NATO BUDGET SYSTEM & RESOURCES MANAGEMENT NATIONAL DEFENCE ACADEMY 12 February 2003 J. Ghesquiere...

NATO BUDGET SYSTEM &RESOURCES MANAGEMENT

NATIONAL DEFENCE ACADEMY

12 February 2003

J. Ghesquiere

Head Resource Policy Unit

NATO HQ

- NATO resources

- National, multinational, joint & common funding

- Common funding: Civil & Military Budget, NSIP

- Resource planning, management, implementation

- Current resource issues

- Role of common funding within NATO

NATO BUDGET & RESOURCES MANAGEMENT

- NATO resources







People

Money

Assets

NATO resources or resources of NATO nations?

‘02

Population 805,800,000

Labour force 376,400,000

GDP (ppp) 22,022 Billion US$

GDP/head 27,330 US$


‘02




GDP/head 27,330 US$

Armed forces 5,731,700 1.52%

Defence exp. 522 Billion US$ 2.37%

Def. Exp/Head 648 US$


‘02




GDP/head 27,330 US$

Armed forces 5,731,700 1.52%

Defence exp. 522 Billion US$ 2.37%

Def. Exp/Head 648 US$

NATO joint 6.7 Billion US$ 1.3% of defencefunding expenditure

NATO common 1.7 Billion US$ 0.32% of defencefunding expenditure

NATO international 16,818 0.29% of armedmanpower forces

- NATO resources







NATO FUNDING ARRANGEMENTS

National defence expenditure:

- the default option;

- 95% or more of overall defence expenditure.

Multinational defence expenditure:

- funding outside formal NATO structures

- a multitude of bilateral and multilateral arrangements

- the substance of the arrangement, the funding mechanisms and the levels of funding remain entirely with the nations concerned

But with NATODefence Planning

providing the broaderframework

NATO RESOURCES?

Joint funding:

- structured forms of multinational funding within the terms of an agreed NATO Charter;

- the participants identify the requirements and the priorities and agree the funding levels;

- NATO has visibility and provides political and financial oversight.

Common funding:

- Allies provide the funding

- NATO Strategic Commands identify the requirements and the priorities

1.3% ofdefence expenditure

0.32% ofdefence expenditure

JOINT FUNDING: NATO Production& Logistics Organisations

CEPMA100 MUS$

NAMEADSMA50 MUS$

NAHEMA100 MUS$

NETMA5,600 MUS$

NAPMA300 MUS$

NAMSA500 MUS$

Logistics

Production

Air Defence

6.7 Billion1.3%

BICES1.5 MUS$

- NATO resources


- Common funding: Civil & Military Budget, and NATO Security Investment Programme





COMMON FUNDING: THE 2003 CIVIL BUDGET

Finances the NATO HQ in Brussels:

- NATO International Staff 110.3 Million €

- HQ running costs 27.0 Million €

- Science programme 20.6 Million €

- Other programmes & Information 12.5 Million €

Total 170.4 Million €

Of this, around 32 Million Euro relate to Outreach and Partnership for Peace activities

Financed from Foreign Ministry budgets, supervised by the CivilBudget Committee, implemented by the NATO International Staff.

NATO MILITARY COMMON FUNDING

Military Budget & NATO Security Investment Programme

- a visible sign of the willingness of nations to share roles, risks and responsibilities;

- activities linked to the NATO defence planning process and to Alliance priorities;

- aimed at the provision of core capabilities outside the reach of individual nations;

MILITARY BUDGET

- in fact some 50 separate budgets;

- finances the operation and maintenance cost of the NATO Command Structure (including the IMS), the NAEW force, command structure C3 support (including most of the NC3A), exercise programmes, the NATO Defense College and some research elements (RTA and SACLANTCEN);

- 2003 budget ceiling of 773.8 million Euro including 51.8 million Euro for Peace Support Operations; - financed from Defence budgets, supervised by the Military Budget Committee, implemented by the various commands and agencies under the control of the respective Financial Controllers.

Military Budget allocations for 2003

Command Structure

24.5%

TEE

3.6%

C3 Support

18.6%

R&D

3.6%

NAEW&C 32.6%

CRO

6.9%

PfP

0.8%

Pensions

2.5%Other Air C2 6.9%

NATO SECURITY INVESTMENT PROGRAMME

- funds investment projects in support of Alliance requirements

- total identified requirements amount to some 9.9 Billion Euro to be implemented over the next 10 to 15 years

- main components are:

- Air C2 (including ACCS): 3,300 million €

- NATO-wide C3 Support: 2,052 million €

- Deployability/mobility: 1,576 million €

- Sustainability: 1,518 million €

- 2003 contribution ceiling at 640 million Euro

- financed from Defence budgets, supervised by the Infrastructure Committee, implemented by host nations and agencies

NATO SECURITY INVESTMENT PROGRAMME

- funds investment projects in support of Alliance requirements

- total identified requirements amount to some 9.9 Billion Euro to be implemented over the next 10 to 15 years

- main components are:

- Air C2 (including ACCS): 3,300 million €

- NATO-wide C3 Support: 2,052 million €

- Deployability/mobility: 1,576 million €

- Sustainability: 1,518 million €

- 2003 contribution ceiling at 640 million Euro

- financed from Defence budgets, supervised by the Infrastructure Committee, implemented by host nations and agencies

Under reviewin line withchangingsecurity

environment

NSIP expenditure estimates for 2003

Air C2

37.3%

Mobility

23.8%

Sustainability

13.2%

CRO4.4%

TEE

1.1%

C3 Support

10.7%

Command Structure

8.5%

International Manpower requirements for 2002

R&D1.4%

Air C214.1%

Mobility1%

Command Structure41.7%

TEE1.4%

C3 Support28.8%

For a total of some 16,818(14,735 military & 2083 civilians)

CRO10.9%

- NATO resources







Common funded resource planning, management& implementation

- part of Alliance overall defence planning;

- requirement identification, prioritisation and overall resource management centralised: role of Strategic Commander, capability package process, Medium Term Resource Plan and NATO auditing;

- budget execution, project development and project execution decentralised: role of budget holder, host nations and agencies;

- NATO resource management in full evolution.

Eligibility for common funding

Resource limitations necessitate a more selective approachto common funding than hitherto.

Therefore, in principle, NATO common funding eligibilitywill focus on the provision of requirements

which are over and above those whichcould reasonably be expected to be made available

from national resources

C-M(93)38(Final)

NATO COMMON- FUNDED BUDGETS

COST SHARE ARRANGEMENTS

Nation

BelgiumCanadaCzech RepublicDenmarkFranceGermanyGreeceHungaryIcelandItalyLuxembourgNetherlandsNorwayPolandPortugalSpainTurkeyUnited KingdomUnited States

Civil Budget

at “19”2.765.350.901.47

15.3515.540.380.650.055.750.082.751.112.480.633.501.59

17.2522.41

Military Budget

at “19” at “18”

NSIP

at “19” at “18” 3.34744.07450.90002.4655

13.854318.34500.38000.65000.04006.86090.14223.61352.01692.48000.46043.37601.2627

12.580723.1500

3.77794.97131.05632.7026

020.70900.46000.76290.05007.38560.15084.02232.14042.90770.56803.98121.5085

15.355527.4900

3.34744.07450.90002.4655

13.854318.34501.00000.6500

07.09790.14223.61352.01692.48000.46043.37601.2627

12.580722.3330

3.77794.97131.05632.7026

020.70901.05000.7629

08.80450.15084.02232.14042.90770.56803.98121.5085

15.355525.5311

NATO COMMON- FUNDED BUDGETS

COST SHARE ARRANGEMENTS

Nation

BelgiumCanadaCzech RepublicDenmarkFranceGermanyGreeceHungaryIcelandItalyLuxembourgNetherlandsNorwayPolandPortugalSpainTurkeyUnited KingdomUnited States

Civil Budget

at “19”2.765.350.901.47

15.3515.540.380.650.055.750.082.751.112.480.633.501.59

17.2522.41

Military Budget

at “19” at “18”

NSIP

at “19” at “18” 3.34744.07450.90002.4655

13.854318.34500.38000.65000.04006.86090.14223.61352.01692.48000.46043.37601.2627

12.580723.1500

3.77794.97131.05632.7026

020.70900.46000.76290.05007.38560.15084.02232.14042.90770.56803.98121.5085

15.355527.4900

3.34744.07450.90002.4655

13.854318.34501.00000.6500

07.09790.14223.61352.01692.48000.46043.37601.2627

12.580722.3330

3.77794.97131.05632.7026

020.70901.05000.7629

08.80450.15084.02232.14042.90770.56803.98121.5085

15.355525.5311

“19” “18”

Bulgaria 0.35 0.4063

Estonia 0.11 0.1277

Latvia 0.14 0.1625

Lithuania 0.21 0.2438

Romania 1.14 1.3233

Slovakia 0.46 0.5340

Slovenia 0.26 0.3018

- NATO resources







THE CURRENT RESOURCE ISSUE:

TRANSFORM THE ALLIANCE TO MEET NEW CHALLENGES

- Enlargement

- Command Structure Review: NCS, FS, CJTF

- Crisis Response Operations

- NATO-Russia and Partnership for Peace

- New capabilities: CBRN, TMD, AGS, SEAD

- European Security & Defence Initiative

Increased pressureon resources

Review existingresources?

Maintain Alliancecohesion !

but

ENLARGEMENT

- Differentiate between defence restructuring costs and costs directly resulting from enlargement;

- For new members enlargement related costs include representation at NATO HQ, NATO Command facilities and NATO Agencies as well as contributions to Civil Budget, Military Budget and NSIP;

- For NATO’s military common-funded programmes, enlargement related costs cover the integration of new members in NATO’s communications and air defence structures and the upgrading of selected mobility and sustainability assets;

- The cost of enlarging to 19 was estimated at 1.5 Billion US$ over a 10 year period.

ENLARGEMENT

Resource timelines:

- Dec 2002 - March 2003: Discuss participation and modalities of participation with prospective new members as part of the Accession Talks.

- Jan 2003 - June 2003: Analyse the implications of the Prague Summit decisions for NATO common funding as

part of the Medium Term Planning process.

- Sept. 2003 onwards: Develop Capability Packages, preparefor accession.

- May 2004: Participate in military common funding.

ENLARGEMENT

Cost share arrangements:

- methodology: “Based on relative Gross National Income (GNI) expressed in purchasing power parities, extrapolated to the date of accession and taking into account the effect of the constrained US cost share.”

- calculation: post-Prague (done)

- discuss with invited nations as part of accession talks (done)

- adaptation of existing cost shares: post-accession protocols

- introduction: post-accession

COMMAND STRUCTURE REVIEW

- Reorient Alliance forces towards flexibility and deployability;

- Need to adapt NATO’s Command Structure:

- eliminate structural redundancies

- focus on deployability and sustainability requirements

- free resources and personnel;

- Find agreement on how the integrated Command Structure, the Force Structure and the Combined Joint Task Force (CJTF) Headquarters work together.

- On current arrangements, integrated HQs are commonly funded, while Force Structure HQs are multi-nationally funded.

COMMAND STRUCTURE REVIEW

Timelines:

- Nov. 2003: Heads of State and Government approved thestructural outline for the NATO Command and force structure and to set implementation dates

- June 2003: Defence Ministers to approve new structure andtask implementation to meet completion deadlines

- March - December 2003: Assess the resource implications ofthe review for incorporation into the Medium TermResource Plan for the period 2005-2009

impacts on investments, O&M and manpower

CRISIS RESPONSE OPERATIONS

“Costs lie where they fall”

- Only costs not attributable to a specific nation and agreed as eligible for common funding will be assumed by NATO:

- investment and O&M of designated theatre HQ elements (including theatre HQ CIS and local connectivity)

- shortfall strategic communications

- critical strategic theatre infrastructure

- IFOR/SFOR/KFOR common funding to date: some 600 Million € shared by all NATO nations;

- Crisis response operations are mainly funded from national defence budgets: military salaries, equipment, logistics support in theatre, locally hired staff at the national commands, etc.

CRISIS RESPONSE OPERATIONS

“Costs lie where they fall”

Resource challenges:

- long-term sustainment

- pressure to outsource specialist capabilities - funding of integrated support activities:

fuel, medical services, airport facilities, transport

- future operations

Support to EU-led operations

NATO-RUSSIA & PARTNERSHIP FOR PEACE

- Military common funding in PfP has been very limited:

- PfP activities largely rely on national sources

- key elements such as C3, CJTF and CAX capabilities are essentially provided as part of overall Alliance requirements

- normal rules apply: O&A, Alliance military requirement

- The need to give more substance to these partnerships may require a rethink of the approach so far:

- participation in crisis response operations

- joint exercises

- airspace management

NATO-RUSSIA & PARTNERSHIP FOR PEACE

NATO-Russia Council is adding new dimension:

- cooperation “at 20” in areas such as crisis management, theatre missile defence, air transport and air refuelling, training and airspace management

- need to think through the resource approach:

- mixture of national and multinational funding

- also joint and common funding?

- so far costs have been limited and have been absorbed within existing arrangements

NEW CAPABILITIES

“Realisation that more needs to be done in common”

- find the right balance between national, multinational, joint and common funding;

- some capabilities are beyond the means of most nations;

- Alliance cohesion requires the sharing of roles, risks and responsibilities;

- strategic commands need core capabilities;

- part of the Defence Capabilities Initiative and now of the Prague Capabilities Commitments

NEW CAPABILITIES

Specific areas of interest include:

Alliance Ground SurveillanceA minimum essential NATO-owned

and operated core capabilitysupplemented by interoperable

national assets as part of a systemof systems

Suppression of EnemyAir Defence

incl. Support Jamming

Theatre Missile DefenceCommonly funded Feasibility Study

Deployable C3 capabilities for alldeployable NATO HQs

+

chemical, biological, radiologicaland nuclear defence capabilities

for all deployable forces

Precision Guided MunitionsLarge air transport capacityAdditional air tanker capacityIncreased deployable combat service support

NEW CAPABILITIES

Funding approaches:

- traditionally most of it would have been national

- much of it now posted for multinational funding approaches:

- equipment stocks - multinational units - transport aircraft - UAVs

- increasing emphasis on joint funding:

- core Alliance Ground Surveillance Capability - core stocks of key equipment - support jamming capability

- common funding for the adaptation of Alliance wide systems

EUROPEAN SECURITY AND DEFENCE IDENTITY

“Use of NATO assets and capabilities in the framework of EU-led operations”

- national assets and collective assets

- application of the “costs lie where they fall” principle?

- NATO likely to expect reimbursement of common funded incremental costs and compensation for collective assets lost

- NATO unlikely to expect reimbursement for ongoing running costs or for normal wear and tear of collective assets

Discussions on financial arrangements have just started

- NATO resources







NATO COMMON FUNDING

- complements national activities and acts as a force multiplier;

- is directly linked to Alliance requirements and priorities;

- provides a “ready-made” environment for the implementation of a wide variety of requirements:

- agreed eligibility criteria

- agreed cost share arrangements

- agreed financial and procurement mechanisms

- reinforces Alliance cohesion

NATO BUDGET SYSTEM & RESOURCES MANAGEMENT NATIONAL DEFENCE ACADEMY 12 February 2003 J. Ghesquiere...

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