Methodology for the comparison of military expenditures

Executive summary

The objective of this report is to assess the extent to which the standardized methodology
developed by ECLAC for Argentina and Chile in 1999-2001 is applicable to comparisons among
other countries, as well as the adaptations that may be needed for that purpose, and to develop an
expanded and more general methodology for the comparison of military expenditure (or defence
spending);. For this purpose, the present report consists of six chapters and six annexes.
Chapter I, "Introduction: setting the stage", seeks to place the issue of measuring military
expenditures in the context of what are termed "confidence-building measures" (CBMs); at the
international level, on the understanding that such measures are designed to reduce the danger of
armed conflict and miscalculations of military activities that could give rise to apprehension and a
variety of unpredictable reactions on the part of some States.
Chapter II, "The measurement of defence spending in Latin America and the Caribbean:
considerations and initial proposals", is the most extensive and is based on the premise that the 2001
ECLAC paper on Argentina and Chile is an acceptable starting point for the present report.
Consequently, some relevant parts of "A common standardized methodology for the measurement
of defence spending" are reviewed in some detail. Furthermore, the methodology related to national
defence is also linked to the studies regularly prepared by the International Monetary Fund (IMF); to
measure defence spending at the world level. In addition, and by way of comparison, the chapter
highlights the activities carried out by the United Nations, and particularly by its Department for
Disarmament Affairs, over the past 25 years on the subject of a standardized instrument for reporting
military expenditures.
Subsequently, and in the same chapter, the work regularly performed by other national and
international institutions that prepare defence expenditure reports, generally with broader analytical
categories, is examined in parallel. In this regard, the London-based International Institute of Strategic
Studies (IISS); and the Stockholm International Peace Research Institute (SIPRI); stand out. Finally,
the chapter reviews some of the tasks in this area carried out by the United States Department of
State, Bureau of Verification and Compliance (formerly ACDA);, and, from other perspectives, for
the Latin American region by the Security and Defence Network in Latin America (RESDAL); and
the Latin America Faculty of Social Sciences (FLACSO);.
Chapter III, "Other aspects of defence spending measurement in Latin America and the
Caribbean", is divided into three sections. The first focuses on the qualitative and quantitative linkages
that exist between the IMF concept of defence spending and the category defined in the ECLAC
standardized methodology as the G1 (basic); level, which is based on the expenditures of ministries
of defence. In this connection, the two approaches are reconciled, with the intention of supporting
them in the future.
In the second section of the chapter, a G2 (expanded); level of the ECLAC standardized
methodology on defence spending is introduced, highlighting the importance of including and duly
distinguishing cases where net pension expenditures for retired military personnel and their families
are added to and included in the national defence expenditure measurement. Finally, the third section
of chapter III reviews some complementary subjects. Among them, reference is made to the G3 (total);
level of the ECLAC standardized methodology for the measurement of defence spending. In addition,
several conceptual indicators are proposed, with a view to improving the comparative evaluation of
the military expenditures of different countries in the Latin American and Caribbean region.
Chapter IV, "Internal security and defence expenditures", begins by emphasizing that, within
the defence expenditure accounted for by individual countries, there may be some significant items
of expenditure allocated to internal security. These items relate to exceptional tasks under the heading
of internal security that are commonly found in some countries of the region, such as the fight against
drug trafficking and against guerrilla movements, other subversive movements and terrorism.
In principle, all the global systems for reporting "military" or "defence" expenditure, including
standardized reporting systems, deal only with external security expenditure to protect the country
from external threats. A review of these systems' methodology for compiling information, however,
reveals no evidence that the reported data exclude the internal disbursements made by some ministries
of defence and military institutions for internal security tasks. For that reason, it is asserted in this
chapter that the calculation of defence expenditure net of internal security expenses should involve,
first, an analysis of the units or institutions that clearly perform internal security functions and that
are included in the initial defence expenditure reported under standardization processes. Second, the
region's armed forces themselves could also be performing other internal security functions that are
still considered part of defence expenditure in the different national and international information
systems. These expenses should be recognized and measured with the standardized measurement
procedures devised for this purpose.
Chapter V, "Arms transfers: separate from but complementary to defence spending", begins
by pointing out that, even though the topic of arms transfers is not included in the terms of reference
of this report on transparency in military expenditure, the conceptual and practical links between
these two issues are evident.
The first section of that chapter reviews the experience of the United Nations Register of
Conventional Arms, which was introduced in 1978. In this respect, it is affirmed that the Register
plays an important confidence-building role by discouraging the excessive and destabilizing
accumulation of arms. The second section focuses on the Inter-American Convention on Transparency
in Conventional Weapons Acquisitions, which was adopted in 1999 by the Organization of American
States (OAS);. Regarding this matter, it is stressed that the categories of weapons in the OAS Convention are based on the United Nations Register of Conventional Arms. Lastly, the third section
examines other international and national institutions that track arms transfers, especially SIPRI and
IISS, whose annual reports provide different background information that is not strictly comparable.
Also, it is indicated that the United States has two public institutions devoted to the issues of arms
transfers and United States foreign military sales.
Chapter VI, "Conclusions and recommendations", indicates that the research and appraisals
presented in the body of this report give rise to 14 specific recommendations. Consequently,
considering the particular characteristics of the study, the chapter is organized in summary fashion
to facilitate the presentation of these recommendations. This could also make it easier in the future
to follow up on some of the initiatives that may be suggested by this report.
The annexes are as follows:
Annex 1, Standardized measurement of defence spending: this is the Argentina-Chile "non-paper"
presented by the two Governments to the ECLAC secretariat on 22 December 1999.
Annex 2, Main international sources of information on defence spending: this reproduces chapter
II of ECLAC (2001);.
Annex 3, The IMF "defense function": this provides details on the functional classification proposed
by IMF (2001);.
Annex 4, Transparency of military expenditure: information note on the subject prepared for this
report (2004);.
Annex 5, The seven categories of conventional arms covered by the United Nations Register: this presents details on what provisions are in force with regard to the matter (2004);.
Annex 6, Summary of basic information and topics to be considered in developing a standardized
methodology for the comparison of military expenditures: specially prepared for this report
(2005);.