Philippine Defense Spending

Some Southeast Asian countries are cutting back on their military spending as an emergency policy because their economies are suffering heavily amid the coronavirus pandemic. Many Southeast Asian countries are facing a tough choice as they also have pressing national security issues such as territorial disputes in the South China Sea. In July 2020 the Philippine government said 10 percent of the 2020 fiscal year's defense spending, totaling 192.1 billion pesos or 3.96 billion dollars, will be returned to the national coffers. The money, originally meant to modernize military equipment, will be diverted to fund anti-pandemic measures.

Since 1995, the Philippines has embarked on a program to modernize the Armed Forces of the Philippines. Congress has enacted two laws providing for the modernization of the armed forces, Republic Act No. 7898 or the “AFP Modernization Act" in 1995, and Republic Act No. 10349 or the “Revised AFP Modernization Act” in 2012. Among the objectives of the two laws on modernization was to develop the AFP's capability to uphold the sovereignty and territorial integrity of the country and to secure the national territory from all forms of intrusion and encroachment. The two (2) laws on the modernization of the AFP provides funding support to the AFP in order to upgrade their capabilities. RA 7898 sought to provide P331 billion [about US$6 billion] to the AFP, while RA 10349 sought to provide a budget of P75 billion [about US$1.5 billion] for its first 5 years of implementation. Only a fraction of the enacted appropriation for AFP modernization was provided, hence procurement of crucial defense materiel was insignificant and the military remained the least capable in the ASEAN region.

The Philippines is shopping for Chinese-made weapons in Beijing, which offered up to $500 million in loans for such deals. The archipelago’s defense minister complained about strings attached to deals with its traditional partner, America. Philippines Defense Secretary Delfin Lorenzana reminded of the offered credit line on the sidelines of the Belt and Road Forum in Beijing 14 May 2017. He was there to sign a letter of intent with Chinese state-owned arms company Poly Technologies.

“We are not saying that we will buy from them or we will not buy from them, but if we need anything from the Chinese defense industry, we are going to procure using the loan that they are going to offer to us,” he said. China offered the $500 million loan and donated $14 million worth of small arms and speed boats to the Philippines in December 2016. Lorenzana said his country would use the offered loan if its military budget is insufficient for a planned modernization. The Philippines plan to spend some $2 billion over five years on defense purposes.

Philippine Defense Minister Delfin Lorenzana joined the country's leader on 07 October 2016 in signaling a shift away from relying on Washington. Speaking to a foreign correspondents' forum, Lorenzana argued that if the US and the European Union didn't like how Manila was conducting its war on drugs, they could go ahead and withdraw their assistance from the country. "I think we can live without (that) aid. Our Congress is actually giving us money now for the procurement of equipment. I believe they will give us more if we don't have a source of other funds," he said.

The Philippines' annual military spending was $2.6 billion in 2014, miniscule compared to China’s $132 billion military budget in 2014. But Manila has focused its resources on improving its capability to monitor and respond to developments in the South China Sea.

Philippines President Benigno Aquino said 23 July 2012 that the country is moving to expand its military capabilities but noted that the country wasn't preparing for a fight over the South China Sea. In his annual state of the nation address to the Congress, Aquino urged lawmakers to pass an Armed Forces modernization bill that would add 75 billion pesos ($1.8 billion) for defense spending over the following five years to acquire more weapons, personnel carriers, frigates and aircraft.

Aquino announced that more than 40 military aircraft — including attack helicopters and two newly refurbished C-130 cargo planes — and other weapons will be delivered in the coming two years to bolster Philippine military. President Aquino also announced that in 2013, "10 attack helicopters, two naval helicopters, two light aircraft, one frigate and air force protection equipment will also be arriving. At this moment, the armed forces are canvassing equipment such as cannons, personnel carriers and [additional] frigates."

Deliveries to be completed by October 2012 include a second ex-US Coast Guard Hamilton-class cutter, a pair of refurbished Lockheed Martin C-130H aircraft; new 81 mm mortars for the Philippine marines and army, and upgrades to the Philippines' Coast Watch System. The Philippine Air Force was slated to receive a second batch of 4 PZL W-3 Sokól combat utility helicopters in November 2012, and in the following month UH-1H helicopters that had been refurbished and upgraded for night-mission use were also to be delivered.

The DND was also looking to acquire 12 T-50 jet fighters from South Korea, a deal that was finally concluded on 30 January 2013. Fernando Manalo, defense undersecretary for finance, munitions, installations and materiel, said a separate P3.2-billion contract for the purchase of 10 attack helicopters from Eurocopter could be signed in August 2012, but it was not. Other experts suggested that Italy, Britain, France, Russia and South Africa were all being eyed to supply the helicopters. According to some reports, the helicopters would be delivered in 2012 if the contract gets the go-ahead, but more plausible reports suggest a later delivery schedule. The brand new helos will supplement the fleet of US-made MG-520 light attack helicopters that the air force had been using since the 1990s. This long running acquisition appeared to be drawing to a conclusion in August 2013.

The United States and the Philippines have a mutual defense treaty that has been in effect since 1952, but it does not extend to territorial disputes involving the Spratly Islands. In 2003 the United States designated the Philippines as a major non-North Atlantic Treaty Organization ally. Total U.S. military assistance to the Philippines rose from US$38 million in 2001 to US$114 million in 2003 and a projected US$164 million in 2005, which would make the Philippines the fourth largest recipient of U.S. foreign military assistance. Australia reportedly also a major source of military assistance.

Apparently, a modest modernization program was the first step necessary to gain respect from the Philippines neighbors and be a worthy member of any security alliance. Once the Philippines was able to project a credible armed forces, it could then work in synchrony with the armed forces of other countries in deterring would-be military adventurism and in performing peace operation efforts for the international community. In addition, a credible armed force would mean a capable force that could effectively support the Philippine government’s diplomatic efforts in addressing contemporary security concerns as territorial conflicts and maritime disputes, as well as threats of transnational nature such as piracy, poaching, smuggling, and environmental pollution.

Renato De Castro has written that "The elite exercise their influence on the country’s defense affairs and armed forces by: a) wielding power and influence over the state’s principal means of coercion through legally controlling the military and police force, which, in turn, hold in check non-state armies, militias and insurgents; and b) formulating decisions that reshape, ignore, or circumvent the strategic interest of the military establishment. The Philippine elite dictate defense reforms through their control of the Philippine Congress. Through their power and influence over appropriation and budgetary matters, these legislators are able to affect defense programs. On the issue of defense spending, the legislators generally concentrate on the acquisition of the requirements for their electoral success — public works projects and patronage — while remaining suspicious of the military by subjecting defense budgets to minute scrutiny.

As evidenced by their behaviour in the National Assembly prior to World War II, the Philippine elite generally feel that “money ought not to be squandered on the army but could be spent on more constructive projects.” ... The traditional political elite in the Philippine Congress have little interest in military or strategic affairs. They instead focus their attention or efforts on accumulating resources and patronage—two crucial components of their control over local and national politics. The elite also see internal security as a primary strategic concern and view external forces as veiled threats that can be handled by the country’s superpower ally, the U.S. "

For decades, the AFP had virtually engaged all of its resources in internal security operations, since the presence of the United States (US) in the country many years ago served as an effective deterrent against external threats. Consequently, the AFP has become less focused on external defense to the point that its capability to operate with other armed forces and to address contemporary threats remained in a dismal status and continue to lag behind that of the neighboring armed forces. There is a need, therefore, for the AFP to focus its efforts in building up a capability suited to the changing scenarios of the international security community. Recent years witnessed how countries in the region exert effort in projecting credible military power in order to instill regional balance of power.

After steadily declining defense spending during the early 1980s, the defense budget grew in the latter half of the decade. Military spending in 1988 totaled 14.14 billion pesos, or US$680 million, about 1.7 percent of the country's gross national product. The 1988 budget represented a greater than 50 percent increase in real spending for defense (adjusted for inflation) over 1985, the last full year Marcos was in office. Defense spending as a proportion of national government expenditures also grew during Aquino's tenure, from a 1985 low of 7.7 percent, to 9.1 percent in 1989. Still, the military's share of the national budget, like total military spending, did not approach the peaks reached during the Moro wars of the 1970s. In 1979 the Philippines spent more than P17 billion (US$806 million) in comparable 1988 pesos for defense, a figure that represented almost 17 percent of the government's budget.

Budget figures do not include United States security assistance, which represented a substantial portion of total spending on the Philippine military. United States military aid increased significantly after Aquino came to power, accounting for 80 percent of military spending on procurement, operations, and maintenance in 1989. United States military aid that year amounted to US$127.6 million. Most of the assistance -- US$125 million -- was provided as a grant under the Military Assistance Program whereas the US$2.6 million balance funded training for Filipinos under the United States International Military Education and Training Program. During the 1988 review of the Military Bases Agreement, the United States pledged its best efforts to increase grant aid to the Philippine military to US$200 million annually in 1990 and 1991.

The thrust of United States security assistance efforts in the late 1980s was to help the Philippine armed forces better combat the communist insurgency. Improved tactical mobility and communications and better equipped soldiers were top priorities. Between 1986 and 1989, the United States sent the Philippines almost 2,900 military vehicles, nearly 50 helicopters, more than 1,650 radios, approximately 225,000 military uniforms, and more than 150,000 pairs of combat boots. Other assistance items included assorted infantry weapons and ammunition and medical equipment.

Despite growing budgets and increased foreign military aid, the armed forces still was described in 1989 as one of the most poorly funded militaries in Asia. Philippine defense spending on a per capita and per soldier basis remained the lowest of the Association of Southeast Asian Nations (ASEAN) countries, despite an active communist insurgency. One study of the military concluded that the armed forces suffered from major resource problems. The author cited serious shortages of vehicles, helicopters, radios, basic infantry equipment, and spare parts. Food, medicine, and clothing also were said to be in chronically short supply. Shortages were compounded by an inefficient logistics system hobbled by red tape and corruption. Soldiers' poor living and working conditions often were mentioned as underlying factors in the military's discipline problems. By the early 1990s top AFP leaders acknowledged many of these shortcomings and were attempting to correct the mismanagement of resources.

Plans in 1990 called for modernizing the military, particularly the air force and navy--services whose forces had received relatively little funding because of the army's extended counterinsurgency campaign. Many of the navy's major ships and craft were World War II-era, and the aging fleet was increasingly difficult to maintain. Modernization plans called for phasing out inefficient ships, refitting others, and acquiring more patrol craft. Using United States military aid, the navy contracted in 1989 for thirty-five fast patrol craft, thirty of which were to be assembled in the Philippines by 1997. The air force inventory, described as one of the most primitive in the region, likewise was to be enhanced by major purchases under a ten-year modernization scheme. The United States was scheduled to deliver twenty-nine MD-520 attack helicopters between 1990 and 1992. The air force also was hoping to add two squadrons of modern fighters such as the United States F-16 to its fleet of nine F-5s [but as of 2012 the F-5s were spare parts bins and the F-16s were still a dream.

Renato De Castro notes that "The elite, however, were not inclined to increase defense expenditures despite the withdrawal of American forces from the Philippines and the consequent cut in U.S. military assistance to the AFP. They believed that as an insular country, the Philippines was not faced by any external threat at the time, and they felt no immediate pressure to allocate more resources for defense spending."

The so-called AFP Modernization effort was really just an upgrade program designed to bring the combat-ready status of the AFP to a minimum acceptable level since, by 2003, it was way below even that modest benchmark. It had been that way since the 1970s with the state of AFP equipage having inexorably deteriorated over the years. Severe limitations in funding support, a succession of world-wide economic crises, poor planning, indifferent decision making, and seeming irrationality in the disposition of modernization funds effectively combined to stunt the growth of the Armed Forces. Looking at the AFP budget from various angles - in terms of per capita, percent of GNP or percent of national budget, and other such standards - the AFP could easily qualify as one of the cheapest armies in the world.

On 27 July 2003, three hundred twenty-three (323) junior officers and enlisted men, mostly from the elite units of the Armed Forces of the Philippines (AFP) --- the Philippine Army’ s Scout Rangers and the Philippine Navy’ s Special Warfare Group (SWAG) --- took over the Oakwood Premier Apartments in the Ayala Center, Makati City (Oakwood). Led by a small number of junior officers --- the soldiers who called themselves the “ new Filipino heroes” and became widely known as the “Magdalo group” --- claimed that they went to Oakwood to air their grievances about graft and corruption in the military, including the sale of arms and ammunition to the “ enemies” of the state. Two principal themes run through all of those grievances: the first is the need for corruption control in the AFP; the second is the need for modernization of the AFP.

The Feliciano Fact-Finding Commission (Feliciano Commission) in mid-October 2003 found basis for grievances involving graft and corruption in the military establishment, such as those in connection with the retirement and separation benefits system, modernization fund, and procurement system, which provide a fertile ground for the recruitment of officers and men for military intervention and the overthrow of the Government. The Feliciano Commission Report also recommended reform measures focusing on the financial management system of the AFP to reduce opportunities for corruption, misappropriation and misuse of public funds.

The RP-US Joint Defense Assessment (JDA) that was completed in September 2003 revealed critical deficiencies in the Philippine defense and military establishment, particularly in the following specific areas: (1) systemic approach to policy planning; (2) personnel management and leadership; (3) defense expenditures and budgeting; (4) acquisition; (5) supply and maintenance; (6) quality assurance for existing industrial base; and (7) infrastructure support. The JDA recommended the establishment and institutionalization of an effective and efficient accounting and financial management system that supports the planning, programming and execution of modernization and other multi-year capability development programs.

The defense budget for 2005 totaled US$840 million, or 5 percent of the proposed government budget of US$16.5 billion. Almost half of the defense budget was designated for the army. Viewed another way, 80 percent of the budget was slated for personnel and almost the entire remaining amount, for maintenance and operating expenses. Thus, less than 1 percent was available for desperately needed procurement.

The ongoing US-supported Philippine Defense Reform program addresses many of the mutineers' key concerns, which were also reflected in the Feliciano Commission report, which the AFP has been trying to follow as a parallel pattern for reform. The Philippine Defense Reform (PDR) and modernization program, supported by U.S. foreign military financing, foreign military sales, and 1206 funds, made substantial progress professionalizing a force that, for many years, was accused of playing politics and supporting extra-constitutional changes of government. Despite persistent pressure from opposition groups, the Philippine military has stayed on the sidelines of political debates, firmly committed to supporting the President and the Constitution.

Conceived as a multi-year plan, championed by Philippine President Arroyo, and having survived changes in Philippine Department of Defense leadership, defense reform was under close review from the Filipino government. Secretary of National Defense Gilberto Teodoro is a staunch advocate of the program (the Philippines spent nearly $250 million on PDR in 2008), and took a hands-on approach to managing modernization. Philippine defense purchases from the U.S. included more than 8,000 radios, upgrades to existing helicopters, radar stations, patrol boats, weapons, and night-vision devices. In addition to prioritizing the ongoing retraining of 82 battalions, the Armed Forces has undertaken a comprehensive restructuring of personnel, logistics, and administration systems. Teodoro was keen to conclude the existing defense reform initiative by April 2010, when President Arroyo was scheduled to leave office.

On October 11, 2010, President Benigno S. Aquino III issued Proclamation No. 50 granting amnesty to certain active and former personnel of the Armed Forces of the Philippines (AFP) and their supporters, who have or may have committed acts or omissions punishable under the Revised Penal Code, the Articles of War or other special laws in connection with, in relation or incident to the July 27, 2003 Oakwood Mutiny, the February 2006 Marines Stand-Off and/or the November 29, 2007 Manila Pen Incident and related incidents.

Despite these advances in reform and modernization, the Armed Forces of the Philippines (AFP) still faced significant budget challenges in their efforts to overcome decades of inadequate funding. The Philippines allocates less than one percent of national budget to defense spending, and in an archipelagic nation of more than 7,000 islands, airlift and maritime logistical transport stand out as two of the most significant deficits in the Philippine military inventory. U.S. assistance has augmented the Philippine efforts, particularly in border security initiatives and counterterrorism operations, but the AFP still lacks an array of modern capabilities, including sufficient logistical support, intelligence platforms, and consistent casualty evacuation capability.