Address by Dr. Davor Božinović
Republic of Croatia Minister of Defense
GLOBSEC 2011, Bratislava, March 2-4, 2011

“Defense Capabilities vs. Defense Cuts: Where to Find the Balance?”

I am here to talk about the impact of the economic crisis on defense spending, with particular focus on how to find the right balance between capabilities and budget cuts.

The recent global economic downturn has had a significant impact on national budgets, especially defense budgets, across Europe and the world. In times of austerity, defense spending is usually and unfortunately, the first victim of choice, provided of course that a “clear and present” danger is not apparent on our radar screen.

Indeed, most security challenges today are not necessarily confined to our immediate geography and are often complex, transnational and difficult to ascertain. That is why the nature of contemporary security challenges is rarely appreciated outside expert circles. It gets even more cumbersome when we try to explain the adverse risks and threats of these future challenges to a wider audience.

The crisis has also had a deep and crippling impact on Croatia and our national defense. And it comes at a particularly apprehensive time for our armed forces.

Even before NATO membership, the Croatian armed forces embarked on a process of reform, modernization and transformation aimed at enabling Croatia’s full integration into the alliance (a long-term process). It has not been easy and it will be even more difficult with fewer resources in the future.

At the same time, Croatia has been gradually increasing its commitment to international crisis management. This in turn places exigent demands on the armed forces by increasing the dynamics of preparing, equipping and deploying additional units, usually at great distances from home.

As we are also experiencing a slow economic recovery, it is difficult to make reliable projections about future spending. Several key impacts have been evident in the wake of the current crisis. As the national budget came under ever greater strain, overall defense expenditures contracted in absolute terms and as a percentage of the GDP ($1.19 billion/1.71% in 2008, $1.01 billion/1.61% in 2009, $899 million/1.52% in 2010). Some modernization and procurement plans have had to be adjusted, re-modified or postponed (i.e. acquisition of PATRIA wheeled armored modular vehicles, air policing capability). Also, some reforms have been delayed or put on hold (i.e. active reserve component).

While our immediate concern to balance the national budget may drive us to look for the most obvious budget cuts and make decisions that bring relief in the short-term, we have to remember that most defense spending involves long-term commitments. Thus, our point of reference should always be the “long view.”

There is an old saying: “if you do not have enough money, then you have to think more.” So, regardless of the duration of this era of fiscal belt-tightening, it will be up to us to use these diminishing funds creatively, prudently and wisely, by investing in resources and opting for solutions which will continually seek to maximize value—greater security for our citizens.

But despite all the cuts, we have been able to follow a pre-charted course in several important policy areas.

As I mentioned earlier, we have sustained and in some cases increased our international deployments – to include NATO, EU and UN operations. Despite the economic woes, our commitments to ISAF have increased, even during the most difficult times of the crisis. Just recently, Croatia initiated the establishment of a military police school in Kabul and has offered additional training for Afghan pilots and maintenance technicians.

Equally important, we have not only been able to maintain our core self-defense capabilities, but we have also been able to preserve our capacity to contribute to the collective defense of NATO – one of our key obligations and commitments to the alliance. We simply cannot reduce or neglect our core defense capabilities as they are a fundamental basis for our national sovereignty, integrity and freedom and represent a key tool in promoting our national interests.

Let me be frank, there is no easy way to find the right balance between developing and maintaining defense capabilities, on the one hand, and budget cuts, on the other. As I see it, there are three fundamental ways to deal with the current and future pressures on our defense expenditures.

First, it involves going back to our strategy. We need to take a new look at ourselves, our environment and where we are going – this is the national security strategy process. In defense, we do this through a strategic defense review (SDR), where we reassess our security challenges, our defense posture, key objectives, priorities, requirements and programs. We have already embarked upon this task. A SDR is also a useful tool to build national consensus on the way forward, especially in times of great economic hardship. We need to clearly establish a baseline of the critical and key capabilities that match the security challenges we will face.

But the SDR should not be driven by “budget cuts”. Rather, it should outline how the government intends to provide for national security and defense, in spite of the current economic difficulties we are experiencing.

If defense expenditures remain fixed and we want to close the gap between capabilities and available resources, there are two pertinent options: (1) we either consider downgrading our strategic objectives (aspirations); or (2) we accept greater risk. Of course, both options have serious political implications and would surely require bipartisan support and national consensus.

Second, we need to look harder and deeper at the way we go about our business in the defense sector. We need to find ways to cut down on unnecessary costs, but not at the expense of key capabilities. We need to reform our existing concepts, structures and processes so that we have available the most cost-effective solutions and maximize the use of the national resources allocated to defense (human, financial, material).

For example, (for many years now) we have habitually allocated a remarkably high percentage of our defense expenditures to personnel (about 72% in 2010). We need to come up with solutions that would free up funds which could be shifted towards modernization (about 10% in 2010).

Third, as a member of NATO, and very soon the EU as well, Croatia will increasingly look to explore the potential benefits of cost-effective defense cooperation through burden sharing arrangements with its allies and regional partners. Such arrangements—whether involving the acquisition of common weapons systems, the development of joint capabilities, or multinational deployments—can still help us meet our security requirements and decrease costs. A regional approach to sharing defense assets and pooling resources is best illustrated in the case of the Nordic states.

Closer to home, the “Central European Solutions for Pooling and Sharing of Capabilities” is a good example (Austria, Croatia, Czech Republic, Hungary, Slovakia and Slovenia). I understand that our defense policy directors have already met and are in the process of identifying common interests and exploring the benefits of “pooling and sharing.”

In Afghanistan, we invited our regional partners to join us in the establishment of the military police school in Kabul. Thus, Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Slovenia have all expressed interest and some have already announced their commitment to support the initiative by sending trainers.

Another area where there is great potential for cooperation and sharing assets on a regional basis is the security of our airspace. Croatia is interested in exploring the prospects of developing a regional air policing capability with its neighbors. Likewise, there is also potential merit in looking into regional cooperation in maritime security in the Eastern part of the Adriatic. Such efforts enable us to continue developing key capabilities and, at the same time, promote the integration of Southeast Europe into Euro-Atlantic structures. Here, NATO can play an important role by providing the bigger picture for our common interests and by playing the role of an advisor, facilitator and honest broker.

Thus, we simply cannot allow our defense capabilities to fall to a level that will limit our capacity to take action. But neither can we simply go about business as usual when we are forced to make painful cuts.

So, while it may be difficult to accept further defense cuts, we can at least try to “cut wisely” and look for novel ideas, new approaches and practical solutions.