SATD NEEDS BUOYANT ECONOMIES, TRADE

6:50 AM Nov 24, 1995

SATD NEEDS BUOYANT ECONOMIES, TRADE
Geneva 23 Nov (Chakravarthi Raghavan) -- The transition to disarmament in Third World countries and in the transition economies, involve incurring high initial costs for slower future benefits, and cannot be undertaken by a country facing obstacles to its exports or existing dogmatic views for reduction of government expenditures.

This appears to be the central message, spread carefully in different parts, of a report by the secretariat of UNCTAD for a meeting next week on Structural Adjustment for the Transition to Disarmament.

The secretariat report, flushing out some of the issues, is to the meeting of the Ad Hoc Working Group to Explore the issue of Structural Adjustment for the Transition to Development (SATD).

International cooperation, UNCTAD says, could minimise the costs and maximise the benefits of SATD, including costs of conversion, both to countries that have already reduced military expenditure and facing high economic and social costs, as well as those considering reduction in military expenditure.

Reduction of military expenditures by developing countries and the former centrally planned economies now in transition to market economy, and diverting such resources for development and social sector spending has now acquired a consensus of sorts, but added on to the "Washington Consensus" for a neo-liberal order, and is evocated by not only the UN system agencies but also the Bretton Woods Institutions.

The IMF, which for long avoided getting into this sensitive area -- involving national security and ability of the United Nations to assure such security for countries, law and order and such real non-economic issues of governance -- has recently been advocating and indirectly pressuring developing countries seeking IMF funds to move towards military expenditure curbs.

The World Bank too has been advocating it in its general policy documents like the World Development Report and individual country advices, even suggesting market-instruments to achieve such goals.

It has become an answer to the pressures and complaints coming up from communities and NGOs over the social costs of the Structural Adjustment Policies promoted by the International Monetary Fund and the World Bank, as well as the kind of 'free-market-free-trade' policies pushed by the two and the newly set up World Trade Organization.

UNDP, UNICEF and others promoting the 20-20 vision have also been pointing to the military expenditure budgets of countries to suggest a wasted resource that can be used for health and education expenditures.

The UNCTAD report, while promoting the general idea of moving towards disarmament, brings a sobering note to the debate on how to achieve the transition to disarmament and need to avoid the SATP becoming an added weight on the people of developing countries and of transition economies over and above the costs of SAPs.

An area that the report appears to have stayed away from is one that some Third World experts raise, namely need for military to deal with national insecurity problems: whether it be the example of former Yugoslavia, or instances like Somalia, Rwanda, Haiti, Afghanistan etc where the Big powers in fact had armed or supported one group or another, with armed militias emerging with changing loyalties.

Fund/Bank and other pressures in such cases to reduce military expenditures and size of armed forces, without assurances of Big Power behaviour, including by their intelligence forces and operations -- could create insecurity, and could sway countries or their military to ensure a high level of expenditure.

Even Fund/Bank conditionalities in such cases are looked at with suspicion -- since they may seem to be aimed at reducing the costs (human and other) of 'interventions' by the majors.

And since, the transition to disarmament involves some initial costs and needs domestic support, sometimes higher than for SAPs, these are issues that appear in need of exploration and discussion.

The initial costs of SATD are sometimes dismissed in simplistic terms.

The World Bank in its staff papers and studies has suggested for example that the problems to law and order of arms with demobilised military personnel could be solved by "buying" the arms at the market price and thus encouraging holders of these arms to "sell".

In an understatement, the UNCTAD report, calls this a "sanguine view".

Schemes to buy back weapons from former combatants have been tried and proved to be normally ineffective, UNCTAD says, since the rate of return on a weapon like kalashnikov can be extraordinarily high and an economic buy-back price is likely to be so much higher than the replacement cost of the weapon that it merely provides an incentive to import further weapons.

At a recent private consultation in Geneva organized by the Quakers, involving non-government experts and delegates, a South African peace researcher threw more light. He noted that the market prices for a Kalashnikov rifle is about $10. But no demobilised soldier, without a remunerative job in the market, and who can and does use such a weapon to hold up traders or even banks and get away with $10,000, is going to sell his weapon. Such a buy-up programme would merely create a new market for the kalashnikovs which are aplenty.

The end of the cold war, UNCTAD says, has crated a new situation with novel challenged under SATD.

It is not just that military expenditures have declined substantially.

At 1991 prices and exchange rates, according to UNDP, world military expenditures reached a peak of $995 billion in 1987 and has fallen in 1994 to $767 billion -- from $885 billion to $649 in the industrial world (with China included in this category for this) and $145 billion to $118 in the developing world. The UNDP on this basis estimates the peace dividend cumulatively (1987-1994) as $807 billion in the industrial world and $126 billion in the developing world.

But the end of the cold war, and reduction in military expenditures, has been followed by severe economic decline in the economies in transition. In the developing countries central government expenditures have declined as a share of GNP - reflecting a smaller role of government in macroeconomic management.

The relationship of all these factors are complex, and disarmament cannot be treated as an isolated phenomenon, UNCTAD says.

In looking at some of the problems of conversion of military production to civilian, UNCTAD points out that the challenge of conversion depends not only on the size of the military sector in the economy but also the pace of change. In some cases the decline has become a "form of shock", in others it has been at a "smoother and more gradual pace". In several countries -- Argentina, Belgium, Brazil, Germany, Poland and Slovakia, for example -- employment in arms industry has fallen sharply. But the consequences of job losses have depended on general capacity of the economy to create demand for civilian goods.

In terms of reconversion of military bases and installations, the report notes that large naval and air bases and their facilities are likely to offer prospects of reconversion to economically profitable activities. In Subic Bay in the Philippines, Cam Ranh Bay and Da-Nang in Vietnam -- all had equipment far superior to any host country facilities and gave rise to ambitious reconversion projects.

But in many cases, transformation costs may be enormous, since a proportion of equipment would have been removed, and those needed for conversion into an industrial zone or commercial airport would be different. Environmental rehabilitation, specially in storage and training areas, could involve further financial burden, and may be a major constraint in attracting investors and developers.

Their distance from potential markets, sources of manpower, commercial shipping routes and other requirements for a new role add to the conversion costs of such air- and naval bases.

Use of communication net work bases for civilian use are constrained by differences in military and civilian standards of equipment, the possibility that key equipment would be removed before handing over such bases to host country -- all these involve initial conversion costs.

Developing countries also face the problems of demobilisation of the armed personnel. Their integration into civilian life involves adjustments, including psychological ones, both of the armed personnel and of the civilian population who might have been victims of the conflict.

Demobilised combatants also need support during transition to productive civil life. In largely peasant societies, return to land may seem an attractive option: but in the interim the land may have passed to other hands and soldiers may not necessarily be successful in return to farming life of before.

In developing countries, with large unemployed and under-employed populations, it would raise questions why demobilised people should get special treatment.

However, there may be practical reasons. As an UNRISD report pointed out, within three years of the end of the war in Nicaragua, 26 new armed groups had emerged.

As a result of demobilisation, without assured and good jobs, some former military personnel turn to banditry, while others emerged as private security guards against such banditry.

Demobilisation during a period of peace -- whether the result of reducing military expenditures or due to a policy shift towards more professional and higher-technology armed forces (which does not necessarily mean reduction in expenditure), but in both cases needing relatively less unskilled manpower -- call for policies promoting employment of the relatively unskilled.

"Demobilization is likely to be more successful if it takes place in a supportive economic environment in which economic policy offers conditions such that the manpower released is likely to find attractive and remunerative work elsewhere in the economy," the report adds.

Underscoring the need for international cooperation to minimize costs of SATD and maximise benefits, the report suggests that this could take a number of forms -- appropriately targeted ODA, reduced military expenditures releasing resources for other uses, encouraging particularly uses that support SATD and conversion in developing countries and transition economies.

The challenge of SATD takes on different forms in developing and the transition economies than in developed countries, the report brings out. Nevertheless, it adds, there are shared as well as distinguishing features and exchange of experiences by countries could help draw both positive and negative lessons.