exports, and policy errors-has eroded the
popularity of the Belaunde administration and
aroused military doubts about the President's leader-
ship. The government, which must grapple with a $12
billion foreign debt and 130 percent inflation, faces
poor economic growth prospects again in 1984. Popu-
lar dissatisfaction over the downturn and the govern-
ment's imposition of IMF austerity measures led to
opposition gains in municipal elections last Novem-
ber-including an impressive showing by the Marxist
United Left coalition.
In February, Peru negotiated rescheduling agree-
ments with its private creditors and signed a new
letter of intent with the IMF for an 18-month standby
agreement worth $260 million. The US Embassy
reports that; as a result of the IMF program, pay-
ments for military imports will be budgeted at $200
million in 1984, down from an estimated $350 million
last year.~~
The Sendero Luminoso's terrorist activities further
contribute to friction between the military and the
government because Belaunde is reluctant to grant
the armed forces the autonomy they want in dealing
with the problem. Guerrilla leaders reportedly believe
that their military capabilities have not been damaged
severely by internal security force successes, and the
SL continues to launch tactical offensives. The Sen-
dero's unpopular violent tactics, serious lack of arms,
and the gradually improving capabilities of the securi-
ty forces will hamper its development into a national
movement. Nonetheless, the guerrillas will continue to
challenge the government's presence in both Zones of
Emergency and undertake periodic attacks in Lima.
Over the past two years, the military has repeatedly
warned the President against drastic cuts in the
military budget. Military leaders have submitted ex-
tensive shopping lists that included not only the
Mirage 2000 fighter but also armor and helicopters
for the Army and modernization of the Navy's aging
surface fleet government disil-
lusionment wit t e arme orces seemingly insatia-
ble requirements but also reveal that the government
continued through 1983 to accede to its wishes.
uled for 1986.
Despite government efforts to meet military demands
on most major items, Peru's economic problems are
affecting procurement, unit readiness, and counterin-
surgency operations. Lack of funds already has led
the Air Force to delay replacement of its aging
Canberra bombers with the US A'-10 or similar
aircraft. Serious differences between Peru and France
over the terms of the Mirage 2000 contract, however,
have been ameliorated with the first deliveries sched-
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Selected Recent Peruvian Arms Requirements and Orders
Funding restraints have hindered the military's ability
to perform its internal security mission. The need for
concessionary financing has delayed acquisition of
counterinsurgency-related equipment, such as heli-
copters, night vision devices, and improved radios. In
addition, a perception that the government has failed
to allocate adequate funds for civic action and eco-
nomic development-which many in the military be-
lieve is essential to winning the struggle against the
guerrillas-not only has provoked numerous com-
plaints from officers, but resulted in the administra-
tion's recent firing of the southern Emergency Zone
commander for his public remarks on the subject.
Economic difficulties have also caused the armed
forces to request salary increases from the administra-
tion Officer pay has
not kept pace with triple-digit inflation. Many officers
are forced to moonlight, and some apparently have
become involved in drug trafficking. This is a major
reason why the military favors only a limited stay for
its troops currently stationed in the new Emergency
Zone, which is in the cocaine-producing northeastern
region of Peru.
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farms and sell produce to bolster the income of
officers and enlisted men. Some units reportedly
spend more time working on these farms than on
for example, that the Army was
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military activities.
Development of Peru's nascent arms industry and
military training programs have suffered. An assem-
bly plant for Italian-designed jet trainers scheduled to
open last year remains uncompleted, and two frigates
under construction since the late 1970s have yet to
join the fleet; technical difficulties also have contrib-
uted to the delays. Information on training programs
and exercises is limited, but the high cost of fuel,
ammunition, and spare parts undoubtedly has hin-
dered these activities.
Thad
refused to return five MB-339 trainer aircraft engines
to Peru until the Air Force paid for repair work. As a
result, the Air Force grounded several aircraft and cut
its training program in half.
Peru's economic difficulties will continue to limit
military readiness, training, and procurement-espe-
cially of the most advanced weapons-but not enough
to cost Lima control of internal security or military
predominance in the Andean region. Peru's principal
rivals, Chile and Ecuador, face similar economic
problems, as well as political uncertainties. The Peru-
vian armed forces' political clout will ensure access to
sufficient financial resources to prevent a serious
deterioration of military capabilities. Civilian govern-
ments of either the left or the right probably will
allocate funds for at least one major purchase by each
service every year-as well as provide for other needs
such as higher salaries~r risk being removed from
office. Indeed, pressure for military purchases already
has caused Peru to violate IMF spending guidelines.
The military leadership is not completely insensitive
to Peru's economic problems and probably will agree
to some reductions or delays in certain programs but
not at the risk of losing superiority over Ecuador and
Chile or reducing pressure on the Sendero Luminoso
terrorists. To help resolve the dilemma, the military is
prepared to consider unorthodox methods of financing
planning to exchange Peruvian iron ore for $16.2
million worth of Yugoslavian munitions.
The emerging strain between military needs and
economic reality could threaten civilian democratic
rule. Despite their increasing frustration with what
they perceive to be the government's ineptitude, mili-
tary lenders probably will not attempt to depose
President Belaunde. Nonetheless, the range of adverse
trends-the administration's declining popularity, in-
creasing strikes and civil disorder caused by the
economic downturn, recent leftist electoral gains, and
civil-military disagreements over counterinsurgency
policy-is causing some officers to consider interven-
tion
The armed forces' current dissatisfaction with Soviet
logistic support, coupled with a desire to diversify
their sources of military aid and thus avoid an
overdependence on the USSR, will lead Peru to
approach both the United States and Western Europe
for new weapons. Nevertheless, we believe the mili-
tary will turn again to the USSR-which historically
has provided generous credit terms-if Western sup-
pliers fail to offer adequate financing, refuse to accept
barter proposals, or are unwilling to sell their most
advanced equipment. Meanwhile,
the USSR, determined to expand its influ-
ence with Peru's armed forces, agreed last year to
refinance Lima's military debt and is increasing ef-
forts to sell equipment and provide training for all
three services. Moreover, should Peru's neighbors
increase their arms purchases, this could further
encourage Lima to turn to Moscow because of the
Soviets' ability to deliver materiel rapidly.
2GV~1 1
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Chile's Military:
Impact of the Economic
Crisis
will degrade operational effectiveness.
Chile's domestic political crisis and the depressed
economy are eclipsing the armed forces' traditional
concerns about the military balance with rival forces
of its neighbors, particularly Peru and Argentina. The
armed forces, who prefer a purely military role, have
been strained in recent years by their political role in
supporting President Pinochet and the ruling military
junta. The development of broad, active opposition to
the regime has aggravated that strain, and the armed
forces face critical choices in the coming months. In
contrast with some Latin American democratic gov-
ernments that feel compelled to placate politically
powerful militaries, Pinochet has used his dual go-
vernment/military leadership role to tightly control
defense expenditures, in part to comply with guide-
lines on government spending under Chile's IMF
economic adjustment program. Selected weapons pur-
chases continue, but the determination to maintain
fiscal discipline-combined with the continuing inter-
national arms embargo against Chile-will limit San-
tiago's ability to modernize its arsenal and we believe
The Military's Role
Defense of Chile's long, vulnerable frontier remains
the military's preeminent responsibility. Chile's
armed forces-victors in a series of wars in the 19th
century and trained by successive European military
missions-have a long .tradition of professionalism
and are perhaps the most competent in Latin Ameri-
ca. Although they have not fought since crushing Peru
and Bolivia in the War of the Pacific (1879-83),
periodic border tensions between Chile and its neigh-
bors-most recently in 1978 when Chile and Argenti-
na almost clashed over the Beagle Channel-have
encouraged high professional standards. Strategic
planning still centers on a perceived need to field
forces simultaneously against Peru, Argentina, and
Bolivia. "To this end, the armed forces are trained and
e ug i~lmost exclusively for conventional warfare.
During 1973-80, Chile contracted for over $1 billion
worth of arms and military services, including jet
fighters, warships, armor, and air defense equipment.
The size of the armed forces increased as well during
this period, with the Army growing from 32,000 to
53,000. Despite this effort, Chile's military remains
underequipped and heavily outnumbered by the com-
bined forces of Peru, Argentina, and Bolivia. Peru and
Argentina, Chile's principal rivals, each have spent
more than Santiago, giving them a growing qualita-
tive edge as well. The international arms embargo
against the Pinochet regime for human rights viola-
tions-adhered to by the United States, which had
been Chile's principal supplier-has denied the Chil-
eans access to many modern weapons and occasional-
ly forced Santiago to purchase less satisfactory equip-
ment from sources such as Israel.
The military is reluctant to assist the National Police
(Carabineros) in maintaining internal security. Unlike
most Latin American police forces, however, the
Carabineros are relatively well trained and only rarely
require direct military assistance. Moreover, the 25X1
armed forces fear jeopardizing the respect of many
middle-class Chileans and recognize their own lack of
internal security training. In August 1983, for exam-
ple, inexperienced troops reinforcing the hard-pressed
police in Santiago fired on demonstrators and inflict-
ed heavy civilian casualties. The military's major
involvement in internal security matters is through
the National Information Center-a military intelli-
gence organization attached to the Interior Ministry
that has acquired a brutal reputation-and through
the occasional deployment of special forces troops
against isolated terrorist elements.
The Chilean military until recently had usually avoid-
ed direct involvement in domestic politics. The quality
of civilian leadership has been generally high since
independence was achieved in 1818, and the Armed
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Forces usually have stepped in only when they have
completely lost confidence in the civilians' ability to
maintain control. Even then it has occurred only after
extensive debate within the military. The reluctance
and indecision that beset the high command before
overthrowing President Allende in 1973-the mili-
tary's first direct intervention in over 40 years-are
illustrative. A continuing lack of confidence in the.
competence and judgment of Chile's current political
party leaders underlies the military's support for
Pinochet's decision to delay the return to democratic
rule until 1990.
The crippling recession that struck Chile in late 1981
prompted the first broad-based opposition to Pinochet
in his 10-year rule. After afive-year boom, Chile's
economy suffered a serious reversal in 1982 when
GDP plummeted 14 percent, the unemployment rate
nearly doubled to 25 percent, real wages dropped, and
hundreds of businesses failed. The regime's reluctance
to adjust its policies despite declining foreign demand
and a liquidity crunch induced by the drying up of
foreign credit gave impetus to the opposition move-
ments
By mid-1983, opposition groups had drawn wide
support from political and labor circles. These groups
demanded an accelerated transition to civilian rule,
and this gave the movement a political dynamic
independent of economic grievances. Pinochet opened
a dialogue with the opposition last August and grant-
ed anumber of concessions that appeared to represent
limited moves toward democratic government. The
failure of the government to continue in this direction,
however, has contributed to renewed protests this
year.
The military, as Pinochet's primary power base, holds`
the key role in the political crisis. Recognizing this,
moderate opposition forces are attempting to persuade
officers that the President would jeopardize the insti-
tutional interests of the armed forces to keep himself
in power. Some officers, particularly in the Air Force
and Navy, have expressed concern that Pinochet's
unwillingness to speed up the political transition will
fuel domestic turmoil and aggravate political polar-
ization, creating opportunities for the radical left.
According to the US Embassy, the Army, the most
important service, still stands behind Pinochet, but
the high command is sensitive to military interests
and almost certainly monitors events closely.
The economic decline has had a serious impact on the
military. Advised by his economic team to curtail
sharply government expenditures, mindful of limits on
military imports under Chile's IMF program, and
probably hoping to show the public that the armed
forces are not exempt from fiscal austerity, Pinochet
has tightly controlled the military budget. As head of
the junta and the military, Pinochet has accomplished
this without provoking a backlash in the armed
services. The US Embassy estimated last year that
programed defense expenditures in 1983 equaled $600
million, representing roughly the same percentage of
the overall budget as the previous year. In addition to
budgeted expenditures, the Chilean military receives
by law 10 percent of the receipts from CODELCO,
the government-owned copper company. The US Em-
bassy estimated that this provided the armed forces
an additional $190 million in 1983, bringing total
military appropriations to about $800 million or about
5 to 6 percent of GNP. Preliminary figures published
by the government in early 1984 suggest that defense
will, at best, maintain its share of the budget this
year.
The government's tight rein on military expenditures
over the past two years has prevented Chile from
matching the military buildups of Peru and Argenti-
na. We believe that this would have been the case,
however, even if Santiago were not under an embargo
by some major weapons suppliers.
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Service
Item
Source
Quantity
Approximate
Cost
(million US $)
Army
Armored vehicles
Domestic
200
Unknown
Air defense equipment
Unknown,
Unknown Unknown
possibly United
Kingdom
100 licensed-produced Swiss-Mowag vehi-
cles reportedly in service.
Army has longstanding requirement for
air.defense equipment. May have evaluat-
ed UK Rapier system. No firm orders.
Chile plans to build a third French-
designed "Batral"-class landing ship.
United Kingdom 14 70 to 100 Negotiations continuing for l4 Jaguar
fighter-bombers. Contract expected in
1984. Will replace aging Hawker Hunters.
Option to buy 26 more.
Jet trainers/light attack aircraft Spain~omestic At least Unknown 12 Casa C-101 (T-36) now operational.
assembly 16 Three more due by June 1984.
Domestic Eventual- Unknown At least eight to 10 T-35 Pillan trainers
assembly ly up to have been assembled. Progress delayed
100 because of technical problems. DAO esti-
mates Chileans can assemble 10 to 15 a
year.
Although Chile has purchased shoulder- Military pay has been hit by the economics ueeze. 25X1
launched surface-to-air missiles, Hawker-Hunter Early last year, for example,
fighter bombers, Canberra reconnaissance aircraft, 25X1
and electronic surveillance equipment from the Unit-
ed Kingdom, budgetary considerations apparently
have kept Chile from buying other British equipment,
~,,,.t. ?~ .t.e .,.~,..,.r. ,.,....e.. ue.....e.. ,,..a ,,.....,.~ea
suppliers have been minimal.
Training likewise has suffered because of budget
probably preclude other major exercises
for only 30 days of at-sea operations per ship this
year. Although high-priority training, such as an
amphibious exercise later this year and the annual
UNITAS regional naval maneuvers, will proceed as
scheduled, the high cost of fuel and munitions will
We believe,
however, their circumstances would have to deterio-
..,,.o ,.,.....:ae..,.~.i_. ~.ec,._e .~.,, ;.....,._ ,.ra~,.,._,.:...~.:..
strictly hierarchical and disciplined military would
confront the high command with their grievances.
The development of Chile's domestic arms industry,
initially spurred by the arms embargo, has been
boosted by Santiago's need to reduce foreign weapons
purchases. Chile now produces a wide range of mate-
riel, including grenades, mines, general purpose and
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cluster bombs, small arms and ammunition, several
types of armored vehicles, antitank missiles, and light
antiaircraft guns. Chile's factories have produced
about 100 license-produced Swiss Mowag armored
vehicles for the Army
and the domestically designed, T-35 Pillan prop-to
replace aging US-built trainers. The Navy has recent-
ly completed construction of two French-designed
landing ships.
The government also hopes to export locally produced
arms. Extensive coverage in trade journals, an aggres-
sive export campaign by the primary private producer
(Cardoen Industries), and displays at military exhibi-
tions in the United States, the Middle East, and
Southeast Asia appear to be achieving results. The
press releases by Car-
doen indicate other countries in the Middle East and
Latin America are also interested in these devices.
We believe Chile's economic difficulties will prohibit
substantial modernization or expansion of its armed
forces over at least the next two years. Unless faced
with an unambiguous threat of war, the Pinochet
government will continue to limit military spending.
Continued cutbacks in training, however, risk the loss
of Chile's qualitative advantage over its traditional
military rivals
We believe the government will authorize some im-
provement in military pay and living conditions to
minimize discontent within the officer corps. Despite
a commitment to promote an arms industry, Chile
wild remain heavily dependent on foreign sources for
its military needs, including imported parts for do-
mestic arms plants. Thus, we expect the government
to purchase weapons selectively from non-Communist
countries, which offer
reasonably modern equipment at advantageous terms.
The armed forces could assume a more active political
role if civil unrest and terrorism escalates. Should this
occur, members of the high command are likely to
urge the President to adjust economic policies to speed
recovery and to accelerate the transition to democrat-
ic rule. Although the armed forces' tradition of acting
by consensus and their doubts about civilian political
leadership mean that military pressures on Pinochet
would build only gradually, we judge that serious
discussion about replacing Pinochet could occur if the
Army believes his leadership is harming both national
security and the military's institutional interests.
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Pakistan: The Economy
and the Military
Over the past few years, the Pakistani Government
has provided enough guns and butter to satisfy the
armed forces and the civilian populace. Financing
today's prosperity and military goals, however, has
come at the expense of investment. This will make
Pakistan heavily dependent on foreign capital for
economic development and military modernization.
The Military: Growing Economic Demands
election with little difficulty.
The Pakistani Armed Forces traditionally have been
the country's most prestigious institution and a unify-
ing national force. Pakistani Army officers or former
officers have ruled Pakistan since the first military
coup in 1958 except for the years between 1971 and
1977 when Zulifikar Ali Bhutto was President and
Prime Minister. The military role under the current
martial law government extends to the local level.
President Zia plans to establish a civilian government
by March 1985; but almost all observers believe he
intends to be elected President, and can engineer his
produce heavy military equipment
Zia's government is committing a larger share of its
resources to defense. Its ongoing military moderniza-
tion program could cost $6.5 billion by the end of the
decade and requires expensive imports. Pakistan man-
ufactures ammunition and small arms but does not
Since the initiation of the military modernization
program in 1981, government expenditures on the
military have amounted to about 25 percent of the
total government budget and 6 percent of GDP-
modest increases over the late 1970s. Defense is
allocated $1.9 billion in the current public budget.
Military imports have become a larger share of total
imports. Reporting from the US Embassy in Islam-
abad indicates that military items were about 11
percent of the total import bill last fiscal year.
Military spending has added to Pakistan's debt bur-
den. Outstanding foreign debt is nearly $17 billion,
including about $2 billion in foreign military debt.
The military debt has grown rapidly since 1980
because of the modernization program. Debt service
payments were about $1' billion last year, equivalent
to an estimated 15 percent of foreign earnings. This
repayment burden currently is manageable.
Pakistan regards US weapons and financing as the
key to its modernization program.
fighter-bombers and the Navy 16 submarine-
launched Harpoon antiship missiles.
? The Army has purchased 100 M-48 tanks, more
than 100 major artillery pieces, and 10 helicopter
gunships.
The Zia government views the US aid package as a
test of US reliability. Pakistanis remember the US
arms embargoes in 1965 and 1971 during Indo-
Pakistani wars and in 1978 over the nuclear prolifera-
tion issue.
many in Islamabad view European suppliers, and
particularly France, as much more reliable because
they are commercially rather than politically motivat-
ed.
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Most Pakistanis consider the military to be the
protector of the state from external aggression rather
than as an internal police force. Support for the
Armed Forces is particularly strong among the ~Pun-
jabis (60 percent of the population) and the Pathans
(20 percent of the population) who have traditionally
followed military careers. The military chose to
remove the civilian presidents in 1958 and 1977
rather than engage in a systematic campaign of
repression against widespread demonstrations in the
Punjab.
Support for the Armed Forces is not as strong among
Sindhis (10 percent of the population) and the Ba-
luchs (S percent of the population). Neither of these
ethnic groups are well represented in the Armed
Forces. In the mid-1970s, the Army put down a
major guerrilla movement in Baluchistan. In 1983 it
helped suppress widespread civil unrest in Sind Prov-
ince. The Army prefers, however, to avoid the role of
an internal police force.
Morale in the Pakistani Armed Forces generally is
good Pakistani officers
and enlisted men live better than their civilian coun-
terparts. Housing, food, and education for children
are either heavily subsidized or free. Military hospi-
tals are among the best in the country, and medical
care is free. Many enlisted men learn technical trades
that can be used rtf'ter retirement from the Armed
Forces, and ofJrcers learn managerial skills. Charges
of widespread corruption in the armed forces since
1977, however, have lowered the military's prestige
with civilians and the officer corps' prestige with
younger ofj'icers. The military's perception that mar-'
tial law has lowered combat capabilities also has
hurt its self=image.
We believe that the West European countries are the
most likely alternative to the United States for mod-
ern arms and that Pakistan will attempt to meet some
of its sophisticated weapons needs from them. Most of
Pakistan's existing modern arms are from France,
which will remain Islamabad's principal European
supplier because of the broad range of high-quality
Financing, however,
remains the principal obstacle to additional arms
deals with the West European countries.
Over the past 25 years, China has supplied the
Pakistani military with the bulk of its armaments.
Although the level of Chinese assistance appears to
have declined since the United States began selling
Pakistan modern military equipment in 1981, we
believe Islamabad will continue to buy substantial
quantities of less sophisticated arms from China:
? China and Pakistan have similar foreign policy
views on regional issues.
? China has been a reliable arms supplier in the past.
? The cost of Chinese equipment is considerably less
than other sources.
? Pakistan has accumulated sizable inventories of
Chinese equipment and will need to obtain spare
parts.
Islamabad has been trying to line up an additional
$800 million to $1.5 billion from the Arab states for
military purchases since 1980. Thus far Saudi Arabia
has committed $500-600 million. Because of the
slump in OPEC oil production, however, oil-rich Arab
states are now facing their own financial constraints.
The level of military spending is not an issue in
domestic politics. The military has received strong
support even during the mid-to-late 1970s when there
was a civilian government and a slight thaw in
relations with New Delhi. India's recent large weap-
ons purchases from the Soviet Union and the Soviet
invasion of Afghanistan have propelled Pakistan's
ambitious modernization program. Islamabad believes
it is vulnerable to political and military pressure by
New Delhi and Moscow and fears that Indian and
Soviet strategic objectives ultimately threaten Paki-
stan. The military believes that modern weapons are
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Pakistan: Burden of Defense, 1980 and 1984
Military Imports as a Share Defense Spending as a Share
of Total Imports of the Budget
Percent Percent
Defense Spending as a Share Defense Spending
of GDP Billion US $
Percent
required to give Pakistan a credible military capabili-
ty to deter aggression or sustain an effective defense
until diplomatic efforts could stop an outbreak of
fighting, and most Pakistanis share this view. ~~
Pakistan's impressive economic performance in recent
years has helped to deter criticism of military spend-
ing as well. The average Pakistani has benefited
directly from economic prosperity. The economy re-
corded six consecutive years of rapid growth through
FY 1983-almost 6 percent annually, according to
US Embassy estimates. Remittances from overseas
workers and higher domestic wages have improved the
purchasing power of middle-class and poor families.
Good weather and higher government procurement
prices for grain have helped farmers.
The improvement in Pakistan's foreign payments has
contributed to the economic prosperity. Growth in
worker remittances, expanded exports of manufac-
tured goods, and lower imported oil costs brought
Pakistan's current account deficit to the lowest level
since the early 1970s. Capital inflows were boosted by
IMF drawings under the final year of a three-year
Extended Fund Facility arrangement and larger aid
disbursements from the United States and other
Western donors. By last summer, Pakistan had dou-
bled its foreign exchange reserves to a record $2
billion, the equivalent of about four months of im-
ports.
The Pakistani economy slowed in the past fiscal year:
? We believe GDP growth was slightly less than 4.5
percent-the lowest since Zia came to power-
because of reduced agricultural output.
? The official consumer price index rose 9 percent
annually compared with less than 7 percent the
previous year.
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Current account
-1,145
- 991
-1,610
-554
-1,028
Trade balance
-2,516
-2,765
-3,450
-2,989
-3,334
Exports (f.o.b.)
- 2,341
2,798
2,319
2,627
2,668
Imports (f.o.b.)
4,857
5,563
5,769
5,616
6,002
Military (f.o.b.)
280
419 ~
~ 571
603
680
Net services and transfers
1,371
1,774
1,840
2,435
2,306
? Continuing government budget deficits and domes-
tic bank borrowing siphoned capital from the pri-
vate sector and contributed to inflationary
pressures.
? Worker remittances declined for the first time since
the 1970s oil boom.
? The trade balance showed a significant deteriora-
tion because of a shortfall in earnings from cotton
exports and a sharp jump in prices for imported
edible oils.
? Capital inflows were reduced because of the prema-
ture termination of the Extended Fund Facility with
the IMF, some difficulties lining up World Bank
loans, and a slowdown in receipts of project aid and
refugee assistance from foreign donors.
Despite last year's economic slowdown, we do not
believe that military spending will become a conten-
tious political issue for Zia this year. President Zia
has acted quickly to assure the population that the
economic situation is under control. We believe he
will continue to intervene in the marketplace to keep a
lid on prices by releasing commodities from govern-
ment stocks and importing basic items in short supply
to shield both the military and the, general population
from the economic slowdown. Foreign exchange re-
serves are large enough to boost imports of consumer
goods in the near term
Increased spending for consumption and defense
could take a toll on development. High levels of
capital investment are necessary if Pakistan is to
employ its rapidly growing population. We believe
that the causes of Pakistan's explosive population
growth-high birth rates and a rapid decline in death
rates-will last at least through the end of the
century. Estimates of annual population growth rates
range as high as 3 percent over the next 20 years.
Thus the population could reach or exceed 150 million
in the year 2000 compared with about 95 million in
mid-1983. Declining job opportunities in the Middle
East will eliminate an im ortant safet valve in the
labor market. the
domestic labor market can absorb effectively only
about half of all eligible male workers; the remainder
are unemployed, underemployed, or employed abroad.
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risky.
Satisfying military and consumer needs will continue
to require a high level of remittances and foreign
financial assistance. Barring higher levels of outside
financing, Pakistan may have to reduce nonmilitary
imports. Such a move, however, would be politically
Implications for the United States
level of US support.
Continued high levels of US financial assistance
probably will be needed for Pakistan to continue its
military modernization program and maintain fairly
rapid economic growth. US assistance also is impor-
tant because it helps encourage funding from other
sources. We believe additional financing from Arab
States, will depend on the
43 Secret
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Turkey's Military:
The Impact of Economic
Problems
to the military.
Turkey's transition to democracy following three
years of military rule has gone smoothly. Newly
elected Prime Minister Turgut Ozal and President
Kenan Evren-who headed the military junta from
1980 to 1983-appear to have established a good
working relationship. The new constitution grants
substantial powers to the President, but Evren gener-
ally supports Ozal's economic stabilization program
and is likely to continue giving the Prime Minister
relative freedom in pursuing economic and political
reforms. In return, despite tight fiscal and monetary
policies, Ozal is unlikely to reduce resources devoted
borders with Syria, Iran, and Iraq.
Ozal appears to share the military's belief that the '
terrorism, that brought the country to the brink of
civil war in 1980, has only been contained, not
eradicated. Ozal recognizes the threat from Turkey's
northern neighbor, the Soviet Union, and has pledged
his full support for the country's membership in
NATO. Furthermore, he recognizes that increasingly
important military challenges could develop on the
in donor countries and difficulties with various
NATO Allies over human rights issues, the pace of
Turkey traditionally has devoted a large share of its
GDP to defense-the third highest in NATO-but it
is also by far the poorest NATO member, and
successive economic and political crises during the
past 30 years have left its military poorly trained and
ill equipped. A massive modernization program was
estimated by US officials in 1981 to cost at least $18
billion, well beyond Turkey's resources. Ankara's
efforts to secure foreign military assistance, however,
will continue to be hampered by budgetary constraints
The Military's Role
The armed forces are perhaps the most highly respect-
ed group in Turkish society and traditionally have
been viewed as the guardian of the state. The mili-
tary's role in Turkey has been extensive since the days
45
of Ataturk, the founder of the Turkish republic. The
restoration of law and order following the military
takeover in 1980 has probably increased its prestige,
and Turks believe the military saved the country from
anarchy.
The military's primary mission is to defend the coun-
try from foreign attack and support NATO in the
defense of its southeastern flank-primarily by pro-
tecting and controlling the vital Turkish Straits.
Turkey maintains an armed force, including paramili-
tary, of about 790,000 men-the second largest in
NATO. The Turks believe their primary threat is 25X1
from the Soviet Union, but they are increasingly
concerned about Syria's intentions and the growing
Soviet influence in Damascus. In addition, Turkey
sees itself surrounded by potentially hostile or unsta-
ble countries-Greece and Bulgaria to the west, and
Iran and Iraq to the south and east.
The Turkish Army also assists the national police and
internal security forces (the Jandarma) and was re- 25X1
sponsible for controlling terrorism following the mili-
tary intervention in 1980. Martial law still exists in all
but 26 of the 67 provinces, and the military's role in
the political process continues to be extensive.
The military traditionally has had little difficulty in 25X1
securing adequate funding from the domestic budget
but continues to face hard currency shortages. As
President, Evren retains substantial powers under the
1982 Constitution, and he can be expected to repre-
sent military interests in the new civilian government.
Defense spending as a share of the national budget
has averaged about 20 percent since 1970 and nearly
5 percent of GDP. Under the new constitution, the
Chief of the Turkish General Staff will continue to be
a key player in determining security policy and the 25X1
defense budget. Prime Minister Ozal also recognizes
the need to address the military's interests and has
accepted the "special programs" initiated by the
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Turkey: Defense Expenditures as a Share of GDP
and the National Budget, 1978-83
Legend Share of GDP
Turkey
Non-US Nato
previous military government, such as the F-16 copro-
duction project, even though he feels they will be a
heavy burden.
Despite budget problems, Turkish military officers
are relatively well off. Officers are drawn from all
regions of the country and mainly from low- and
middle-income families. They are selected at an early
age and receive extensive education between 14 and
22. While at school, the officer candidates are indoc-
trinated with the principles of Ataturk and military
discipline. Their wages are generally similar to civil-
ian pay, but, as officers rise in their careers, they
receive generous perks, such as automobiles and
shares in defense industries. The Foundation for the
Promotion of the Turkish Air Force, for example, will
have a 1.9-percent share in the F-16 coproduction
venture. On the other hand, Turkish conscripts, who
form over 90 percent of the Army, are paid very little
and do not receive the perks the officers do. At best,
the military keeps them employed and provides some
training and education.
Economic and Political Backdrop
Turkey is emerging from economic and political
turmoil, which reached its nadir in 1979-80. At the
end of 1979, inflation was in triple digits, the current
account deficit was large, and the country's access to
private foreign credit had been completely cut. Severe
shortages of many imported products-especially
oil-caused great hardships and severely disrupted
production. In part, this crisis was the product of
fundamental weaknesses in the economy, which was
modeled along the nationalistic lines enunciated by
Ataturk.'Economic activity was largely directed by
the state, foreign investment was discouraged, and
export industries were ignored. The economic collapse
also resulted from policy errors as successive weak
coalition governments in the 1970s resorted to price
controls, expansionary fiscal and monetary policies,
and an overvalued exchange rate to avoid adjusting to
the oil price shock of 1973/74.
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Turkey: Economic Indicators, 1980-84
Real GNP Growth
Percent
Current Account Balances
Billion US $
1980 81 82 83 848
country.
Retail Price Growth, Istanbul Exports
Percent Billion US $
Total Outstanding Disbursed Debt Service Ratio
Debt Percent of foreign exchange
Billion US $ earnings
The country's institutions were almost paralyzed. The turning point for the economy came with the
Terrorism multiplied and at its peak claimed more January 1980 economic stabilization program. Large-
than 20 lives a day. The number of "liberated ar- ly drafted by Turgut Ozal-then chief economic
eas"-effectively out of the control of government adviser to the newly formed conservative coalition
security forces-was proliferating throughout the government of Prime Minister Demirel-the program
Imports
Billion US $
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was a serious attempt to reshape the economy along
export-oriented, free market lines. It was supported by
more than $4 billion in loans from the IMF, the
OECD, and the World Bank and achieved dramatic
results during the next two years as inflation eased,
exports boomed, and GNP growth resumed. Domestic
violence, however, continued.
The military intervened on 12 September 1980 to
restore order. It suspended constitutional rights and
imprisoned thousands of suspected terrorists. To depo-
liticize the bureaucracy, the military government
rewrote the civil service laws to bar public employees
from politics and barred leaders of established politi-
cal parties from politics for 10 years. The generals
turned over the reins of power in November 1983 to a
civilian government elected under a new constitution.
Following his election in November 1983, Prime
Minister Ozal instituted a series of economic reforms
to further his 1980 stabilization program and rejuve-
nate aslowing economy. Although GNP grew 3.2
percent in 1983, exports stagnated and the current
account deficit grew to about $2 billion. In addition,
the inflation rate rose to about 40 percent by yearend,
up from 25 percent in early 1983.
Ozal's new measures included liberalizing import
controls, improving export incentives, and abolishing
most foreign exchange controls. Interest rates were
raised above the inflation rate, and the prices of
several subsidized goods were increased substantially.
In addition, Ozal pushed through the Grand National
Assembly a controversial bill permitting the state to
sell shares in state enterprises to private investors-a
dramatic departure from Ataturk's state capitalism.
The measures have encouraged optimism among in-
ternational bankers about Turkey's economic pros-
pects, and the country is beginning to regain its access
to the private credit market.
We expect Ozal's policies to improve Turkey's econo-
my. GNP is expected to rise by as much as 5 percent
in 1984, and exports will probably increase 15 to 20
percent, aided by the new export incentives and daily
adjustments in the exchange rate. Preliminary results
for the first half of the year are encouraging; export
receipts were up nearly 32 percent over the same
period a year earlier.
Turkey: Defense Expenditures,
by Type, 1983
u. t
Operations
and
Maintenance-
34.2
Construction=
z.
Operations
and
Main[enance-
24.7
Procurement-
21.3
Inflation, however; continues to be Ozal's major chal-
lenge. Although several indicators point to a slowing
down in the current 55 percent rate, inflation is
unlikely to fall below 40 percent for 1984.
In addition, Turkey's transition to democracy has
gone smoothly since the parliamentary election in
November, even though Ozal was not Evren's favored
candidate. The recent municipal elections gave a
further boost to Turkish democracy and another solid
victory to Ozal's Motherland Party. However, be-
cause terrorism is on the rise, Ozal and Evren have
been reluctant to push for an amnesty bill or lift
martial law.
Economic problems have significantly affected Turk-
ish military capabilities. Inflation and a shortage of
foreign exchange have significantly affected military
spending, since nearly all of Turkey's military equip-
ment is imported. Defense spending, which rose
sharply in the mid-1970s following the invasion of
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.Major Deficiencies
in Turkey's Armed Forces,
as Assessed by NATO
No nuclear, biological, or
chemical defense equipment
Low ammunition stocks
Shortage of spare parts
Lack of electronic warfare
equipment
Insufficient fuel stock
Obsolete maritime patrol
aircraft
Lack of shore-based surface-to-
air and surface-to-surface
missile systems
Major naval bases vulnerable to
aerial mining because of lack of
minehunters and ground-based
air defense systems
No all-weather air defense
aircraft
No replacement for obsolete
NIKE-Hercules SAM system
Lack of short-range air defense
protection for airfields
Lack of airfield damage repair
capability
Lack of point-defense missile
systems
key's defense capabilities.
No modern shipboard ASW
systems
Insufficient armor, artillery,
and antiarmor equipment
Lack of night vision devices
Lack of low-level air defense
Little defensive capability
against electronic warfare
Cyprus, has slowed since 1978 and would have de-
clined in real terms without assistance from Turkey's
NATO Allies. In addition, the US arms embargo
following the Cyprus invasion further reduced Tur-
cause much of their equipment is obsolete.
Economic difficulties have delayed or scaled back
several important programs, including the replace-
ment of F-5 and F-100 squadrons, the purchase of
ASW helicopters and short-range air defense missiles,
and the building of sufficient war reserve ammunition
stocks. There is insufficient live-fire training in all
three services because of ammunition shortages. Both
the Army and Air Force have had difficulties in
retaining skilled and experienced personnel. Equip-
ment procurement has been particularly hard hit,
with only 10 percent of the military budget devoted to
this purpose-the lowest share in NATO. Moreover,
the Turks have been forced to spend a high proportion
of their budget on operations and maintenance be-
Average pilot flying hours short
of NATO standards
Turkey depends almost totally on foreign aid for
military equipment purchases. Over the past several
years, foreign military aid has accounted for roughly
15 to 20 percent of the total Turkish defense budget
and nearly one-fourth of spending for operations and
maintenance. The United States is the chief donor,
and more than three-fourths of the $715 million in
military aid the United States is providing Turkey in
Fiscal Year 1984 will go toward equipment modern-
ization. West Germany also provides significant levels
of aid, while other NATO Allies provide minimal
amounts. A large reduction would force Turkey to
abandon several important projects, such as the F-16
coproduction deal and ammunition procurement.
Turkey recently has begun a major effort to develop a
domestic arms industry to reduce the country's depen-
dence on foreign suppliers. Much of this effort, how-
ever, is tied to foreign military assistance programs or
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Major Turkish Modernization Programs,
as of May 1984
Upgrading M-48 tanks to M48A5 model
with assistance from the United States
and West Germany
Receiving Leopard IA3 tanks from West
Germany
Signed contract for 36 Rapier surface-to-
air missile systems from Great Britain
Signed contract for four new MEKO frig-
ates; two to be built in West Germany and
two in Turkey with assistance from several
NATO Allies
Received two used frigates from West
Germany
Building German Type 209 sub-
marines in Turkey with West German
assistance
Signed contract for 160 F-16 fighters,
purchased with US assistance
Receiving used F-104s from various NATO
Allies
Will receive 15 used F-4s from the United
States
offset arrangements. For example, the Turks plan to
assemble some of the frigates purchased from West
Germany and are now building submarines with West
German assistance. The Turks will make some parts
for the 160 F-16s they are buying from the United
States and will assemble the aircraft at a new aero-
space factory at Murted to be completed by 1989. A
small technological base and lack of a highly skilled
labor force will hamper Turkey's efforts to establish
an indigenous arms industry over the next several
years. Moreover, political differences between Turkey
and its allies over human rights, the extent of democ-
racy, and Cyprus have affected aid levels and contin-
ue to hurt modernization efforts.
Implications for the United States
Economic difficulties probably will not seriously
weaken the ability of the Army and Jandarma to deal
effectively with internal security threats, but Turkey's
external military capabilities and modernization ef-
forts will fall short of their perceived requirements.
Financial constraints will grow, as large rescheduled
debt payments begin to come due later this year.
Turkey's ability to .match the military strength of its
neighbors is likely to deteriorate unless military aid is
increased sufficiently to permit a large modernization
effort.
Turkey will continue to press the United States for
increases in military aid and for a larger portion of aid
in the form of grants. The Turks have complained
about the level of and strings tied to the proposed
Fiscal Year 1985 military aid. Ankara is accusing the
United States of supporting the Greek positions on
Cyprus and the Aegean and of allowing Cyprus to
interfere with US-Turkish relations.
Although Ankara almost certainly will not pull out of
NATO any time soon, US actions on the Cyprus issue
and on aid could cause the Turks to demand greater
concessions under the US-Turkish Defense and Eco-
nomic Cooperation Agreement, which expires in
1985. They also could press to renegotiate some 240
other security arrangements with the United States.
The Turks might even consider restricting access to
some of the important US facilities in the country, as
they did following the US arms embargo in 1975.
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Indonesia's Military:
Adjustment to Austerity
high-technology items.
Indonesia's current economic austerity has delayed
major military improvements but has not significantly
reduced military defense capabilities. The armed
forces appear to be weathering austerity fairly well,
and grumbling within the officer corps at present does
not threaten the regime. Moreover, budget restric-
tions have promoted efficiency by forcing the military
to focus on upgrading forces rather than on acquiring
Austerity, however, poses three problems over the
longer term:
? The inability to fund major equipment purchases
will delay plans to upgrade defenses along the
archipelago.
? Personnel cutbacks may increase resentment within
the officer corps, as prospects for advancement are
reduced.
? Economic stagnation could lead to domestic politi-
cal and social instability, necessitating greater inter-
vention by the armed forces. This would increase
the likelihood of popular resentment of repressive
security measures and undermine both the mili-
tary's legitimacy and its external defense capability.
The Indonesian Armed Forces (ABRI) under Presi-
dent Soeharto have been the dominant political force
in Indonesia for the last 17 years, exercising control
over the senior bureaucracy and the ruling political
party. Military domination extends to the provincial
and local levels through civilian positions occupied by
officers. In addition, the military maintains an admin-
istrative structure parallel to local civil authorities.
The military is not well prepared to provide an
effective defense against a major external threat.
Despite an army of over 200,000 men, for example,
only the 30,000 men of the Army Strategic Reserve
are available to meet external threats or a major
insurgency. The Air Force provides at best a minimal
air defense, and this is largely limited to the main
islands of Java and Sumatra. The Navy cannot
maintain' effective control over the vast waters of the
archipelago with its present fleet.
Existing forces, however, can respond to internal
threats. The internal security apparatus maintains a
close watch on dissidents and potential opponents of
the regime-including Islamic fundamentalists, Com-
munists, students, and other disaffected groups-and
has demonstrated that it will not tolerate any threat to
the government. The armed forces have successfully
contained low-level separatist insurgencies in the re-
mote Provinces of Aceh, East Timor, and Irian Jaya.
An upswing in fighting in the latter two regions in the
past year, however, has posed an additional burden on
the military's budget.
Austerity: The Armed Forces Adjust
since the Sukarno years in the early 1960s.
During 1979-81, oil export price increases boosted
Indonesia's foreign exchange earnings, and the mili-
tary undertook a massive modernization program.
The result was an equipment-buying spree unmatched
Since early 1982, the world oil glut and weak com-
modity markets have drastically reduced exhort earn-
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ings. the current 25X1
account fell from a $2.1 billion surplus in fiscal year
1980/81 to a deficit of $7.1 billion in fiscal year
1982/83. Deteriorating external accounts also have
meant slower economic growth and budget stringen-
cies. Real GDP growth slowed from 8 percent in 1981
to 2.3 percent in 1982 and recovered only to 4 percent
in 1983. Government revenues, based largely on oil,
declined nearly 10 percent in real terms over the same
period.
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The economic downturn has sharply curtailed the
purchasing power of the military budget. The Defense
Development Budget, which accounts for arms pro-
curement and modernization expenditures, has failed
to keep up with inflation and devaluation. While
spending in fiscal year 1983/84 rose by 5 billion
rupiah, in dollar terms the figure dropped about $230
million, or 27 percent, from the previous year. The
projected increase of 123 billion rupiah for fiscal year
1984/85 will restore military investment only to about
$700 million, still roughly 20 percent below the fiscal
year 1982/83 figure
The reduction in the military development budget has
led to the postponement or elimination of several "big
ticket" weapons purchases, such as advanced fighter
aircraft (probably the F-16A, F-20, or Mirage 2000)
and minehunting vessels.
Budgetary constraints have limited military exercises
and foreign training as well. The number of Indone-
sian officers training overseas in 1983 was drastically
cut back, and there are no indications of any increase
this year.
Jakarta has requested a reduction in the US Interna-
tional Military Education and Training Program
(IMET) next year because of Indonesia's inability to
provide counterpart funds. In addition to the reduc-
tion in IMET candidates, the Indonesians have cut
the number of military students trained in Australia
by 60 percent for fiscal year 1984/85, and may forgo
such training altogether.
Foreign military assistance programs, meanwhile, are
providing little compensation for lower oil earnings
and domestic budget cuts. US foreign military sales
(FMS) credits have been reduced in recent years-
from $40 million in 1982 to $25 million in 1983. Even
if credits are restored to the $40 million level as
proposed by the US administration, this amount
would represent a decrease in real terms from the
level of several years ago.
Financing the Indonesian Armed Forces:
0.,8`-Budget Items
The armed forces have a major stake in the economy
through their control of numerous businesses that
.finance military spending beyond the levels provided
by official defense appropriations. In addition, mili-
tary officers benefit personally through their links to
enterprises that provide supplemental personal in-
come and benefits.
Nonbudget funding sources, such as commercial en-
terprises, account for an unknown portion of defense-
related expenditures, particularly payrolls and pen-
sions. According to the US Embassy in Jakarta,
1984/85 budgeted defense expenditures (1.9 trillion
rupiah) represent approximately 3 percent of GDP. A
knowledgeable observer has estimated that nonbud-
get spending could be as high as budgeted expendi-
tures.
Indonesia's modest defense industries do little to
alleviate the budget crunch. Although Jakarta, like
its ASEAN partners, wants to increase local produc-
tion of defense equipment, Indonesian defense indus-
try capabilities are limited to the production of a
small range of unsophisticated materiel, such as
munitions and small arms. Although Minister for
Research and Technology Habibie-responsiblelor
defense industries-has launched a major expansion
program, he tends to favor commercial production at
the expense of military equipment. The Nurtanio
aircrgJ't plant, for example, is concentrating on com-
mercial aircrctf't.
Partly because of the military's financial problems,
Jakarta is reevaluating its national defense strategy.
The Cabinet reshuffle of March 1983 took the first
step in this direction by separating the armed forces
commander from the minister of defense-ABRI
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Indonesia: Procurement of Selected
Military Equipment, 1983-84
Equipment
Number
Supplier
Status
Tribal-class frigates
3
United Kingdom
For delivery in 1984
Minehunters
3
The Netherlands or Italy
Rescheduled in 1983; procurement deci-
sion still pending
Attack-class patrol craft (used)
2
Australia
Delivered in 1983
F-16As
24
United States
Decision postponed in 1983; renewed in-
terest currently noted by US Embassy
HAWK trainer aircraft
6
United Kingdom
Delivered in 1983
Boeing 737 (surveillance)
2
United States
Delivered in 1983
Rapier surface-to-air missiles
United Kingdom
Proposed for 1984-85
20-mm antiaircraft artillery (RH 202)
9
West Germany
Delivered in 1983
105-mm howitzers
172
United States
Ongoing program
105-mm SP howitzers a
50
The Netherlands
For delivery in 1984
AMX-10 P personnel carriers
NA
France
Canceled in 1983
Armburst antitank missiles
2,000
West Germany
Ongoing program; first delivery in 1983
Thompson TRS-2215 radars
2
France
Ongoing program; first delivery in 1983
a Part of an ongoing larger acquisition of armored vehicles from the
Netherlands.
sitions, and reserves.
headquarters was made responsible for operational
control while the Department of Defense assumed
responsibility for planning, budgeting, materiel acqui-
the Air
Force and Navy will be unable to adequately protect
the islands and waters of the archipelago before the
year 2000. With this in mind, current Indonesian
strategic planning calls for an island-by-island de-
fense, relying on mobile combat units and local
defense forces to meet localized territorial violations,
? A reduction in the number of Army Area Com-
mands from 16 to nine.
? Consolidation of similar Air Force and Navy Area
Commands with the remaining Army Area Com-
mands.
In promoting a leaner fighting force through training
and improved readiness, Murdani has dropped pro-
grams to upgrade the Army,'s 100 battalions in favor
of a smaller force of 20 to 30 mobile battalions trained
for combat operations throughout the archipelago.
The remaining battalions are to be relegated to a
static territorial defense role requiring lower readiness
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infiltration, subversion, and separatism
To this end, Armed Forces Commander Murdani has
proposed a major streamlining of ABRI's command
structure to promote efficiency and reduce costs.
the reorganization
? The elimination of the joint-service National Strate-
gic Command and a sharp reduction, if not com-
plete elimination, of subordinate Territorial
Commands.
capabilities.
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forces in a much better position to deal with insurgen-
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Force Chief of Staff has been directed to reduce
senior officer positions from 400 to 100 by cutting
logistic slots. Plans to strengthen the national air
defense system call for completing the early warning
radar network and acquiring surface-to-air missiles.
The US Embassy reports that Jakarta is considering
purchase of the British Rapier system. The Navy's
command structure will be streamlined, and plans for
expansion will undoubtedly be reevaluated. One long-
term project that appears to remain unaffected is the
development of a major base for fleet operations at
Ratai Bay in southern Sumatra. Construction of this
base, however, is scheduled over a 20-year period.
We have no evidence that budgetary constraints are
seriously affecting morale. One reason is that the
spending cuts have mainly affected force expansion
plans and equipment. Although military salaries have
not kept pace with inflation, President Soeharto has
shown his concern over the falling real incomes of the
military by granting a 15-percent salary increase this
year after atwo-year freeze; during this period,
inflation averaged 11 percent annually.
General Murdani's reorganization plan, however, has
caused. grumbling within the officer corps as younger
officers see their vrosvects for advancement reduced,
We expect that
the senior command will tr to ease the effects of the
reorganization on morale.
Although the buildup of forces for external defense
has been slowed, budget restrictions may prove to be a
long-term benefit for the armed forces. Belt
tightening has forced the military to emphasize better
training and an improved command structure. We
believe of acombat-ready, rapid deployment force of
30 battalions is well within Indonesian capabilities.
We expect that implementation of the present strate-
gic plan over the next five years will put the armed
cies and other internal threats.
We expect some recovery in Indonesia's export earn-
ings over the next few years. This assumes that the
world economic recovery does not falter. Neverthe-
less, Jakarta's projection of 5-percent average annual
growth for the next five years is lower than the,7- to
8-percent annual growth rates achieved in the 1970s,
and we believe actual growth may fall short of this
projection. As a result, the military can expect con-
tinuing budget stringency through the end of the
decade, but Jakarta will be careful not to cut operat-
ing funds below the minimum levels necessary to
ensure the loyalty of the armed forces. Jakarta proba-
bly will postpone major arms acquisitions for as long
as possible.
We believe one possible exception to delayed pur-
chases would be the acquisition of an advanced
fighter, such as the F-16 or F-20, by the Air Force.
purc ases espite avmg to pursue a itiona auster-
ity measures in other areas. Jakarta probably would
call for further FMS credits or other concessional
financing to help offset purchase of a US fighter.
Over the longer run, two intractable trends will
impose greater demands on Indonesia's financial re-
sources: rising unemployment and tighter oil export
earnings. The rapid growth of the labor force-half
the population of 164 million is under 16-will re-
quire major investments to create civilian jobs. In
addition, rising domestic oil consumption and a rela-
tively flat production ceiling will limit the volume of
oil for export. Budget revenues in turn will be
squeezed at a time when social needs press for greater
spending on nondefense items.
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its sources of supply.
We believe that Jakarta will continue to concentrate
military capabilities on internal threats in the near
term. Although some improvement in conventional
forces may be made, an effective strategic capability .
against major external threats could be developed
before the turn of the century, even if economic
conditions permit an increase in defense spending.
Budget cuts also could strengthen a tendency away
from traditional Western arms suppliers as Jakarta
seeks to reconfirm its nonaligned status and diversify
Cuts in the military development budget increase the
importance of US FMS credits. The Indonesians
objected to the 1983 reduction and would probably
look on continuing low FMS levels as another indica-
tion of US indifference to Indonesian needs. A decline
in understanding between the two nations could revive
frictions such as the-issue of US transit of Indonesian
waters and airspace, although it is highly unlikely that
US-Indonesian relations will deteriorate seriously un-
der the present leadership in Jakarta.
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The Philippines:
'The Impact of Austerity
on the Military
strength in the latter half of the decade.
The ongoing financial crisis is undermining the mili-
tary's budget and further eroding an already weak
counterinsurgency program. We do not believe recent
declines in military perquisites will lead to a military
coup, however, unless the security situation deterio-
rates precipitously or President Marcos becomes inca-
pacitated. Over the longer term, the wilting economy
could strain the US-Philippine security and aid rela-
tionship, particularly if US security assistance fails to
redress the armed forces' severe equipment, supply,
and logistic problems. Added stress to the relationship
could result if the Communist insurgency gains
across-the-board budget cuts.
Since Manila halted principal repayments on its $25
billion foreign debt last October, austerity has become
the focus of government planners and Philippine
businessmen. Trade financing has fallen to unprece-
dented levels, inventories have been depleted, and
large-scale manufacturing layoffs have begun. Finan-
cial negotiations on a $650 million IMF standby loan
are holding up foreign debt rescheduling. Manila,
accordingly, is restricting imports and proposing
hardware, fuel, and spare parts more costly.
The budget crisis is eroding privileges accorded the
armed forces during martial law (1972-81) and revers-
ing the effects of the military buildup in the mid-
1970s to combat the Muslim rebellion. According to
our estimates, this year the government, in real terms,
is spending about 75 percent of what it spent on the
military in 1980 and approximately one-half of what
it spent at the end of the Muslim rebellion in 1977.
Military purchasing power is threatened by the depre-
ciating exchange rate, which makes imported military
Budget austerity and foreign exchange shortages have
sharply restricted military training programs. Foreign
training programs-such as the International Mili-
tary Education and Training (IMET) program in the
Armed Forces of the Philippines:
Defense Budget, 1977-84
Nominal pesos
United States-have become more expensive because
costs of travel and in-country living expenses, typical-
ly borne by the foreign government, have escalated
with the depreciating peso. After the 21-percent
devaluation of the peso last October, for example, the
Philippine armed forces decided to forgo 75 slots in
the 1984 IMET program. At home, the peso devalua-
tion has slowed construction on a new training facility
for the Army, and budget austerity has shrunk the
Army training command's budget by 60 percent.
Philippine military modernization plans also are on
hold. Since the mid-1970s, the military budget has
been devoted almost exclusively to operating expenses;
in 1984 less than 10 percent of expenditures are
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The 1 SS,000-member armed forces of the Philippines
are composed ojfour services:
? The Philippine Army (70,000).
? The Constabulary, including combat infantry bat-
talions and law enforcement personnel (more than
40, 000).
? The Navy, including marine and coast guard units
(about 28,000).
? The Air Force (about 17,000).
In addition, there are, about 40,000 police under
Constabulary command and a partially armed Civil-
ian Home Defense Force ojabout 75,000.
During the past decade, the armed forces have fo-
cused almost exclusively on internal security. The
Philippines-which hosts two US military facilities,
Clark Airbase and Subic Bay Naval Base-relies on
the US defense umbrella.
Since martial law was imposed in 1972, the armed
forces have taken on growing political
responsibilities.?
? Their mission-which has traditionally included
external defense, internal security, and law and
order-has been expanded to include promoting
economic development.
? As the power ollocal political institutions declined
during martial law, the military began to assume
devoted to new equipment. Although most military
equipment purchases traditionally are funded through
foreign military aid programs, even these,~~
(have
been hurt. Navy construction and modernization pro-
grams, for example, are bogged down because of local
funding constraints.
The government's countersinsurgency program chron-
ically suffers from poor logistic support, equipment
shortages, and low morale. Although the government
publicly downplays the Communist insurgency, since
the role of 'patron" traditionally held by power-
ful local politicians, and prosecute many civil
cases normally handled by the judiciary.
? Military courts established during martial law still
can adjudicate cases involving civilians accused of
subversion.
? The sheer size of the military, which tripled since
1972, has made it a visible force to be reckoned
with at the local lever
The role of the military in civilian government deci-
sionmaking at the. national level remains shrouded
and is most likely limited to areas-such as defense
policy and national security-that are.its natural
interests. Nonetheless, President Marcos, in apparent
recognition ojthe military's evolving political role,
recently invited the Chief of Stc~j'of the Armed
Forces to Cabinet meetings. Although we believe the
military remains subservient to the president and
probably would not move against him, the ethic that
placed military loyalties subservient to the civilian
constitution was severely eroded under martial law.
As a result, the military probably will be drawn into
the succession struggle.
1981 Manila has identified the revolutionary move-
ment as its most serious internal security threat. The
Communist Party of the Philippines and its military
wing, the New People's Army (NPA), commands
8,000 to 12,000 guerrillas in virtually every province.
If current trends continue, we believe the insurgents
will be able to disrupt economic activity within several
years.
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Equipment and materiel shortages are a major cause
of the weak counterinsurgency effort, and this is likely
to worsen as austerity takes hold. A commanding
general on the insurgent-ridden island of Mindanao
lacked sufficient transport and communications
equipment to launch a sustained offensive against the
guerrillas. His command-which covers five provinces
and 31,630 square kilometers-has only three heli-
copters and seven trucks; some are sidelined with
maintenance problems at any given time.
Equipment shortages are worse where the insurgency
has received less government and media attention.
Each of the four battalions in the Northern Com-
mand-which covers 11 provinces on Northern Lu-
zon-has a single two-and-a-half-ton truck, one heli-
copter, and one fixed-wing aircraft to fight the
insurgency. Recently on Luzon, a military command-
er complained that he was unable to attack an NPA
squad that had walked into an ambush because his
unit lacked automatic weapons, had limited ammuni-
tion, and was outgunned.
Because of the sagging purchasing power of military
salaries, we believe military abuses-for example,
theft, extortion, and graft-are increasing. We believe
this is alienating local support for the government and
further weakening the counterinsurgency effort.
it is virtually impossible for officers
to maintain ivmg standards without supplementing
their income, legally or otherwise. The situation is
worse for troops in the field, who receive a daily
subsistence allowance of only 53 cents. In the first
instance of its kind, a battalion commander was killed
by his own men for stealing their pay earlier this year.
The Philippine military views US security assistance
as compensation for sagging domestic budget alloca-
tions. For example,
Initial assistance re-
quests could take the form of increased training or
stepped-up military aid and equipment.
and has re-
quested easier repayment terms for fiscal year 1984
FMS credits. Manila may also request that a portion
of its FMS repayment obligations be rescheduled
through the Paris Club, along with other official
government-to-government debt.
given the Philip-
pines. The House Foreign Affairs and the House
Appropriations Committees have recommended that
the FY 1985 appropriation of $60 million in foreign
military sales credit be delayed in favor of increasing
the appropriation of economic assistance by an equiv-
alent amount. The Senate Foreign Relations Commit-
tee has proposed that the switch should affect $30
million worth of assistance rather than $60 million.
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The congressional proposals have particularly upset
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year's negotiations to renew the Military Bases
Agreement but were overruled by Marcos.
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During the review of the Military Base Agreement in
April 1983, the United States pledged to exert its
"best efforts" to secure security assistance totaling
$900 million over thefive-year period 1985-89. This
assistance includes grant military aid of $125 mil-
lion, economic development assistance of $475 mil-
lion, and Foreign Military Sales credits of $300
million for the purchase of US-manufactured mili-
tary equipment.
and the scheduled
disbursement of aid will probably change. For its
part, Manila has proposed that the appropriation of
several categories of aid be accelerated (with the
exception of Economic Support Fund disbursements)
Co ease the country's ongoing financial crisis:
Another devaluation would put additional upward
pressures on prices
We believe there is little likelihood that the decline in
resources available to the military will be reversed. At
current exchange rates, we estimate the government
budget for 1985 at approximately $4.3 billion, of
which roughly 12 percent or about $500 million can be
expected to go to the military. If the peso depreciates
to 18 pesos to the dollar, as anticipated, and inflation
continues at present rates, the real purchasing power
of the military could drop by about 40 percent in
1985.
These constraints could force the military to defer the
purchase of costly, high-technology systems-such as
F-16s-in favor of a more gradual modernization that
would better prepare the military for fighting the
insurgency. Among other things, equipment purchases
aimed at improving counterinsurgency capabilities
Foreign Military
Sales (FMS) Credits
US proposal
60
60
60
60
60
300
Philippine
proposal
110
109
81
300
Military Assistance
Program (MAP)
US proposal
25
25
25
25
25
125
Philippine
proposal
58
48
19
125
Economic Support
Fund
95
95
95
95
95
475
Even after agreement with the IMF is reached and
commercial debt rescheduling is completed later this
year, the Philippine economy will face several difficult
years. We .estimate a 5- to 6-percent contraction of
GNP in 1984 as imports and domestic credit are
constrained. Growth will remain sluggish over the
medium term. In addition, last October's devaluation
and rapid monetary expansion since then have pushed
inflation in recent months to a 60-percent annual rate.
would include helicopters, communications equip-
ment, trucks, and armored cars. On balance, we
believe austerity will continue to have an overall
weakening effect on the counterinsurgency effort.
to increase military salaries by 10 percent demon-
Although the economy will continue to erode the
interests of the military, a coup sparked by disgrun-
tied officers is, in our view, only a remote possibility.
The likelihood of the military's seizing power will
depend less on how badly their economic interests
suffer in absolute terms than on how they fare relative
to other groups. President Marcos's decision in May
strates that military personnel are still relatively
better off than the majority of the labor force.
Although budget cuts will be severe, the military's
1984 share of the national budget will be 13 percent,
according to our estimates~omparable to what the
other ASEAN states spend.'
'Although the accounting periods for the ASEAN states vary,
during fiscal year 1983 only Thailand (at 19.9 percent) and
Malaysia (at 16.8 percent) spent a greater share of their budget for
. the military. Singapore and Indonesia spend between 11 and 12
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There is a greater chance of a military takeover,
however, if the financial crisis provokes widespread
civil disorder in the politically strategic capital or the
insurgency poses a threat to government control in the
provinces sooner than we expect. Urban disorder
could take the form of widespread strikes, mass
antigovernment demonstrations, or rioting in response
to food and fuel price hikes. In that case, we believe
the military would intervene.
officer corps.
The economic crisis is likely to widen existing divi-
sions within the military. There already is a split
between a "professional" group in the senior officer
corps-typically associated with Vice Chief of Staff
Gen. Fidel Ramos-and a group that is considered
more corrupt-loyal to Armed Forces Chief of Staff
Gen. Fabian Ver. These rifts could become more
acute as the insurgency gains ground, equipment
shortages mount, and economic difficulties make mili-
tary corruption less palatable to the professional
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Nigeria's Military: Difficult
Times Ahead
Nigeria's economic decline
Economic hard times are straining the already deli-
cate fabric of Nigeria's armed forces, which have
been governing since a senior officer coup last Decem-
ber. The current government-headed by Maj. Gen.
Muhammadu Buhari and dominated by his fellow
northern Muslim officers-appears increasingly be-
wildered by the magnitude of Nigeria's economic
problems and is in constant fear of being ousted by
disgruntled soldiers. We expect Nigeria's political
climate to become increasingly volatile as military
leaders strive to contain the political fallout from
the overall capabilities of the armed forces.
Any regime in Nigeria must be responsive to the
attitudes and ambitions of the ofi'icer corps and the
military's increasing equipment and training needs.
The ability of senior offiicers to ameliorate discontent
in the military, however, is being weakened by wors-
ening economic conditions. In our judgment, senior
officers will continue to pay lipservice to the goal of
strengthening and modernizing the armed forces, but
there is little likelihood of significant improvement in
The Military Inherits Chaos
The need to meet a growing debt-servicing burden is
adding to the military's domestic woes. Extensive
Nigeria is in the midst of its worst economic crisis
since independence in 1960, partly because of the .
world oil glut. Nigerian oil production-which pro-
vides more than 95 percent of foreign exchange
receipts and about 90 percent of government reve-
nues-has fallen from 2.3 million b/d in 1979 to a
range of 1.2-1.6 million b/d in 1984. Oil revenues-
which peaked at $26 billion in 1980-are estimated at
$15 billion this year. With export earnings plummet-
ing, Nigeria's imports are dropping sharply. Most
sectors of Nigeria's import-dependent economy have
been crippled by the lack of imported raw materials
and most development projects have been halted.
borrowing by former President Shagari's civilian gov-
ernment is now causing Lagos to spend a large portion
of its export revenues on~servicing its debt. Nigeria;s
debt service on its medium- and long-term debt will
exceed $3 billion this year. In addition, Lagos thus far
has been unable to clear up its $6-9 billion in short-
term arrears, and this is impeding its ability to import.
Running From Economic Reality
Buhari and his fellow senior officers promised swift
and decisive action to revive Nigeria's economy after
they seized power, but they were unaware of the
magnitude of the problem. Early pronouncements
stressed that more prudent management and the
return of ill-gotten gains by former civilian politicians
were the keys to economic recovery. Senior offiicers
quickly set out to "control" the economy by forcing
powerful traders to release hoarded goods and lower
prices. At the same time, senior offiicers sought to
reassure international creditors that Nigeria would 25X1
honor its financial obligations and follow through on
negotiations with the IMF.
After eight months in power, however, the regime
appears increasingly adrift and unsure of'what eco-
nomic correctives to adopt. While the ruling military
council now appears to recognize that there are no
"quick fixes," responsibility for charting along-term
economic-recovery plan remains unassigned. In our
view, the Buhari regime makes most economic deci-
sions in a crisis atmosphere, attempting to minimize
the short-run political impact of its actions. As a
consequence, the government has been sending con-
tradictory economic signals by its conflicting policy
statements. In the critically important oil sector, for
example, the managing director of the national oil
company and the federal minister for petroleum often
find themselves at odds over what production policies
the government should pursue.
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The government has taken some steps to adjust
spending to reduced revenues, but these moves have
made life more difficult for most Nigerians. Since
seizing power, the government has purged as many as
50,000 bureaucrats from federal and state civil serv-
ices, reduced spending on already inadequate public
services, frozen wages, and reintroduced several un-
popular taxes and fees. Moreover, the government's
efforts to set import priorities and gain better control
of foreign exchange allocation have been undermined
by bureaucratic inefficiency and persistent corruption.
The Buhari government has been similarly unsuccess-
ful in sorting out Nigeria's tangled international
financial situation. Its refusal to devalue the naira,
liberalize trade restrictions, or modify domestic petro-
leum subsidies continues to block an IMF agreement
and stall negotiations with Nigeria's foreign creditors.
In July the regime obtained a temporary 150,000-b/d
increase in its 1.3 million-b/d OPEC quota, but will
have difficulty selling the added production unless it
cuts prices. Moreover, Lagos's efforts to secure bilat-
eral assistance-from countries such as Saudi Ara-
bia-hold little promise of success.
Nigeria's military views itself as the guarantor and
protector of national unity, and the final arbitor of
political power. Although the second-largest military
force in black Africa-behind Ethiopia-the armed
forces' prolonged involvement in politics has under-
mined its capability to respond to an external threat
or to maintain a high level of readiness. The problems
plaguing the military-endemic to most Third World
countries-have been compounded in Nigeria by the
rapid expansion and contraction of personnel. The
military grew rapidly from 7,000 at independence in
1960 to over 250,000 during Nigeria's 1967-70 civil
war to its present strength of about 130,000.
Nigeria's military establishment is beset by the same
political, social, ethnic, regional, and religious divi-
sions that characterize the society at large. Although
the precise ethnic composition of the military is
unknown, southern-particularly Yoruba-and mi-
nority tribesmen from the Middle Belt region histori-
cally have found themselves in competition with large-
ly Muslim Hausa-Fulani northerners. These tensions
are heightened by personal ambitions and rivalries
among the highly politicized officer corps.
Economic hard times notwithstanding, the current
government has promised to take decisive action to
modernize and upgrade military capabilities. In par-
ticular, the current regime has acknowledged that it
needs to:
? Continue paring the military to what is believed to
be its optimum strength of between 80,000 and
100,000.
? Recruit a younger and more literate military force.
? Increase training, which suffers from a lack of
purpose, coordination, and funding.
? Purchase more modern weaponry while improving
the availability of spare parts, upgrading mainte-
nance, and establishing more dependable communi-
cations links.
The extent to which austerity has hurt the armed
forces remains unclear. Soldiers still enjoy better
living standards than their civilian counterparts, but
inflation and rising civilian unemployment are adding
to the already sizable number of extended-family
members who depend on a soldier's paycheck. Thus
far, economic realities have not tempered the Buhari
government's promises to buy more modern weapon-
ry, upgrade training, and improve soldiers' living
conditions. The government's May 1984 budget, for
example, allocates 9.3 percent of total spending to
defense, while the deposed Shagari government rec-
ommended 10 percent. In our judgment, while senior
officers recognize the importance of adjustments, they
are unwilling to slash military spending given their
concerns about forestalling a coup attempt by more
junior officers
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would add to unemployment.
As a consequence, the government continues to make
military decisions with little apparent concern for
long-range economic consequences. The regime, for
example, has decided to proceed with the controver-
sial purchase of Jaguar aircraft from the United
Kingdom despite reservations about the cost of the
contract negotiated by the Shagari government. Simi-
larly, the regime is attempting to improve training by
upgrading the newly named Armed Forces Universi-
ty-formerly the Nigerian Defense Academy-to a
degree-granting institution. The government also has
launched a campaign to eradicate illiteracy in the
enlisted ranks, which is perhaps as high as 70 percent.
The regime has threatened to expel those who fail to
achieve literacy in a specified time, even though this
given current economic realities.
Despite Nigeria's currently dim economic outlook and
political uncertainty, we expect no major changes in
defense policies or spending as long as senior officers
maintain control. We judge that senior officers be-
lieve they have little choice but to continue with
stopgap policies designed to placate demands from
more junior officers. The regime is more likely, in our
judgment, to pursue a few "big ticket" purchases-
particularly for the Air Force-while scaling back
and canceling some smaller contracts as evidence of
the military's bearing its share of economic hard
times. Promises of improved training-partially to
gain the support of less senior officers-will be highly
publicized, but, in our view, will be difficult to achieve
little funding.
In the near term, we doubt there will be significant
improvements in the military's overall ability to re-
spond to internal and external threats. In our judg-
ment, the military will be distracted from its profes-
sional missions, as long as it exercises direct political
power. The squeeze on government revenues also will
hurt. Projects such as the Defense Industries Corpora-
tion designed to make Nigeria largely self-sufficient
in small arms production will remain high on the
government's priority list but probably will receive
Although spending cutbacks are required for econom-
ic stabilization, senior officers-well aware of the
threat of a junior- or middle-grade officer coup-are
unlikely to make sweeping changes in the military's
composition or organization. Wholesale retrench-
ments could provoke more coup plotting and would
add to already high unemployment. Instead, we be-
lieve military leaders will continue to retire and
shufiie officers of suspect loyalty as need be, while
giving high priority to ensuring that salaries are paid
on time and that food and housing needs are met at
minimally acceptable levels. Even so, we believe that
the regime will be unable to shelter the military from
economic adversity, particularly enlisted men whose 25X1
families are being hurt by the contracting economy.
As economic stringencies worsen, senior officers com-
prising the Buhari regime face a struggle in counter-
ing the im ression that the constitute a "privileged
class." growing 25X1
perceptions among junior- and middle-grade ofi^i-
cers-and we believe in the enlisted ranks as well-
that the current leadership is corrupt, though not yet
on the scale on their civilian predecessors. In our view,
ostentatious wealth-which all past governments have
exhibited-during a time of economic crisis will hard-
en attitudes of frustrated junior- and middle-grade
officers. It will also widen the gap between better paid
senior officers and those struggling to make ends meet
in the enlisted ranks.
As the Army is drawn more heavily into politics,
including responsibility for maintaining public order
in the face of economic decline, we expect force 25X1
readiness to decrease. Serious logistic and mainte-
nance problems-particularly spare parts shortages-
will be aggravated by declining availability of foreign
exchange.
In our judgment, Nigeria's military is likely to be-
come even more politicized and divided as long as it
remains in power. In particular, we believe senior
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officers will find it increasingly difficult to maintain
discipline over junior-and middle-grade officers disil-
lusioned and frustrated by the inability of the present
government to make good on its economic and politi-
cal promises
In our view, the best the current government can hope
for in the short run is to keep frustrated junior officers
off balance and in check, while cushioning the impact
of continued economic decline on the military. Al-
though this could give the impression that Nigeria is
"muddling through," we see little prospect that any
government will be able to carry out more far-
reaching economic reforms essential for longer term
political stability.
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