Department Seal Annual Report on Military Expenditures, 1998
Submitted to the Committee on Appropriations
of the U.S. Senate and the Committee on Appropriations of the U.S. House of Representatives
by the Department of State on February 19, 1999, in accordance with section 511(b) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1993

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INDIA



MILITARY SPENDING

REPORTING PERIOD:

Indian fiscal year 1998-99 (April 1 - March 31).

AMOUNT: 

Figures are expressed in USD, based on the exchange rate of 42.25 
rupees per dollar.  The rate of inflation factored by the 
wholesale price index is about 8 percent.

	Army 		5.10 billion USD
	Air Force		1.35 billion USD
	Navy			0.69 billion USD

Total defense spending as reported by the Indian government, is 
approximately 11.2 billion USD.  In addition to the subtotal of 
7.14 billion USD for the three military services, the 1998-99 
budget reflects approximately 2.45 billion USD for capital 
purchases for all three services.

PERCENTAGE OF GDP:  

Official defense spending accounts for about 2.5 percent of GDP.

PERCENTAGE OF BUDGET: 

About 17.7 percent of total government spending.

TRENDS IN REAL TERMS:

In real terms, the Indian defense budget received about a 15 
percent increase in 1998-99 after adjusting for an estimated 
inflation rate of approximately 8 percent.  A significant portion 
of the increase--perhaps as much as 10 percent--is committed to 
meeting the recommendations of the fifth pay commission, a plan 
to increase salaries of government employees including military 
personnel.








ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

Army:                                1.1 million
Air Force:                           150,000
Navy:                                 55,000
Paramilitary Organizations:
	Border Security Force:          174,000
	Central Reserve Police Force:   160,000
	Assam Rifles:                    52,000
	Rashtriya Rifles:                36,000
	Coast Guard:                      8,000
	Indo-Tibetan Border Police:      30,000
	Federal Security:               196,000
	Home Guard:                      55,000
	State Armed Police:             400,000
	Territorial Army:                40,000

COMMENTS ON ITS POLITICAL ROLE:

The Indian armed forces (IAF) pride themselves on an apolitical 
tradition dating back to the creation of India in 1947.  However, 
the army and paramilitary forces increasingly are concerned about 
the political dimension of their involvement in several ongoing 
insurgencies in the country.

The armed forces continue to play a major role in humanitarian 
and disaster relief operations within India.  Internationally, 
the IAF perform an important role in supporting UN peacekeeping 
operations.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

The armed forces continue to support the core national principle 
of civilian control over the military.  Officer appointments 
traditionally are made on the basis of seniority.  Removal 
procedures are subject to review by civilian authorities, 
including the court system.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

The BJP made national security a prominent issue in its coalition 
government which came to power in March 1998.  An added factor in 
the use of increased visibility of the defense complex is India's 



nuclear tests in Pochran in May 1998.  The defense budget likely 
will receive increases in the future.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

The U.S. continues to seek a security dialogue with India to 
address our concerns following nuclear tests in May 1998.  U.S. 
policy continues to support reductions in military spending that 
would accrue through a reduction in tensions between India and 
China and between India and Pakistan.  We continue to encourage 
Indian restraint regarding weapons of mass destruction and 
believe that the nuclear capabilities of the three countries--
India, Pakistan, China--have led to heightened tensions in the 
region.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:  None reported.

HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

India is an active participant in the UN group of governmental 
experts on the UN Register of Conventional Arms.  In 1998, India 
participated in the UN Register of Conventional Arms.  India has 
never submitted a standardized MILEX report to the UN.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

Regional talks among the South Asian nations remain focused on 
trade, economic, and cultural issues.  Multilateral talks on 
REDUCING MILITARY SPENDING have not been held in this region.  
India's relations with China were improving before the nuclear 
tests particularly with regard to implementation of confidence-
building measures along their border.  Since May, however, 
relations have stagnated.  Relations with Pakistan remain 
difficult, although the governments in New Delhi and Islamabad 
are publicly committed to continuing their political dialogue 
which gained some momentum in 1997.  Following nuclear tests in 
both countries, India and Pakistan have come under strong 
international pressure to resolve these differences to reduce 
tensions in the subregion.  On the heels of a prime ministerial 
meeting on the margins of the UN General assembly (UNGA) in 
September 1998, foreign secretary level talks were held in 
Pakistan from October 16-18.  They were followed by extensive 
talks on outstanding issues--Kashmir, border, economy, and 
security--on November 5-13 in New Delhi.  The two foreign 
secretaries will hold further talks in February.  To date the 


talks have resulted in small but promising agreements concerning 
cross-border transport and energy purchases and further 
agreements are possible.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

The Indian defense budget numbers, as reported in the Ministry of 
Defense annual report and available in the public domain, 
probably provide a fairly accurate overview of aggregate 
statistics such as the percentage of total government spending on 
defense.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

There is no transparency on the amounts spent on specific 
programs, particularly programs of proliferation concern.  The 
government does frequently make supplemental appropriations 
during the fiscal year to augment its initial defense budget.






INDONESIA


Overview:  Indonesia's overall military expenditures are far from 
transparent as funds have traditionally flowed to the military 
from business activities, private contributions, and off-budget 
government money.  Based on the officially published budget 
alone, Indonesian defense expenditures traditionally have been 
low in comparison to the country's GDP and population.  Since 
1988, according to the U.S. Arms Control and Disarmament Agency's 
(ACDA) "World Military Expenditures and Arms Transfers, 1996," 
Indonesia's officially published military budgets have generally 
been characterized by low comparative ratios in all areas, 
including percent of total budget, percent of GNP, and in per 
capita spending per annum (in the latter Indonesia has averaged 
between USD 10 and 12 over the last decade).  According to ACDA's 
statistics, in recent years arms imports have also been 
comparatively low, generally amounting to less than one percent 
of total imports.  During 1997-98, Indonesia's severe financial 
crisis, and its unstable currency, have made accurate assessment 
of Indonesia's military expenditures even more problematical.  It 
is probable, however, that military spending has declined, 
perhaps as much as 30 percent in dollar terms.  Most major arms 
import deals have been shelved, with the exception of a 400 
million dollar purchase of HAWK aircraft from the UK.  In 1995, 
Indonesia ranked 107 in the world in GNP per capita, and its 
ranking in (officially published) military expenditure per capita 
was 115.


MILITARY SPENDING

REPORTING PERIOD:

Indonesian Fiscal Year, April 1998 to March 1999.

AMOUNT:  Estimated USD 1.0 billion.

PERCENTAGE OF GDP:  1.3 percent.

PERCENTAGE OF BUDGET:  7.9 percent.

[Note:  In light of the economic turmoil gripping Indonesia, the 
budget from which the above figures are drawn must be viewed as a 
work in progress, with major revisions likely as the Indonesian 
government continues to negotiate with the International Monetary 
Fund (IMF).  The drastic depreciation of the rupiah (from 
rp2,400/USD in mid-1997 to rp15,000/USD in mid-1998) and its 
subsequent partial recovery (to the 7-8,000/USD level in late 


1998), can make defense spending comparisons based on U.S. dollar 
amounts very misleading.  Indonesia's high inflation rate (75-80 
percent in the first 11 months of 1998) will reduce the buying 
power of the defense budget.  In terms of buying power, most 
observers here believe that the Indonesian defense budget has 
declined by as much as 30 percent in the past year.  Given the 
instability of Indonesia's economic situation, the percentage of 
GDP given above is a very rough estimate at best, and is based on 
the assumption that both the economy as a whole and the defense 
budget will be declining in real dollar terms with the result 
that the relationships between them will remain more or less the 
same.  In terms of the military's share of overall government 
spending, it is likely that greatly increased spending on social 
safety net items eventually will push down the military's 
percentage of total government outlay.]

TRENDS IN REAL TERMS:

Prior to the financial crisis, officially published Indonesian 
defense spending, including police expenditures, had been falling 
in relation to GNP, from a peak level of 3 percent of GNP IN 1981 
to levels of about 1.5 percent in the 1990's.  Defense spending 
had experienced similar declines in relation to overall 
government outlay.  Real growth in the military budget from 1988 
to 1997 paralleled the steady expansion of the Indonesian economy 
during that period.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

The total manpower complement of the Indonesian armed forces, 
including police is 451,000.  The breakdown by service is:

Army:      216,000
Navy:       26,000
Air Force:  27,000
Marines:    12,000
Police:    170,000

Indonesia has contributed peacekeeping forces abroad under the 
auspices of the UN a total of 17 times since its first 
deployment, to the Sinai in 1957, and to Bosnia most recently.







COMMENTS ON ITS POLITICAL ROLE:

The armed forces (ABRI) exercises a socio-political role under 
the concept of "dual function."  "Dual function" means that 
active duty officers are posted to jobs in all levels of 
government, from the cabinet to the smallest village, in the 
legislatures at all levels, and also in commercial and state 
corporation areas.  For example, 14 of Indonesia's 27 provincial 
governors are active duty or retired military officers, and a 
significant percentage of local district chiefs are military men.  
The military also retains 75 appointed seats in the National 
Assembly.  In 1998 there were growing calls for an end to ABRI's 
political role especially concerning the military's seats in the 
parliament.  ABRI's leadership said it would only consider 
gradual reduction of the military's political role.  Armed Forces 
Chief/Defense Minister Wiranto has said that in the future all 
military officers assigned to civilian positions must be in 
retired status.  ABRI's primary roles are to maintain internal 
security and to protect the country from external threats.  The 
police are under military command [although scheduled to be 
separated in April 1999], and ABRI units are stationed in every 
province and district.  Continuing serious unrest throughout the 
country in 1998 resulted in significant military involvement in 
internal security.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

Under former President Soeharto, appointments, transfers, and 
dismissals of high-ranking officers were approved personally by 
the president.  While President Habibie retains the formal 
ability to appoint and dismiss high-ranking officers, he is in a 
much weaker position vis-a-vis the military than his predecessor.  
Most military personnel decisions are taken within the military 
itself and the Ministry of Defense and Security whose current 
minister is also the chief of the armed forces.  However, in 
regard to key military assignments, it appears that the armed 
forces chief continues to be subject to pressure from cabinet 
members as well as from within ABRI.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

See classified annex.






U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

U.S. efforts to reduce arms spending in Indonesia and elsewhere 
in the region are indirect and focus on our support of regional 
confidence-building, especially through the ASEAN Regional Forum 
(ARF).  In the long term, regional initiatives such as the ARF, 
and the Indonesian-sponsored informal workshops on reducing 
tension in the South China Sea, are the hopes for reducing 
tensions, addressing long-term security threats, and ultimately 
removing or ameliorating the potential causes for a regional arms 
race.  The U.S. is also encouraging efforts to reach a settlement 
in East Timor, in part through a reduced ABRI presence in the 
province, which could result in a minor reduction in overall 
defense spending.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

See classified annex.

HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

Indonesia has submitted standardized MILEX reports to the UN 
three times--1980 to 1982.  Indonesia has provided accurate and 
timely information to the UN Register of Conventional Arms.  In 
1998, Indonesia participated in the UN Register of Conventional 
Arms.  The U.S. Embassy is unaware of any other Government of 
Indonesia obligation to provide data on military spending to 
international organizations.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

At present, no regional forum or ongoing dialogue is specifically 
addressing REDUCING MILITARY SPENDING.  Indonesia is a founding 
member of the ARF (see above), which is addressing the general 
topic of confidence-building measures.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

See classified annex.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

See classified annex.



ISRAEL


MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

                         1996      1997        1998
Nominal (in NIS bn) (a)  30.0      32.2        34.4
Exch. rate (NIS/USD)(b)   3.19      3.45        3.77

Notes:

	(a) actual for 1996-97; budgeted for 1998.
	(b) actual annual average rate for 1996-97; estimated for
	    1998.

PERCENTAGE OF GDP:  

                         1996      1997        1998
Pct. of GDP               9.9       9.6         9.0

PERCENTAGE OF BUDGET: 

                         1996      1997        1998
Pct. of budget           20.6      19.5        19.8

TRENDS IN REAL TERMS:

In real terms, total Israeli military spending increased slightly 
in CY-98, primarily because of higher personnel costs and 
increased R&D expenditures.  Despite some efforts to reduce 
personnel costs by trimming reserve forces, eliminating 
redundancies, and reprogramming funds to priority projects, 
Israeli defense spending likely will increase in the medium term, 
especially given expensive modernization and procurement plans, 
as well as projected Wye-related expenditures.  Long-term savings 
in Israeli defense spending would be fostered by regional 
political normalization and concomitant arms control efforts.

[Note:  Estimates of Israeli defense spending must take into 
account the inclusion of dollar-based U.S. defense assistance to 
Israel and fluctuations in the shekel/dollar exchange rate.]





The following is an index of defense spending in real 
(constant-shekel) terms, as estimated by Israel's Central Bureau 
of Statistics:

Index of real defense spending (1990 = 100)
(billions of constant 1990 shekels)

                    Real
         NIS ('90)  pct.
Year     bn.        chng.     Index
1990     14.2        8.4      100.0
1991     14.7        3.5      103.5
1992     13.7       -6.5       96.8
1993     14.7        6.7      103.5
1994     13.4       -8.7       94.5
1995     12.8       -4.7       90.1
1996     13.6        7.8       97.1
1997     13.9        2.4       99.5
1998     14.1        1.4      100.9

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

According to the best estimates available, the Israeli Defense 
Force (IDF) maintains standing forces of approximately 175,000 
and reserve forces of approximately 400,000.

COMMENTS ON ITS POLITICAL ROLE:

By law, the IDF is apolitical.  However, senior officers often 
speak publicly on national security issues, and their 
professional judgments inevitably bear on the ongoing Israeli 
debate over Peace Process issues.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

Civilian control over the military is a firmly established and 
respected principle in Israel.  The IDF is under the control of a 
civilian defense minister who makes key appointments in it.  
While he can also remove officers, such disciplinary action 
usually is carried out within the IDF.








REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

For now and the foreseeable future, a reduction in Israeli 
military expenditures in absolute terms is highly unlikely.  
Long-term trends in military spending reflect increasing 
personnel costs, an ambitious modernization program aimed at 
maintaining Israel's "qualitative edge," continued subsidies to 
Israeli defense industries, and spending related to the Wye 
Agreement.  Absent further progress in the Peace Process overall, 
especially in the Syrian and Lebanese tracks, substantial IDF 
expenditures on the continuing low-intensity conflict in Lebanon 
and protecting settlements in the Golan, West Bank and Gaza will 
be required.  Threats of terrorist activity in these and other 
areas, and Israeli defense efforts to counter regional 
proliferation of weapons of mass destruction and related delivery 
systems, will also work against reductions in military spending.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

Continuing U.S. efforts to advance regional peace remain the best 
way to reduce Israeli and other military expenditures in the 
Middle East over the longer term.  Israel generally has been 
skeptical of multilateral efforts to limit arms exports to the 
region, viewing them as inadequate in scope and unduly influenced 
by commercial interests.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

The IDF is chronically short of the funding needed to match its 
ambitious procurement, R&D, and other programmatic spending 
requirements, including its support to defense industries and 
redeployment commitments under the Wye Agreement.  In keeping 
with Prime Minister Netanyahu's 1996 pledge before the U.S. 
Congress, the Government of Israel (GOI) is following up with the 
United States concerning phasing out Economic Support Funds (ESF) 
and allocating a portion of the money saved to FMF.  In addition, 
new U.S. assistance to Israel for its long-term defense 
modernization program, as well as aid expected under the Wye 
Agreement, means that overall defense spending will not decrease 
but in fact will rise over the next 8-10 years.








HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

Government officials state that Israel has provided all required 
arms transfer data to the UN Register.  In 1998, Israel 
participated in the UN Register of Conventional Arms.  Israel has 
submitted standardized MILEX reports to the UN four times--1988 
to 1991.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

Israel was an active participant in the Arms Control and Regional 
Security (ACRS) working group of the Middle East peace talks 
until the work of the group was suspended due to problems in the 
Peace Process and differences over nuclear/NPT issues.  Israel 
sees ACRS as an important part of multilateral regional 
cooperation and views these discussions, coupled with political 
and economic normalization, as offering some hope for eventually 
reducing overall military spending by Israel and other countries 
in the region.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

As part of the regular budget of the GOI, the Israeli defense 
budget is in the public domain.  It includes broad functional 
breakdowns of military spending (e.g., salaries, procurement, 
pensions, etc.) and specific policy changes for the new budget 
year and their estimated budgetary effects.  We have no reason to 
doubt these estimates.  Supplemental military appropriations in 
the Knesset are not uncommon.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

The overall military budget and its major components are approved 
by the Knesset.  Its relative transparency also is enhanced by 
press reporting.  In addition, the Office of the State 
Comptroller serves as an internal control mechanism by overseeing 
all government ministries and presenting an annual report to the 
Knesset.







KENYA



MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

Actual spending by the Kenya Department of Defense (KDOD) during 
the 1997/98 fiscal year (July-July) was Kenya shillings 
(Kshs)10.79 billion or USD 174.3 million.  The KDOD budget 
estimate for the 1998/99 Fiscal Year is Kshs 11.56 billion or USD 
197 million.  In addition to KDOD, the 1998/99 budget 
appropriates Kshs 8.93 billion or USD 149.6 million for non-
military security forces.  The average exchange rate for 1997/98 
was Kshs 61.9 equals USD 1.00; The projected rate for 1998/99 is 
Kshs 59.7 equals 1.OO.

Table I:  1997/98 Kenyan Security Budget Expenditures
          (millions of Kshs)
                          Total  Recurring  Development
Department of Defense:
  Initial Estimate      12,094.8  11,412.8     682.0
  Approved Expenditures 10,789.5  10,668.9     120.6
  --DOD Administration      34.3      34.3       0.0
  --Armed Forces        10,755.2  10,634.6     120.6
    - Army                    -         -      118.6
    - Air Force               -         -        2.0
    - Navy                    -         -        0.0

Non-military security:   9,088.4   8,669.7     418.7
  General Service Unit     951.2     881.1      70.1
  National Police        5,434.6   5,318.8     115.8
  Administrative Police  1,656.2   1,655.2       1.0
  National Youth Service 1,046.4     814.6     231.8

Source:  Kenyan Ministry of Finance.






Table II:  1998/99 Kenyan Security Budget Estimate
           (millions of Kshs)
                         Total    Recurring  Development

Department of Defense:  11,759.0  11,558.0     201.0
  DOD Administration        32.5      32.5       0.0
  Armed Forces          11,726.5  11,525.5     201.0
  - Army                      -         -      128.1
  - Air Force                 -         -       54.4
  - Navy                      -         -       18.5

Non-military Security:   8,933.3  7,555.7    1,377.6
  General Service Unit     995.1    907.2       87.9
  National Police        5,090.1  5,003.4       86.7
  Administrative Police    897.3    892.9        4.4
  National Youth Service 1,950.8    752.2    1,198.6

Source:  Kenyan Ministry of Finance.

Table III:  Other Date (millions of Kshs)
                           1996/97  1997/98  1998/99 est.

Total GOK approved budget  201,454  272,481  241,742
  Recurring budget         156,439  231,871  203,476
  Development budget        45,015   40,610   38,266
Fiscal Year GDP            564,699  605,766  614,496
Ave. Exch. Rate (Kshs/USD)    55.3     61.9     59.7

Sources:  Kenyan Ministry of Finance, Central Bureau of 
Statistics, and the Central Bank of Kenya.

PERCENTAGE OF GDP:  

The KDOD budget amounted to 1.8 percent of GDP in 1997/98 and is 
projected at 1.9 percent of GDP in 1998/99.

PERCENTAGE OF BUDGET: 

The KDOD budget amounted to 4.0 percent of the total budget in 
1997/98 and a projected 4.9 percent in 1998/99.  Budget totals 
include debt service and other statutory obligations.

TRENDS IN REAL TERMS:

Due to a Government of Kenya (GOK) budget shortfall in mid-1998, 
the Ministry of Finance imposed an across-the-board 10 percent 
spending reduction.  In 1997/98, the Department of Defense spent 
11 percent less than Parliament appropriated, primarily because 


the armed forces only spent 18 percent of its USD 11 million 
development (procurement and construction) budget.  The 1998/99 
development budget is only USD 3.4 million.  KDOD uses 
procurement funding to modernize Kenyan forces by replacing 
existing weapons systems, rather than to expand the overall 
military establishment.  For 1998/99, the recurrent (operating) 
budget is up 1.3 percent above original 1997/98 projections and 
up 8.3 percent above last year's austerity program expenditures.  
The armed forces have very little money available for operations 
and maintenance.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

The armed forces include about 22,000 personnel, including the 
army (18,000), the navy (1,000), the air force (3,000), and KDOD 
headquarters staff (200).  A number of Kenyan military personnel 
participate in international peacekeeping operations in Angola, 
Bosnia, Croatia, Western Sahara, and the Kuwait/Iraq border.  In 
addition to the armed forces, Kenya employs up to 40,000 police 
and paramilitary personnel.  The national police, which report to 
the Commissioner of Police in the office of the president, field 
about 18,000 officers.  The General Service Unit (GSU) has around 
5,000 paramilitary personnel.  In addition, Administrative Police 
(AP) report to local district commissioners, who in turn report 
to the office of the president.  Finally, the National Youth 
Service (NYS), which is administered by the office of the 
president, provides some paramilitary training to young job 
trainees.

COMMENTS ON ITS POLITICAL ROLE:

The Kenyan military is a professional, apolitical force that 
supports existing civil authorities.  Its main mission is defense 
of the country's borders in a notoriously unstable region.  
Military commanders resist pressure to become involved in 
politics, including intervention in tribal clashes.  The police 
or GSU are generally used for politically sensitive missions.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

President Daniel Arap Moi also holds the GOK defense portfolio.  
KDOD, like the police, is part of the office of the president.  
All but senior military officers are appointed, promoted, and, if 
necessary, removed by the military's professional personnel 
system.  The president appoints and retires senior military 
officers.


REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

It is unlikely that the GOK will reduce its military budget in 
the near future.  The cost of carrying out the military's mission 
is increasing.  Armed groups of pastoral tribesmen periodically 
move across the Somalia, Ethiopia, and Sudan borders and 
challenge GOK security forces.  Chronic instability in Somalia 
and the ongoing civil war in southern Sudan also pose threats to 
Kenya's national security.  The GOK is devoting some funds to 
needed modernization programs.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

The U.S. and Kenya enjoy a close military relationship.  Kenya 
has long been a force for regional stability, and actively 
participates in international peacekeeping operations.  Kenyan 
military spending levels are in the normal range.  Nevertheless, 
the U.S. has consistently encouraged the Kenyan military to make 
more efficient use of its resources.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

GOK budget shortfalls forced the military to adopt austerity 
measures and defer some modernization programs.  The current 
armed forces high command is making inroads against institutional 
corruption and reducing traditional officer perks.  Major 
spending reductions are unlikely, however, as the military 
already lacks financing to sustain the current force.  The armed 
forces is unable to maintain adequate training levels or replace 
aging equipment.

HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

As presidential discretionary spending is not included, the 
accuracy of GOK security-related budget figures is unknown.  The 
GOK provides arms transfer data to the UN Register of 
Conventional Arms.  In 1998, Kenya did not participate in the UN 
Register of Conventional Arms.  In the past, Kenya has 
participated.  Kenya has never submitted a standardized MILEX 
report to the UN.






HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

Through the Commission on East African Cooperation (EAC), Kenya 
is developing a closer security relationship with Tanzania and 
Uganda.  EAC talks are likely to result in increased regional 
military coordination, but not a reduction in Kenyan military 
expenditure.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

Official budget allocations may be reduced due to austerity 
measures.  On the other hand, KDOD can benefit from the 
discretionary funds of the office of the president.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

There is little factual information available about GOK military 
spending other than the parliament appropriation bills.  The GOK 
does not normally make supplemental appropriations to augment the 
defense budget.  The appropriation process enhances the 
accountability of the armed forces to the civilian political 
authorities, particularly the office of the president.  The lack 
of open debate on the budget or mission of the armed forces, 
however, limits their accountability to the public.




KUWAIT



MILITARY SPENDING

REPORTING PERIOD:  July 1, 1997 to June 30, 1998.

AMOUNT: 

$2,703,237,900 ($1 equals .303 Kuwait dinars).  This amount 
includes the budget for the Ministry of Defense and the National 
Guard, as well as a supplemental budget for military rebuilding.

PERCENTAGE OF GDP:

Approximately 9 percent of GDP.  This reflects a projected drop 
of roughly 11 percent in GDP for 1998 due to the fall in oil 
prices.

PERCENTAGE OF BUDGET: 

Approximately 19 percent of budgeted government expenditures.

TRENDS IN REAL TERMS:

Although military spending stayed at relatively the same level 
for 1998, the projected drop in GDP due to the fall in oil prices 
may cut the amount projected for 1999.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

Approximately 21,000.  These forces are dwarfed by those of Iraq 
and Iran, Kuwait's northern neighbors.  Kuwait's huge oil 
reserves (96 billion barrels, more that the United States and all 
of the former Soviet Union combined) represent both a strategic 
asset to the West and a temptation to Kuwait's neighbors.

COMMENTS ON ITS POLITICAL ROLE:

Kuwait's military commanders have never taken a political role in 
governing the country, and there are no indications they will do 
so in the future.  In fact, members of Kuwait's armed forces are 
not allowed to run for public office or to vote, although 
legislation is being considered to grant military personnel the 
vote.  Although most of the officer corps is Kuwaiti, enlisted 



military personnel are a mixture of Kuwaitis and third-country 
nationals.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

The civilian leadership has complete control over the appointment 
and dismissal of military officers.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

See classified annex.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

See classified annex.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

The cost of rebuilding its armed forces has strained the budget 
and forced Kuwait to look for ways of reducing defense 
expenditures.  Spending levels are of great interest to the 
National Assembly, the only freely elected parliament in the GCC 
(Gulf Cooperation Council).  However, given its strategic 
situation, the government has decided that defense spending will 
remain a high priority--and we agree completely.

HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

In 1998, Kuwait did not participate in the UN Register of 
Conventional Arms.  Kuwait has never submitted a standardized 
MILEX report to the UN.  Kuwait has expressed a willingness to 
provide spending data and arms transfer information to the UN or 
regional organizations, but has not, to our knowledge, done so 
yet.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

Kuwait is a strong proponent of regional cooperation, and has 
been involved in joint exercises with GCC and Damascus 
Declaration elements.  Those forces are not, however, at a high 
level of readiness, and Kuwait must still look to its own 
resources and outside allies for security.




ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

The military budget is generally accurate and complete, 
particularly on the procurement side.  Although it has not done 
so thus far in the Kuwaiti fiscal year, the government has on 
occasion submitted supplementary appropriations requests to the 
National Assembly for unforeseen expenses ( for example, a 
supplemental appropriation was authorized in 1995 to pay for the 
costs of the U.S. response to the Iraqi buildup in October 1994).

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

The overall Government of Kuwait budget is made public, and must 
be approved by the National Assembly, but details are vague and 
opportunities for off-budget spending significant.  The National 
Assembly is playing an increasingly important role in the entire 
budget process, and its scrutiny of the budget may lead to 
greater details in the breakdown of expenditures, which are 
currently divided into only five major categories:  salaries, 
goods and services, transport equipment, construction projects, 
and miscellaneous expenditures and transfer payments.  On the 
revenue side, Kuwait has stringent financial secrecy laws which 
cover government-owned assets, including the Fund for Future 
Generations (FFG), managed by the Kuwait Investment Authority 
(KIA).  KIA's assets are estimated to be about USD 60 billion, 
and have, in the past, been used to help defray the deficit and 
cover reconstruction costs from the Iraqi invasion.




MALAYSIA



MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

Amount in Malaysian ringgit and U.S. dollar:  5.346 billion 
ringgit or 1.364 billion U.S. dollars.  The estimated operating 
expenditure is 3.064 billion ringgit; the estimated development 
expenditure is 2.282 billion ringgit.  (The dollar/ringgit 
exchange rate fluctuated widely in 1998.  We are using the 1998 
average exchange rate of 3.92 ringgit to the dollar.)

PERCENTAGE OF GDP:  

The U.S. Embassy calculates that the 1998 combined operating and 
development defense budget represents 1.9 percent of GDP.

PERCENTAGE OF BUDGET: 

The Malaysian armed forces (MAF)'s operating expenditure budget 
for CY 98 is estimated to represent 6.6 percent of the Government 
of Malaysia (GOM)'s operating expenditure budget.  The MAF's 
development expenditure budget is estimated to represent 11.8 
percent of the government's total development expenditure budget.  
The defense budget, including expenditures for both operating and 
development costs, is estimated to be 8.1 percent of the 
government's total budget.

TRENDS IN REAL TERMS:

According to the Ministry of Finance's budget figures, since 1994 
the MAF received the following amounts in billions of ringgits:

Year            Operating                      Development

1994            3.399                          2.166
1995            3.647                          2.474
1996            4.030                          2.061
1997            4.063 (estimated actual)       1.814
1998            3.064 (latest estimates)       2.282






ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

B.  ROLE OF ARMED FORCES

The MAF structure calls for 110,000 personnel, but actual 
strength is perhaps twenty percent less.  The MAF is planning to 
rebalance the personnel numbers among its three services as part 
of its modernization program for the year 2020, which it hopes to 
substantially complete in three years.

-- The army officially has 90,000 billets, but its actual 
strength is around 75,000.  The MAF proposes to reduce the army's 
billets to 80,000.

-- The Royal Malaysian Air Force (RMAF) is supposed to have 
10,000 personnel, but its actual strength is around 8,000 plus.  
The RMAF is seeking to have 11,500 billets under the 
modernization program.

-- The Royal Malaysian Navy is supposed to have 10,000 personnel, 
but it is similarly understaffed.  Under the new program, the 
navy hopes to have 11,000 billets.

Malaysia has been a major contributor of military personnel to UN 
peacekeeping operations and has participated in 15 peacekeeping 
operations and observer missions under the auspices of the United 
Nations.  In July 1998, however, the Minister of Defense 
announced that Malaysia would no longer engage in any 
peacekeeping missions at its own expense because of national 
austerity measures.  The Royal Malaysian Police, which reports to 
the Ministry of Home Affairs, is primarily responsible for 
maintaining internal security.

COMMENTS ON ITS POLITICAL ROLE:

The MAF refrains from engaging in either partisan activities or 
making politically-charged pronouncements.  The GOM civilian 
leadership sets the MAF's overall policy orientation and 
determines the size of its budget.  The MAF's primary mission is 
the protection of the nation and EEZ (exclusive economic zone) 
from external threats, and the MAF's leadership focuses on these 
narrowly interpreted professional responsibilities.






CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

The civilian leadership appoints and removes all senior military 
officers.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

Until mid-1997 Malaysia, along with some other ASEAN (Association 
of Southeast Asian Nations) countries, was in the process of an 
ambitious defense modernization program.  The GOM has viewed its 
force modernization program as a prudent, modest and, until 
recently, financially sustainable enhancement of its conventional 
deterrent capabilities.

However, the economic turmoil which struck the region in the 
second half of 1997 led Malaysia to slash its defense budget by 
21 percent.  To implement this cut, the Ministry of Defense cut 
the armed services' operating budgets, capped salaries, 
downgraded the operational readiness of military units, scaled 
back joint exercises with other countries and deferred big-ticket 
defense purchases.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

U.S. efforts are indirect and focus on our support of regional 
confidence-building, especially through the ASEAN Regional Forum 
(ARF) process.  In the long term, the continued success of ASEAN 
and regional initiatives such as the ARF are the best hopes for 
reducing tensions, addressing long-term security threats, and 
ultimately removing or ameliorating any potential causes for a 
regional arms race.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

Even at the height of the defense modernization efforts in 
Southeast Asia, the GOM dismissed arguments that there was an 
arms race underway in the region.  Pointing to ASEAN's record of 
resolving regional problems through diplomatic means, the GOM 
maintained there was little necessity for ASEAN members to engage 
in regional discussions to reduce military spending.  However, 
the financial crisis which struck the region starting from the 
second half of 1997 has forced the GOM to unilaterally cut 
military spending.





HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

The GOM values the ARF as a potentially useful mechanism for 
promoting defense transparency and confidence-building diplomacy 
in the larger East Asia region.  The ARF has endorsed the UN 
Register of Conventional Arms to which the GOM has regularly 
submitted data on its latest arms acquisitions.  In 1998, 
Malaysia participated in the UN Register of Conventional Arms. 
Malaysia has submitted standardized MILEX reports to the UN two 
times--1987 and 1990.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

At present, no regional forum or ongoing dialogue is specifically 
addressing REDUCING MILITARY SPENDING.  Malaysia is a founding 
member of the ARF (see above), which is addressing the general 
topic of confidence-building measures.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

Malaysia does not release details of its military budget, and the 
actual magnitude and composition of GOM defense spending is not 
clear.  The MAF's budget has some flexibility.  There have been 
cases in the past when the MAF's budget was revised upward rather 
quickly to achieve a GOM policy goal - such as providing airlift 
to Malaysian troops in Bosnia.  On the other hand, economic 
problems in 1997 led the GOM to slash the defense budget.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

It is unclear whether portions of the civilian budget are used 
for military spending.  However, as mentioned above in our 
comments on the MAF's political role, the GOM civilian leadership 
determines the size of the military budget.  The overall budget, 
including military spending, is debated in Parliament.






MOROCCO



MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

1997:  1322.7 million dirham.  $1450.8 million.
(exchange rate:  9.1 dirham = $1 U.S. dollar.)

PERCENTAGE OF GDP:  4.2 (1997).

PERCENTAGE OF BUDGET:  17.8 (1997).

TRENDS IN REAL TERMS:

Military budgets in real terms in Morocco have fallen slightly 
over the past decade.  However, the military budget as a 
percentage of GDP actually increased in 1997 due to the fall in 
GDP.  With a forecast GDP growth rate of 6.8 percent in 1998, the 
military budget's share of GDP should fall back to about 3.8 
percent.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:  198,500

Army:       175,000
Air Force:   13,500
Navy:        10,000
Gendarmes:   12,000

The armed forces have, and do, participate in international 
peacekeeping operations including IFOR, SFOR, and Somalia.

COMMENTS ON ITS POLITICAL ROLE:

The Moroccan military does not play a significant political role 
in the Moroccan government.  After surviving two military coup 
attempts in the 1970's. King Hassan II goes to some lengths to 
prevent the military from becoming a power center.  For example, 
the king has ensured that the three military services remain 
separate.  While the king has some close associates in the 
military, the military does not have significant political power.




CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

Civilians have virtually no authority in military appointments or 
removals.  The king is the supreme commander-in-chief and makes 
essentially all important policy decisions.  Officer 
appointments, promotions, and retirements are handled by elite 
power groups within the military--with the king's approval, and 
according to the king's schedule.  A civilian was recently 
appointed to lead the National Defense Administration, the 
successor agency to the Ministry of Defense, which was abolished 
after the coup attempts.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

With the current size and deployment of the Moroccan military, 
reduction in spending is unlikely, since the services are 
considered underfunded as it is--particularly with regard to 
spare parts.  The only real prospect for a military spending 
reduction would be for a corresponding reduction in forces to 
occur.  The Moroccan armed forces currently has 50-60 percent of 
its forces in the Western Sahara--a huge drain on resources.  If 
an eventual successful conclusion to the dispute there occurs, a 
reduction of forces and budget would then be possible in theory.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

In 1994 FMF was eliminated, after averaging $43 million a year in 
the proceeding decade.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

Morocco's efforts appear to be limited to reducing acquisitions.  
There have been no force reductions or base closures of which we 
are aware.  Instead, several military installations have opened 
in recent months.

HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

Morocco has never submitted a standardized MILEX report to the 
UN.  In 1998, Morocco did not participate in the UN Register of 
Conventional Arms.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?  No.



ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

The military budget is not generally considered to be always 
accurate and complete.

Also see classified annex.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

Morocco's audit office is responsible for monitoring and auditing 
the expenses of all government offices, including the military.  
The military's budget is provided from the general budget of the 
state through the minister delegate for defense administration, a 
civilian.




NICARAGUA



MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

The 1998 defense budget is approximately 25.49 million dollars 
(268.4 million cordobas) at the 1998 average exchange rate of 
10.53 cordobas per dollar.

PERCENTAGE OF GDP:  1.28 percent.

PERCENTAGE OF BUDGET:  4.12 percent.

TRENDS IN REAL TERMS:

As anticipated, military spending declined in 1998, both in 
nominal and real terms.  Much of the real decrease resulted from 
the Government of Nicaragua's (GON) one percent per month 
crawling peg devaluation of the official exchange rate.  The 
proposed budget for 1999 is 294 million cordobas.  At an average 
exchange rate of 11.7 cordobas per dollar (assuming continued 
devaluation), this would put the 1999 budget at approximately 
26.7 million dollars--up 9.5 percent from 1998 levels, but still 
lower than the 29.83 million dollar 1997 budget.  1999 figures 
are subject to adjustment; the National Assembly is expected to 
postpone considering the 1999 budget until February of 1999, in 
order to take better account of new expenses related to Hurricane 
Mitch.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

The size of the army is officially 14,143, which includes 1,374 
civilians.

COMMENTS ON ITS POLITICAL ROLE:

The Nicaraguan army has evolved from a Sandinista-dominated, 
revolutionary army in the 1980's to a downsized, relatively 
apolitical professional army officially answering to a civilian 
Ministry of Defense.  In September 1994, then-President Chamorro 
signed into law a new military code which was an important step 
forward for the democratic process.  It provided a framework for 


institutionalizing civilian control of the armed forces.  As 
stipulated in the code, then-army commander General Humberto 
Ortega stepped down on February 21, 1995.  The President named 
General Joaquin Cuadra to replace him.  Upon taking office in 
January 1997, President Arnoldo Aleman appointed Liberal 
Constitutional Party legislator Jaime Cuadra, to be the first 
incumbent of the newly-created civilian defense ministry--the 
first in Central America.  In September 1997, Jaime Cuadra was 
replaced as defense minister by Pedro Joaquin Chamorro, son of 
former President Violeta Chamorro.  Joaquin Cuadra remains the 
army commander.

Initially, the new Ministry of Defense focused exclusively on 
encouraging the demobilization of "re-armed groups" in the North.  
With the completion of the disarmament process in December 1997, 
the ministry shifted its focus towards transforming itself into 
an institution that could exercise effective civilian control 
over the military.  Legislation enacted in 1998 defining the 
Ministry of Defense's relationship was helpful.  The Nicaraguan 
army's central role in responding to the aftermath of Hurricane 
Mitch served as a catalyst to improved civilian/military 
coordination.  The army carried out orders from the civilian-led 
National Emergency Committee for helicopter deliveries of food 
and medicine, and rescue of stranded and injured
persons--including some U.S. citizens.  Defense Minister Chamorro 
coordinated the army's role.  The Nicaraguan military 
demonstrated through its response to the disaster a high degree 
of professional competence, an increased willingness to accept 
civilian direction, and a desire and capability to coordinate 
effectively, including with U.S. military personnel and resources 
sent to assist in the relief effort.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

Under the military code, the civilian president may appoint and 
remove the commander-in-chief of the army.  The president names a 
new commander of the army based on nominees submitted to the 
"Military Council," which is composed of the top several dozen 
military commanders.  The president can also reject the slate of 
candidates and ask the military council to provide other names.  
The commander-in-chief of the army can be removed by the civilian 
president only for cause, which the military code defines as 
insubordination, mental or physical deficiencies, violation of 
the apolitical nature of the commander's duties, or conviction 
for a crime requiring punishment beyond the equivalent of a 
military letter of reprimand.




REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

In the short term, the Nicaraguan army's role in rebuilding after 
Hurricane Mitch will make further spending reductions difficult.  
The army provided disaster response capabilities no other GON 
entity has.  In the areas of disaster response, and in combating 
armed criminal bands in remote rural areas, the Nicaraguan army 
has unique capabilities.  For 1999, the army is seeking increased 
funds to repair and upgrade navy patrol craft, and to install 
new, more fuel-efficient engines in its aging fleet of trucks.  
It seeks a larger role in combating drug trafficking along the 
Caribbean coast and in protection of natural resources, and has a 
legal mandate to perform those functions.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

The U.S. supports the policies of international financial 
institutions, such as the IMF's Enhanced Structural Adjustment 
Facility (ESAF), which requires cuts in overall Nicaraguan 
government spending.  The Nicaraguan government signed a
three-year ESAF in January 1998, and to our knowledge was in 
compliance at the time Hurricane Mitch hit.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

Nicaragua has greatly reduced military spending in conjunction 
with the downsizing of its army.  Since 1990, the size of the 
army has been reduced from about 90,000 - 95,000 to the current 
level of 14,143.  The number of military facilities was 496 in 
1990, and has been reduced to a current total of 168 military 
installations/facilities.  Moreover, direct foreign military 
assistance from the Former Soviet Union and Soviet Bloc countries 
has ended.

HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

Nicaragua makes public basic national budget information.  
Nicaragua has never submitted a standardized MILEX report to the 
UN.  In 1998, Nicaragua did not participate in the UN Register of 
Conventional Arms.  In the past, Nicaragua has participated.






HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

In December of 1995, Nicaragua signed the "Central American 
Democratic Security Treaty," which strengthens regional 
democratic norms and creates a fuller framework for regional 
cooperation.  The National Assembly ratified this treaty in July 
1996.  It has not entered into force because the required 
ratification by at least three Central American countries has not 
occurred.  The treaty contains some military cooperation and 
confidence-building commitments, but they have not formally been 
implemented.  It also contains provisions on law enforcement, the 
environment, and drug trafficking.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

The Nicaraguan army operates businesses whose income goes into a 
military welfare and retirement fund, the "Institute of Military 
and Social Welfare."  The army does not publicly report this 
income, though it says the funds are not used to augment its 
operational budget.  The civilian comptroller-general has 
oversight responsibilities for the administration and finances of 
the institute.  The minister of defense participates as a member 
of the institute's board.  No information on finances of the 
institute is available publicly.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

The overall military budget is published as part of the 
government's national budget.  However, the submission on the 
military contains far fewer details than are provided in the 
budget submissions of other government ministries.





NIGERIA


Note:  This report on Nigeria updates information provided in 
last year's report, covering CY 1997 and CY 1998 expenditures.


MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

Nigeria's total published military budget allocation for CY 1997 
was 17.91 billion naira, equivalent to USD 210 million at the 
market exchange rate of 85 naira per USD 1.00.  Of the total, 72 
percent (12.97 billion naira) was budgeted for recurrent 
expenditures, while 28 percent (4.94 billion naira) was allocated 
for capital expenditures,  However, Nigeria made an undetermined 
amount of foreign procurements at an official exchange rate of 22 
naira per USD 1.00.  Thus, USD 210 million is an underestimate of 
Nigeria's publicly acknowledged military expenditures.

Nigeria's published military budget for CY 1998 is 23.07 billion 
naira, with 66 percent (15.13 billion naira) allocated for 
recurrent costs and 34 percent (7.94 billion naira) for capital 
expenditures.  At the market exchange rate, the total military 
budget would equal USD 271 million.  The government has indicated 
that in 1998 it will approve fewer instances in which its 
purchases will be made at the official (22 naira to USD 1.00) 
dollar rate.  However, USD 271 million should still be concerned 
an underestimate.

Also see classified annex.

PERCENTAGE OF GDP:

In 1997, acknowledged military spending, at a market exchange 
rate, represented 0.4 percent of Nigeria's estimated GDP of USD 
51.4 billion.  This is an underestimate, for reasons cited above 
and below in the military budget accuracy assessment.

PERCENTAGE OF BUDGET:

In 1997, publicly acknowledged military expenditures represented 
12.6 percent of total recurrent expenditures, and 5.6 percent of 
capital expenditures.  Overall, publicly acknowledged military 
expenditures accounted for 9.4 percent of the 1997 budget.



In the 1998 budget, acknowledged military allocations make up 13 
percent of recurrent expenditures, 5.7 percent of capital costs, 
and 9 percent of total allocations.

TRENDS IN REAL TERMS:

Between 1996 and 1997, acknowledged military expenditures rose 
16.6 percent in nominal terms.  In real terms, this represents an 
increase of 8.1 percent.

From 1997 to 1998, acknowledged military spending is slated to 
rise 28.8 percent in nominal terms.  However, reduction in use of 
the official exchange rate for military purchases would result in 
a less of an increase in acknowledged military spending.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

Estimated total personnel - 76,500, consisting of:

	-  Army		62,000
	-  Air Force	 9,500
	-  Navy		 5,000

Nigeria's armed forces participate in regional and UN 
peacekeeping deployments.

Also see classified annex.

COMMENTS ON ITS POLITICAL ROLE:

Nigeria has been under military rule for all but nine years since 
independence in 1960.  A military coup overthrew the country's 
last elected civilian president in 1983.  After a protracted 
program to return to civilian rule, the former military 
government of General Babangida annulled results from the June 
1993 presidential elections.  General Sani Abacha took power in a 
palace coup in November 1993.  In 1995, Abacha began a return to 
civilian rule program seemingly designed to maintain himself in 
power.  Upon Abacha's death in June 1998, General Abdulsalami 
Abubakar became head of state.  The military regime rules through 
select use of a previous constitution supplemented by decrees, 
which may not be challenged in court.  Military administrators 
function as governors of Nigeria's 36 states.  The Abubakar 
administration is conducting a transition to civilian rule 
scheduled to culminate in a hand over to an elected civilian 



government in May 1999.  Following the turnover to civilian 
leadership, the Nigerian military will continue to play an 
important, albeit unofficial, role in the country's political 
life.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

Under the current conditions of military rule, civilian 
authorities are not able to appoint or remove military officers.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

Significantly reducing Nigeria's military spending is very 
unlikely until after the establishment of civilian government.  
Even under a civilian administration, the military will remain a 
powerful political force that can effectively lobby for a 
significant budget allocation.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

U.S. ability to engage Nigeria on military issues has been 
minimal since the imposition of sanctions on Nigeria following 
annulment of the 1993 elections and subsequent events.  As a 
result of these sanctions, bilateral military contacts were very 
limited.  However, bilateral contacts have significantly improved 
since General Abubakar came to power in June 1998.  Because of 
sanctions in place, the U.S. does not sell or service military 
equipment in Nigeria, nor does it provide military training such 
as IMET.  However, this has not prevented Nigeria from acquiring 
equipment from suppliers in some other nations.

Also see classified annex.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

Led by a military government, Nigeria has not been inclined to 
reduce military spending.  Additional factors also provide 
Nigerian leaders with arguments against reducing military 
expenditures.  Nigeria has on-going border disputes with 
neighboring Cameroon which has led to periodic military clashes.  
Nigeria also has demonstrated its desire to project its influence 
in West Africa in part through its military forces under the 
banner of the Economic Community of West African States (ECOWAS) 
and its Cease-fire Monitoring Group (ECOMOG).  A military force 
less than 80,000 strong is not excessive, Nigeria believes, for a 
country of 110 million people.


HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

Nigeria has never submitted a standardized MILEX report to the 
UN.  In 1998, Nigeria did not participate in the UN Register of 
Conventional Arms.  In the past, Nigeria has participated.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

None.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

The formal budget figures presented above do not present an 
accurate or complete picture of Nigeria's military spending; they 
are underestimates.  As noted above, some military purchases 
employ an artificially low naira/dollar exchange rate.  In 
addition, major portions of Nigeria's participation in ECOMOG and 
military procurement traditionally have been off-budget.  A 
portion of Nigeria's oil revenues are deposited in what are 
termed dedicated accounts which provide the government with funds 
to finance projects and programs not subject to fiscal oversight.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

Due to the factors listed above, Nigeria's military budget cannot 
be considered transparent.  Under current conditions of military 
rule, the military is not accountable to civilian authorities and 
the public.





PAKISTAN


Under the terms of the "Pressler Amendment," USG military and 
security assistance, FMS, and new economic assistance were cut 
off in 1990 when the President determined that he could no longer 
meet the legal requirement to certify that Pakistan did not 
possess a nuclear explosive device.  In January 1996, the 
President signed legislation (the "Brown Amendment") that 
provided one-time relief from Pressler sanctions by releasing USD 
358 million worth of materiel that, while paid for by Pakistan, 
had been blocked in the pipeline.  By the end of 1998, that 
pipeline had been almost completely emptied.  The 1996 
legislation, however, did not unblock 28 F-16 fighters that 
Pakistan paid for, but which remained undelivered.  In December 
1998, this issue was resolved by a bilateral agreement.  Pakistan 
withdrew its claim for the aircraft in return for a payment of 
$326.9 million from the U.S. Treasury Judgement Fund, a fund used 
to settle legal disputes that involve the U.S. Government.  In 
addition, the U.S. Government agreed to use all available means 
to provide Pakistan with goods and benefits up to a value of 
$140 million.  The 1996 legislation also removed International 
Military Education and Training (IMET) and Overseas Private 
Investment Corporation (OPIC) from Pressler sanctions, but 
resumption of these programs was blocked by sanctions under the 
Symington Amendment.  In October 1998, further legislation (the 
"Brownback Amendment"), gave the President authority to waive 
certain sanctions on Pakistan, including programs under the 
Foreign Assistance Act (including IMET and TDA [Trade and 
Development Agency], loans by private banks, loans by 
international financial institutions, and credits, such as those 
of the Export-Import Bank and OPIC.  In November, President 
Clinton decided to exercise that authority.


MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

FY 97/98 revised budget (millions of Pak rupees)

	Total military expenditures:  Rs 133,834
	or, converted at USD 1 = Rs 42.4, USD 3.16 billion.

Note:  Converted at mean interbank floating rate for 1997.




FY 98/99 budget (millions of Pak rupees)

	Total military expenditures:  Rs 145,000
	or, converted at USD 1 = Rs 50, USD 2.90 billion.

Note:  Converted at mean interbank floating rate for year to 
date.

PERCENTAGE OF GDP:

FY 97/98 revised budget:  4.7 percent.

FY 98/99 budget:  4.4 percent.

PERCENTAGE OF BUDGET: 

FY 97/98 revised budget:  29 percent.

FY 98/99 budget:  29 percent.

TRENDS IN REAL TERMS:

1998/99 spending is a nominal 9 percent increase over 1997/98 
revised expenditures in Pak rupees.  Inflation is running at 
approximately 6.5 percent, which means that military expenditures 
have a real increase of roughly 2 percent.  This is reduced 
somewhat by the fact that the Pak rupee has depreciated nearly 14 
percent against the U.S. dollar over the past year, raising the 
cost of goods purchased with hard currency.  In contrast to 
recent years, 1998/99 military purchasing power has remained 
roughly equivalent with that of the previous year.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

Active-duty Pakistan armed forces are estimated to number about 
775,000 personnel, including auxiliary units, divided as follows 
(essentially unchanged from last year's report):

Army:			550,000.

(19 infantry divisions, 2 armor divisions, and 1 artillery 
division.)

Air Force:		 35,000.
(15 fighter squadrons and 3 training squadrons that are combat 
capable.)


Navy:			 23,000.
(12 surface combatant ships, 6 submarines, 4 Atlantiques, and 3 
P-3C aircraft.)

Paramilitary:		150,000.

Coast Guard:		  1,000.

Marine security:	  1,000.

Marines:			    120.

COMMENTS ON ITS POLITICAL ROLE:

The armed forces of Pakistan--particularly the army--play a 
significant political role, albeit a lesser one than that they 
played as recently as ten years ago, when Pakistan was under 
martial law.  During 1998, the military demonstrated its respect 
for Pakistan's democratic institutions, most notably when General 
Jehanghir Karamat, the army chief of staff and highest-ranking 
military officer, resigned over differences with
Prime Minister Nawaz Sharif over public criticisms he had leveled 
against the government for mismanaging the affairs of state and 
failing to consult.  Although his criticisms reflected 
unhappiness within the military over government mishandling of 
the economy and other issues, his resignation, following a 
meeting with the prime minister, demonstrated a continuing 
military commitment to respecting constitutional norms.  The 
military appears unwilling to insert itself directly into the 
political process except in dire circumstances.  In November, 
however, the army was itself tasked to establish military courts 
in Karachi to support governor's rule.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

Civilian authorities appoint the most senior officers of the 
military, i.e., the chief of each of the three services and the 
chairman of the joint chiefs of staff committee.  Effective
April 1, 1997, Prime Minister Nawaz Sharif amended the 
constitution, removing the president's power to make these senior 
military appointments at his own discretion.  Generally, senior 
military officers serve out their appointed terms and then 
retire.  While political leaders normally do not try to remove 
senior military leaders in advance of their scheduled 
retirements, when the prime minister expressed unhappiness over 
the public criticisms of his government by General Karamat, the 
general decided to resign.



Appointments to lower levels in the military are approved by the 
political leadership, but only after consulting the chiefs of the 
three services, who play the central role in determining who 
serves in the critical subordinate ranks.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

As noted above, Pakistan's officially-declared military 
expenditures have declined in dollar terms and only slightly 
increased in real rupee terms (they have remained roughly the 
same as proportions of both the budget and GDP).  Realizing that 
the weak Pakistani economy cannot provide additional resources 
for badly-needed equipment modernization, Pakistan's military 
leadership is assessing means to reduce manpower and training 
costs without undercutting fighting capability.  That said, 
significant reductions in Pakistan's military spending are not 
likely.  Although there is some discussion in the media, the 
military, and among intellectual elites of the trade-off between 
military spending and funds available for desperately needed 
social and economic development, major political parties do not 
publicly advocate reducing military expenditures or the size of 
the armed forces in the existing security context.  There is a 
broad political consensus on the need to maintain an effective 
defense.

In light of the current imbalance between the military 
capabilities of Pakistan and its greatest perceived external 
threat--India--Pakistan is not likely to make unilateral military 
reductions that could exacerbate an already unfavorable military 
equation.  There is little domestic pressure for such reductions.

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

In general, U.S. efforts to influence Pakistan's defense 
structure have focused on nonproliferation goals rather than the 
size of Pakistan's defense budget.  Specifically, the U.S. has 
urged that Pakistan avoid a nuclear weapons or missile race with 
India, the results of which would be disastrous for the Pakistani 
economy.  In 1990, Pressler Amendment sanctions were imposed on 
Pakistan following the President's inability to certify that 
Pakistan did not possess a nuclear explosive device.  The 
Symington Amendment (1976, amended 1994) imposed further 
sanctions.  Although the Brown Amendment in 1996 removed some of 
these sanctions, the nuclear tests carried out by Pakistan in May 
of this year in response to tests by India automatically 
triggered further sanctions under the Glenn Amendment 


(1977, amended 1994).  Subsequent negotiations between the U.S. 
and Pakistan aimed at securing adherence to global 
nonproliferation objectives produced a Pakistani commitment to 
sign the Comprehensive Nuclear Test-Ban Treaty (CTBT), the 
removal of Pakistani objections to the Conference on 
Disarmament's (CD) establishing of an ad hoc Committee in Geneva 
to negotiate a Fissile Material Cutoff Treaty (FMCT), and ongoing 
meetings with U.S. experts on steps to improve export controls.  
Progress in these talks, which are ongoing, coupled with 
Pakistan's dire economic straits, prompted the President in 
November to exercise the waiver authority granted him under the 
Brownback Amendment to ease a number of sanctions against 
Pakistan.  On the military side, this includes the resumption of 
IMET.

In addition, realizing that any progress Pakistan makes towards 
nonproliferation goals will depend largely on similar action by 
India, the USG continues to encourage both governments to engage 
in a serious bilateral dialogue on the range on contentious 
issues between them, including Kashmir.  The U.S. was encouraged 
by the resumption of official, senior-level talks between the two 
countries in late 1998.  By strongly encouraging India and 
Pakistan to engage in bilateral dialogue aimed at reducing 
tensions, the U.S. seeks to create conditions that make it 
possible for both nations to reduce their military expenditures.

The virtual elimination of U.S. assistance to Pakistan and the 
reduction of military-to-military cooperation since the original 
imposition of Pressler sanctions have diminished our ability to 
influence the government on these issues.  By allowing resumption 
of the IMET program, Brownback is a potentially important step 
toward expanding our mil-to-mil relationship in response to 
progress on our nonproliferation agenda.

COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

The euphoria that immediately followed Pakistan's nuclear tests 
was followed, in turn, by growing concern about how Pakistan's 
already-fragile economy would weather post-test international 
sanctions as well as an expensive arms race with India.  These 
concerns have strengthened the growing realization, in civilian 
as well as military circles, that there are very real limits on 
the national resources Pakistan can devote to military spending.  
While high-profile initiatives to cut military spending are 
unlikely to be announced, many national decision-makers are 
increasingly attuned to the need to keep military spending in 
check.



HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

Pakistan has provided official military expenditure data to the 
World Bank (its accuracy is in question for reasons explained 
below).  Pakistan provides arms transfer data to the UN every 
year.  In 1998, Pakistan participated in the UN Register of 
Conventional Arms.  Pakistan has never submitted a standardized 
MILEX report to the UN.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

There have been no official talks in South Asia focused on 
reducing regional military spending.  However, Pakistan's 
dialogue with India, which resumed at the foreign secretary level 
during 1998, has been aimed at resolving contentious issues 
(namely, Kashmir) and identifying possible avenues of 
cooperation, including negotiation of confidence-building 
measures.  This dialogue offers the promise of lowering mutual 
threat perceptions, with lower military expenditures on both 
sides of the Indo-Pak border a possible result.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

Official military expenditure figures do not fully reflect 
reality.  An undetermined amount of military expenditures are 
hidden elsewhere in the budget (for example, in spending on 
communications infrastructure).  Certain sensitive programs, such 
as nuclear weapons and missile development, are not identified in 
any published budget figures.  Given the secrecy that envelops 
military spending, it is difficult to tell whether supplemental 
appropriations are made to augment official budget figures.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

The military budget is not transparent.  Only two line items in 
the official budget ("Defense Administration" and "Defense 
Services") represent all military expenditures.  There is no 
explanation of what these line items stand for, or how the funds 
are spent.  Parliamentary consideration of the budget 
traditionally has not shed any light on military expenditures.  
This lack of transparency leads to impressions that kickbacks and 
other forms of corruption take place at the upper levels of the 



national defense establishment, among civilians as well as 
members of the military.  For example, three naval officers were 
recently convicted for taking money in connection with submarine 
construction.



PERU



MILITARY SPENDING

REPORTING PERIOD:  January 1 to December 31, 1998.

AMOUNT: 

1998:  USD 913.3 million (2,676 million soles; 1998 average 
exchange rate 2.93)

Projected 1999:  USD 882.5 million (2,772 million soles; 
estimated 1998 average exchange rate 3.14) (figures do not 
include significant off-budget expenditures).

PERCENTAGE OF GDP:  

1998:  1.42 percent; projected 1999:  1.35 percent
(Note:  Off-budget expenditures not included).

PERCENTAGE OF BUDGET: 

1998:  9.1 percent; projected 1999:  8.5 percent.

TRENDS IN REAL TERMS:

Given forecasts of 6 percent inflation, 7.2 percent depreciation 
of the sol versus the U.S. dollar, and 3 percent growth in 
overall GDP, U.S. Embassy expects 1999 defense spending will drop 
about 2 percent in real terms.

ROLE OF THE ARMED FORCES

SIZE OF THE ARMED FORCES:

122,000 (army, air force, and navy); 100,000 (national police).

COMMENTS ON ITS POLITICAL ROLE:

According to the Peruvian constitution, the president presides 
over the system of national defense made up of the armed forces 
(the army, navy, and air force) and the national police.  The 
armed forces are primarily tasked with guaranteeing the 
independence, sovereignty, and territorial integrity of Peru.  
The armed forces also "assume control of internal order" in 
accordance with article 137 of the constitution dealing with 
states of emergency and states of siege.  In 1998, the president
continued states of emergency in a number of departments 
comprising over 10 percent of Peruvian territory and over 20 
percent of the Peruvian population.  These emergency zones were 
established previously in response to two terrorist insurgencies 
which continue to operate in certain areas of Peru.

CAN CIVILIAN AUTHORITIES APPOINT AND REMOVE MILITARY OFFICERS?

The constitution established the president as the supreme 
commander of the armed forces, but in practice, the degree of 
civilian control depends entirely on the president's relationship 
with the military leadership.  In August, the Peruvian president 
dismissed the president of the armed forces joint command who had 
headed the joint command for over six years, and replaced him 
with the defense minister.  The current president of the joint 
command and the new defense minister are both active duty army 
generals.  There has never been a civilian minister of defense in 
Peru since the defense ministry was created in 1986.  The 
president must approve the promotions and retirements of all flag 
rank officers of the three armed services and the national 
police.

REDUCING MILITARY SPENDING

FEASIBILITY OF REDUCING MILITARY SPENDING:

In the wake of the October 26 signing of a global and definitive 
peace agreement between Peru and Ecuador, the Government of Peru 
(GOP) is likely to curtail projected increases, and perhaps 
reduce, its defense spending.  President Fujimori announced in 
November that Peru will suspend the purchases of military 
aircraft and missiles in order to shift resources to education 
and health care.  He also noted that the defense budget will 
undergo a progressive annual reduction resulting in the savings 
of "tens of millions of dollars."

U.S. EFFORTS TO ENCOURAGE REDUCED MILITARY SPENDING:

The U.S. Government--along with the other three Guarantors of the 
1942 Rio de Janeiro protocol (Argentina, Brazil, Chile)--helped 
Peru and Ecuador conclude in 1998 a global and definitive 
settlement of their long-standing border dispute.  Peru and 
Ecuador reached an agreement on confidence- and security-building 
measures as part of that comprehensive accord.  In addition to 
its role as a Guarantor of the Peru-Ecuador peace process, the 
USG also continued to work toward a multilateral agreement on 
transparency and confidence in conventional arms acquisitions at 
the Organization of American States (OAS).


COUNTRY EFFORTS TO REDUCE MILITARY SPENDING:

Peru engaged in successful substantive negotiations with Ecuador 
to resolve their long-standing border dispute.  The Peruvian 
president has publicly indicated that a substantial reduction in 
defense spending will be one of the benefits of reaching a peace 
accord with Ecuador.

HAS THE COUNTRY PROVIDED ACCURATE MILITARY SPENDING DATA TO 
RELEVANT INTERNATIONAL ORGANIZATIONS AND ARMS TRANSFER DATA TO 
THE UN REGISTER OF CONVENTIONAL ARMS?

Peru has submitted standardized MILEX reports to the UN three 
times--1992 to 1994.  Peru did report arms transfer data to the 
UN Register of Conventional Arms in 1998.

HAS THE COUNTRY PARTICIPATED IN REGIONAL TALKS TO REDUCE MILITARY 
SPENDING?

Peru promotes bilateral military commissions to build confidence 
with each of its five neighbors.  Peru, like other OAS members, 
is engaged in discussion of the USG-proposed OAS resolution on 
transparency and confidence in conventional arms acquisitions.


ASSESSMENT OF MILITARY BUDGET ACCURACY

IS THE MILITARY BUDGET ACCURATE AND COMPLETE?

Military budget figures are not considered definitive and 
spending on the military includes significant "off budget" items.  
The extent of this additional spending is unclear as the 
military, citing security reasons, does not reveal a breakdown of 
military expenditures.  The Interior Ministry maintains separate 
budget items for defense and national security and for 
maintenance of internal order.

TO WHAT DEGREE IS THE MILITARY BUDGET TRANSPARENT?

The military budget is not transparent.  This lack of 
transparency significantly diminishes the accountability of the 
military to civilian authorities and the public.  President 
Fujimori did announce in July 1998 that Peru had acquired 
18 MiG-29s at the cost of "hundreds of millions of dollars."  The 
GOP has never revealed the exact cost of its MiG-29 acquisitions 
or the extent of other close air support aircraft purchases, 
however.


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