WT3 Defence Economics Task Force Document

In an attempt to increase the sense of security and confidence among the countries in the region, the Stability Pact strives to enhance transparency and consolidate progress in the defence and security field. Aimed at facilitating the often painful and difficult transition into a new security culture in the region, several project frameworks have been developed. These focus on seeking to assist with the non-security impacts of military restructuring and downsizing.

The military sector in every South East European nation faces the difficult challenge of restructuring and, inevitably, downsizing its forces and activities. While that entails a number of internal challenges for future military strategy and tasks, it also involves considerable external dislocation, particularly in economic terms.

The single biggest cost factor in every military is personnel. A leaner military sector results directly in releasing former military personnel into the civilian labor market. As the skills acquired by these personnel often have little direct bearing on existing commercial requirements, the likely initial result is unemployment and disillusionment, which carry with them potential security implications. In close collaboration with a number of international organizations, notably NATO, and donor governments, the Stability Pact is associated with a number of programs in South East European nations to provide training opportunities for former military personnel so as to ease and speed their transition to a productive civilian life. Currently active programs are currently operating in Bosnia, Bulgaria and Romania, while plans are underway to implement programs in Croatia, Albania and Yugoslavia.

While providing a future for former military personnel is a priority task, downsized militaries also have diminished use for physical assets, notably military bases. Assisting the defence sector in South East Europe to convert its physical assets into productive economic resources helps consolidate security sector reform and contribute to national prosperity. Together with NATO, the Stability Pact has spearheaded a process of pilot project development coupled with assistance in the development of a long-term strategic approach to closing and converting military assets. With programs currently active in Romania and Bulgaria, Croatia and Yugoslavia have specifically expressed interest in proceeding in the near future.

As military sectors are restructured and missions transformed, the requirements for military-related technology and supplies also changes. Some SE European nations seek to maintain traditional production at these plants in spite of the lack of an economic or security rationale in an effort to avoid any substantial economic dislocation. The reorientation of entire companies and plants to civilian production has remained the exception. Often it has been a case of partial restructuring with diversification of the product range and partial conversion through relocating personnel. Difficulties can however be overcome. Certain factors have contributed to successful industrial conversion elsewhere:

Growing civilian markets offering arms companies opportunities for civilian marketing
Reorientation of company business practices and the organizational structure to meet the demands of the civilian market
Stakeholders who are committed to pushing forward the reorientation process
Support in critical phases by government agencies, and especially within a regional network Working with experienced international NGOs and others, the Stability Pact seeks to foster information exchange and the development of projects to facilitate military industry conversion. Specific interest in this so far has been expressed by the FRY, including the Republic of Montenegro, as well as Bulgaria.

Defence Sector Conversion Challenges