Category Archives: DND-AFP budget

Philippine defense spending: As of 2013

This is an update of last year’s article on defense spending (see here). The 2013 graph shows a disturbing P26.5M drop that may give the impression that the Philippines was reducing its defense commitments. This, however was there result of a shifting of responsibility for certain funds from the Department of National Defense to other departments.

budget

A review of service-level budgets actually show a continuation of the upward trend of the past five years.

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The allocation for the AFP Modernization fund remains at P5 billion.

Congress raises DND budget by P3.6B

President Aquino signed the P1.816 Trillion 2012 national budget on December 15. Based on details revealed in the Manila Bulletin, the DND allocation was P108.1B. This represents a P1.35B increase from the Department of Budget and Management’s (DBM) 2012 National Expenditure Program which originally sought P106,750,022,000. This amount is P3.6B, or 3.4%, higher than the 2011 budget.

As of writing, the 2012 General Appropriations Act is not yet available on the DBM Website. For discussions about this budget, see the following Timawa.net discussion.

Is Congress turning back the Capability Upgrade Program (CUP) clock?

The Capability Upgrade Program is a priority component of the Philippine Defense Reform (PDR) that sought to re-prioritize the AFP modernization program . It consists of three six-year phases designed to bring the AFP to a condition where it could be modernized, before it actually pours funds into modernization.

Phase 1: Back to basics This phase sought to apply the sum of P5 billion per year, for a total of P30 billion, to upgrade the AFP’s Internal Security Operations (ISO) capabilities in the following key areas:

  • Mobility
  • Firepower
  • Communication
  • Force protection
  • Combat life support for individual units

Understandably, ground troops benefited the most from this phase, thus giving the lion’s share of funding to the Philippine Army and Philippine Marines. The Philippine Air Force and Philippine Navy also received funding, but primarily for acquisitions that improved their ability to support land forces.

Phase 2: Transition from basic capabilities to first-level modernization This phase sought to invest P10 billion a year, for a total of P60 billion over six years, to begin meeting basic requirements for external security threats. This phase would have focused on the needs of the Philippine Air Force and the Philippine Navy.
Phase 3: Beginning of real modernization This final six-year phase sought to apply P20B per year to complete the AFP’s goals for its 18-year capability planning horizon.

According to the AFP Modernization report of 2008, Phase 1 started in 2005. Among the highlights of the phase were:

  • Mobility
    • 1/4 ton KM-450 trucks
    • KM-250 trucks (6×6)
    • ACV-300 and ARV armored vehicles
    • Refurbishment of F-27 transport aircraft
    • UH-1 light transport helicopters
    • SF-260 trainer aircraft
    • Multi-Purpose Assault Craft (MPAC)
  • Firepower
    • Squad Automatic Weapons: M249 (Belgium) and K-3 (South Korea)
    • Night-fighting systems (PA, PMC)
    • Jacinto Class Patrol vessel upgrades (Phases 1, 2, & 3)
    • PKM patrol gun boat acquisition and upgrade (South Korea)
  • Communication
    • Harris digital radios
    • Base communications network
    • GPS units for infantry units
  • Force protection
    • PASGT-type Kevlar helmets
    • Level 3 body armor
  • Combat life support for individual units
    • Medical equipment for AFP hospitals

A more comprehensive list is available on the Timawa.net forum here.

The primacy that ground forces enjoyed is readily apparent. While the Philippine Navy and Air Force also received their share of funds, the projects prioritized were assets that supported ground forces. The Navy’s acquisitions since enactment of the Modernization Law consisted of logistical support vessels and patrol craft optimized for littoral operations. The Philippine Air Force became, for the most part, a transport helicopter force, as air defense considerations were set aside with the retirement of its last F-5A fighters in 2005.

While some critics labelled the Armed Forces of the Philippines (AFP) the weakest military force in Asia. Other, more astute defense observers, called it “the most COIN-specialized force in Asia”.

By the turn of the second decade of the 21st century, things were looking up. By 2011, the programmed end of the ISO phase, all CUP Phase 1 acquisitions were complete. Thus the AFP was poised to begin the transition to Phase 2, and develop capabilities that could be applied to external defense concerns such as the Kalayaan Island Group. The Philippine Navy and Philippine Air Force were to get their due.

The legislature, however, appears to be oblivious to the the progress already made since 2005. The two most comprehensive AFP Modernization bills currently pending in Congress, the Enrile (SB 2093) and Lacson (SB 2938) bills, are both adamant that ISO remain the principal focus of the AFP Modernization program. The Lacson bill even seeks to return the program to how it was in Phase 1 of the CUP, by requiring that:

“. . . the first five (5) years of the implementation of the program shall be substantially focused and directed initially towards addressing the internal security threats of the country . . .”

The Enrile bill inserted the following into the law’s objectives:

“To develop its capability to detect, prevent, neutralize and repel internal threats against the Filipino people, the government and its institutions.”

Do our political leaders really want to put off preparations for external defense for another half-decade . . . or more?

To comment on this essay, see the following Timawa forum discussion.

A comparison of AFP Modernization bills in Congress

This comparison focuses on the following bills that have been filed in the Philippine Senate.  Cong. Rodolfo Biazon’s modernization bill is not available in either the Senate or House bills databases. For this reason, his bill has been excluded from the comparison.

To discuss this comparison, see the following Timawa.net discussion: http://www.timawa.net/forum/index.php?topic=29660.0

Bill Number Author Status
2903 Juan Ponce Enrile [ FIRST REGULAR SESSION, 14TH CONGRESS ][ 2008 ]2/26/2008   –   Introduced by Senator JUAN PONCE ENRILE;2/27/2008   –   Read on First Reading and Referred to the Committee(s) on NATIONAL DEFENSE AND SECURITY; WAYS AND MEANS; and FINANCE;
351 Antonio Trillanes [ FIRST REGULAR SESSION, 15TH CONGRESS ][ 2010 ]7/6/2010   –   Introduced by Senator ANTONIO “SONNY” F. TRILLANES;8/4/2010   –   Read on First Reading and Referred to the Committee on NATIONAL DEFENSE AND SECURITY;[ 2011 ]2/15/2011   –   Conducted JOINT COMMITTEE MEETINGS/HEARINGS;3/16/2011   –   Conducted TECHNICAL WORKING GROUP;
2705 Ralph Recto [ FIRST REGULAR SESSION, 15TH CONGRESS ][ 2011 ]2/16/2011   –   Introduced by Senator RALPH G. RECTO;2/21/2011   –   Read on First Reading and Referred to the Committee on NATIONAL DEFENSE AND SECURITY;[ 2011 ]3/16/2011   –   Conducted TECHNICAL WORKING GROUP;
2938 Panfilo Lacson [ SECOND REGULAR SESSION, 15TH CONGRESS ][ 2011 ]8/16/2011   –   Introduced by Senator PANFILO M. LACSON;8/17/2011   –   Read on First Reading and Referred to the Committee(s) on NATIONAL DEFENSE AND SECURITY and WAYS AND MEANS;

What they amended

The following table shows the distribution of amendments that each bill sought to introduce. SB 351 (Trillanes) and SB 2705 (Recto) focused on very specific aspects of the Modernization Law, and were not thorough reviews of the document, presumably relying on the work already performed in the older SB 2093.

SB 2093 (Enrile) SB 351 (Trillanes) SB 2705 (Recto) SB 2938 (Lacson)
Sec. 1 – Short title X
Sec. 2 – Declaration of Policy
Sec. 3 – Objectives of the AFP Modernization Program
Sec. 4 – Components of the AFP Modernization Program x x
Sec. 5 – Development of AFP Capabilities
Sec. 6 – Period of Implementation X x
Sec. 7 – Submission of the AFP Modernization Program x
Sec. 8 – Appropriations for the AFP Modernization Program x
Sec. 9 – Multi-year Contracts and Other Contractual Arrangements
Sec. 10 – Self Reliant Defense Posture Program x x
Sec. 11 – AFP Modernization Act Trust Fund x x
Sec. 12 – Modernization of the Government Arsenal x
Sec. 13 – Austerity and Use of Savings
Sec. 14 – AFP Procurement System x x
Sec. 15 – Guidance for the President x
Sec. 16 – Annual Reports x
Sec. 17 – Separability Clause
Sec. 18 – Repealing Clause
Sec. 19 – Effectivity Clause
Number of new sections introduced in addition to amendments of existing sections 2 0 1 1

Duration

Section 6 of the law indicates that the law would be implemented over a period of 15 years. This section, however, is silent with regards to when that period begins. The Effectivity clause in Sec 19, stipulates that the law is effective 15 days after publication in at least two national newspapers . . . whose dates are, for obvious reasons, are not contained in the document itself. The law itself was approved in February 23, 1995.

SB 2093 (Enrile): Prescribes an initial 5-year modernization plan that will be then be reviewed thereafter. The exploratory note states that the bill seeks to eliminate deadlines, thus allowing the AFP to pursue continual modernization. However the bill does not amend Sec. 6 which prescribes a 15-year time table.

SB 351 (Trillanes): This bill is silent on timetables, and does even take up the matter of the expiration of the law

SB 2705 (Recto): Moves the deadline for the modernization law to December 31, 2021

SB 2938: Prescribes a 15-year modernization plan explicitly starting from when the new law is enacted

Government Arsenal

Only Enrile and Lacson discuss the Government Arsenal. Both seek to make the GA the principal source of ammunition for all uniformed government agencies, beyond the AFP and PNP, and to convert the GA’s facilities into an “economic zone”, thus granting it special regulatory privileges. Enrile goes further by seeking to transform the Government Arsenal into a lead agency for promoting the development of a domestic defense industry.

Sourcing of equipment

RA 7898 was very specific about the kind of equipment that the AFP could acquire from a sourcing standpoint. Sec. 4, sub-par B, as it currently stands, requires that any equipment that the AFP acquires be used by the armed forces of the country of origin, or by the armed forces of at least two other countries.

This was the sole amendment in Trillanes’ bill, which sought to reduce the number of countries using the equipment to just one. Enrile’s amendment exempted locally produced equipment from this provision.

Taxes

Enrile and Lacson sought to exempt modernization projects from taxes and other government fees

Equipment selection

The Lacson bill institutionalizes the use of the Defense System of Management (DSOM) in equipment selection. DSOM is an acquisition management process described in Memorandum Order 17, series 2011 as:

The Defense System of Management (DSOM), built upon the concept of a strategy-driven, capability-based, multi-year planning process, inclusive of its four mutually supporting components: the Defense Strategic Planning System (DSPS), the Defense Capability Assessment and Planning System (DCAPS), the Defense Acquisition System (DAS) and the Defense Resource Management System (DRMS) incorporating two sub-systems the Planning, Programming, Budgeting and Execution System (PPBES) and the Financial Management System (FMS).

Funding

All funding intended for the AFP modernization program is pooled into the AFP Modernization Trust Fund (AFPMTF). As the law currently stands, this includes the amount allocated by the General Appropriations Act, government arsenal profits, income from the sale of uneconomical assets, and the sale of military camps.

Both the Enrile and Lacson bills sought expand the sources of funding for the AFPMTF. Both bills explicitly authorized the President to allocate whatever supplemental funding he/she saw fit. They also added the proceeds of joint ventures agreements to the list of fund sources.

Enrile added a provision that ensured that amounts in the fund that were not consumed during the fiscal year could be carried over to the next. He also required that the annual appropriation specifically for modernization, should not be less than 0.3% of the last officially reported GNP.

Lacson also opened the fund to accepting both local and foreign donations, and stipulated a 35% share of national government’s income derived from petroleum production (e.g., Malampaya, etc.). He also broadened use of the fund by allowing the AFP to charge expenses related to pre and post qualification activities. Hitherto, the AFP had to source these activities from its own operations budget and had been the a source of delays.

DND procurement system

The Government Procurement Reform Act (RA 9184), which currently governs all government procurement activities went into effect eight years after the Modernization Law. The complexities of the law’s checks and balances have been blamed for much of the delays in the implementation of the modernization program. Among the issues is the primacy of bidding as a means of acquisition. Both the DND and Commission on Audit have bewailed the AFP’s lack of procurement expertise, which have reportedly contributed to the glacial pace of the modernization program.

Both the Enrile and Lacson bills seek to exempt the DND from the requirements of RA 9184 and allow it to develop its own procurement system. The Lacson bill, however, the free the AFP of the need to conduct public bidding for its requirements, but leverages performance sureties stipulated in Sec 39 of RA 9184.

Focus on internal security

Whereas the original modernization law was predicated on extraction of the AFP from Internal Security Operations (ISO), and shifting it towards an external defense posture, the Enrile and Lacson bills explicitly bring responsibility for Internal Security Operations back into the AFP’s area of responsibility. Lacson even goes so far as to specifying that the first five years of the modernization program be focused on developing internal defense capabilities.

Given that the ISO-focused phase of the AFP Capability Upgrade Program (CUP) had already been completed, and the AFP has entered the second phase which is design to begin the transition to external defense, this turning-back-the-clock position is perplexing.

Philippine defense spending: A historical perspective

Related Timawa.net discussionhttp://www.timawa.net/forum/index.php?topic=8421.msg281544#msg281544

Based on available data on the Department of Budget and Management Website, Philippine defense spending is at an all time high. The following graph presents the DND budget from 2005 (the oldest record available at the DBM site) to 2011.

The DND allocation increased by 81% for 2011. Interestingly, this does not even reflect that additional funding that is drawn from General Fund 151 (Malampaya). The department is no longer limited to its share of the General Appropriations Act.

While the recent increase in defense spending is cause for encouragement, the Philippines has been under spending on its defense for so long, it will take several years, if not several administrations, worth of improved spending to realize true military modernization.

The following graph presents World Bank data on Philippine defense spending, as percentage of GNP from 1990 to 2010.

From: http://datafinder.worldbank.org/military-expenditure

Proposed 2012 budget for the Department of National Defense published

The Department of Budget and Management has published the National Expenditure Program for 2012 on its Website. President Aquino presented the same to Congress on the 26th of July.

The proposed budget increased the DND budget by P2,245,101,000. One notable beneficiary of the increase is the Government Arsenal which received a 35% increase in its allocation. The AFP Modernization budget, however, remained at P5 billion — the same amount allocated for the past 5 years.

The following table shows a comparison of key data points.

http://www.dbm.gov.ph/NEP2012/DND/DND.pdf

Total DND budget

2012 (Proposed): P106,750,022,000

2011 (Actual): P104,504,921,000 Ref
2010 (Actual): 57,670,254,000 Ref
2009 (Actual): 56,483,128,000 Ref
2008 (Actual): 50,927,127,000 Ref
2007 (Actual): 49,341,721,000 Ref
2005 (Actual): 46,036,935,000 Ref

Service 2012 (Proposed) 2011 (Actual) 2010 (Actual) 2009 (Actual) 2008 (Actual)
Philippine Army 35,393,537,000 33,588,021,000 30,512,109,000 29,854,002,000 26,094,639,000
Philippine Air Force 10,550,438,000 10,134,945,000 9,262,345,000 8,948,207,000 8,080,382,000
Philippine Navy 12,084,438,000 11,354,372,000 10,520,362,000 10,472,762,000 9,228,538,000
GHQ 37,857,103,000 34,691,887,000 5,247,456,000 5,125,801,000 5,629,684,000

Government Arsenal:

2012 (Proposed): 645,660,000

2011: 420,943,000 (Ref)
2010: 362,538,000 (Ref)
2009: 361,597,000 (Ref)
2008: 277,877,000 (Ref)

AFP Modernization:

2012 (Proposed): 5,000,000,000

2011: 5,000,000,000 (Ref)
2010: 5,000,000,000 (Ref)
2009: 5,000,000,000 (Ref)
2008: 5,000,000,000 (Ref)

The NEP presents the budget that Office of the President wants, but merely serves as a guide for congressional deliberation as they craft the General Appropriations Act.