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NATO BUDGET SYSTEM & RESOURCES MANAGEMENT. NATIONAL DEFENCE ACADEMY 12 February 2003 J. Ghesquiere Head Resource Policy Unit NATO HQ. NATO BUDGET & RESOURCES MANAGEMENT. - NATO resources - National, multinational, joint & common funding - Common funding: Civil & Military Budget, NSIP

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nato budget system resources management

NATO BUDGET SYSTEM &RESOURCES MANAGEMENT

NATIONAL DEFENCE ACADEMY

12 February 2003

J. Ghesquiere

Head Resource Policy Unit

NATO HQ

nato budget resources management
NATO BUDGET & RESOURCES MANAGEMENT

- 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 management3
NATO BUDGET & RESOURCES MANAGEMENT

- 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

People

Money

Assets

nato resources or resources of nato nations 02
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$

nato resources or resources of nato nations 025
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$

Armed forces 5,731,700 1.52%

Defence exp. 522 Billion US$ 2.37%

Def. Exp/Head 648 US$

nato resources or resources of nato nations 026
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$

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 defence

funding expenditure

NATO common 1.7 Billion US$ 0.32% of defence

funding expenditure

NATO international 16,818 0.29% of armed

manpower forces

nato budget resources management7
NATO BUDGET & RESOURCES MANAGEMENT

- 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

slide8

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 NATO

Defence Planning

providing the broader

framework

slide9

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% of

defence expenditure

0.32% of

defence expenditure

slide10

JOINT FUNDING: NATO Production

& Logistics Organisations

NAMSA

500 MUS$

6.7 Billion

1.3%

Logistics

CEPMA

100 MUS$

BICES

1.5 MUS$

Production

NAHEMA

100 MUS$

NAMEADSMA

50 MUS$

NAPMA

300 MUS$

NETMA

5,600 MUS$

Air Defence

nato budget resources management11
NATO BUDGET & RESOURCES MANAGEMENT

- NATO resources

- National, multinational, joint & common funding

- Common funding: Civil & Military Budget, and

NATO Security Investment Programme

- Resource planning, management, implementation

- Current resource issues

- Role of common funding within NATO

slide12

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 Civil

Budget Committee, implemented by the NATO International Staff.

slide13

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;

slide14

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.

slide15

Military Budget allocations for 2003

Pensions

2.5%

PfP

0.8%

CRO

6.9%

Command Structure

24.5%

Other Air C2 6.9%

TEE

3.6%

NAEW&C 32.6%

C3 Support

18.6%

R&D

3.6%

slide16

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

slide17

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 review

in line with

changing

security

environment

slide18

NSIP expenditure estimates for 2003

Sustainability

13.2%

Command Structure

8.5%

C3 Support

10.7%

TEE

1.1%

Mobility

23.8%

Air C2

37.3%

CRO

4.4%

slide19

International Manpower requirements for 2002

CRO

10.9%

Air C2

14.1%

R&D

1.4%

Mobility

1%

C3 Support

28.8%

TEE

1.4%

Command Structure

41.7%

For a total of some 16,818

(14,735 military & 2083 civilians)

nato budget resources management20
NATO BUDGET & RESOURCES MANAGEMENT

- 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

slide21

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.

slide22

Eligibility for common funding

Resource limitations necessitate a more selective approach

to common funding than hitherto.

Therefore, in principle, NATO common funding eligibility

will focus on the provision of requirements

which are over and above those which

could reasonably be expected to be made available

from national resources

C-M(93)38(Final)

slide23

NATO COMMON- FUNDED BUDGETS

COST SHARE ARRANGEMENTS

Civil Budget

at “19”

2.76

5.35

0.90

1.47

15.35

15.54

0.38

0.65

0.05

5.75

0.08

2.75

1.11

2.48

0.63

3.50

1.59

17.25

22.41

Military Budget

at “19” at “18”

NSIP

at “19” at “18”

Nation

Belgium

Canada

Czech Republic

Denmark

France

Germany

Greece

Hungary

Iceland

Italy

Luxembourg

Netherlands

Norway

Poland

Portugal

Spain

Turkey

United Kingdom

United States

3.3474

4.0745

0.9000

2.4655

13.8543

18.3450

0.3800

0.6500

0.0400

6.8609

0.1422

3.6135

2.0169

2.4800

0.4604

3.3760

1.2627

12.5807

23.1500

3.7779

4.9713

1.0563

2.7026

0

20.7090

0.4600

0.7629

0.0500

7.3856

0.1508

4.0223

2.1404

2.9077

0.5680

3.9812

1.5085

15.3555

27.4900

3.3474

4.0745

0.9000

2.4655

13.8543

18.3450

1.0000

0.6500

0

7.0979

0.1422

3.6135

2.0169

2.4800

0.4604

3.3760

1.2627

12.5807

22.3330

3.7779

4.9713

1.0563

2.7026

0

20.7090

1.0500

0.7629

0

8.8045

0.1508

4.0223

2.1404

2.9077

0.5680

3.9812

1.5085

15.3555

25.5311

slide24

NATO COMMON- FUNDED BUDGETS

COST SHARE ARRANGEMENTS

Civil Budget

at “19”

2.76

5.35

0.90

1.47

15.35

15.54

0.38

0.65

0.05

5.75

0.08

2.75

1.11

2.48

0.63

3.50

1.59

17.25

22.41

Military Budget

at “19” at “18”

NSIP

at “19” at “18”

Nation

Belgium

Canada

Czech Republic

Denmark

France

Germany

Greece

Hungary

Iceland

Italy

Luxembourg

Netherlands

Norway

Poland

Portugal

Spain

Turkey

United Kingdom

United States

“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

3.3474

4.0745

0.9000

2.4655

13.8543

18.3450

0.3800

0.6500

0.0400

6.8609

0.1422

3.6135

2.0169

2.4800

0.4604

3.3760

1.2627

12.5807

23.1500

3.7779

4.9713

1.0563

2.7026

0

20.7090

0.4600

0.7629

0.0500

7.3856

0.1508

4.0223

2.1404

2.9077

0.5680

3.9812

1.5085

15.3555

27.4900

3.3474

4.0745

0.9000

2.4655

13.8543

18.3450

1.0000

0.6500

0

7.0979

0.1422

3.6135

2.0169

2.4800

0.4604

3.3760

1.2627

12.5807

22.3330

3.7779

4.9713

1.0563

2.7026

0

20.7090

1.0500

0.7629

0

8.8045

0.1508

4.0223

2.1404

2.9077

0.5680

3.9812

1.5085

15.3555

25.5311

nato budget resources management25
NATO BUDGET & RESOURCES MANAGEMENT

- 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

the current resource issue transform the alliance to meet new challenges
THE CURRENT RESOURCE ISSUE:TRANSFORM THE ALLIANCE TO MEET NEW CHALLENGES

Increased pressure

on resources

- 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

Review existing

resources?

Maintain Alliance

cohesion !

but

slide27

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.

slide28

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, prepare

for accession.

- May 2004: Participate in military common funding.

slide29

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

slide30

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.

slide31

COMMAND STRUCTURE REVIEW

Timelines:

- Nov. 2003: Heads of State and Government approved the

structural outline for the NATO Command and

force structure and to set implementation dates

- June 2003: Defence Ministers to approve new structure and

task implementation to meet completion deadlines

- March - December 2003: Assess the resource implications of

the review for incorporation into the Medium Term

Resource Plan for the period 2005-2009

impacts on investments, O&M and manpower

slide32

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.

slide33

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

slide34

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

slide35

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

slide36

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

slide37

NEW CAPABILITIES

Specific areas of interest include:

Suppression of Enemy

Air Defence

incl. Support Jamming

Alliance Ground Surveillance

A minimum essential NATO-owned

and operated core capability

supplemented by interoperable

national assets as part of a system

of systems

Theatre Missile Defence

Commonly funded

Feasibility Study

Deployable C3 capabilities for all

deployable NATO HQs

+

chemical, biological, radiological

and nuclear defence capabilities

for all deployable forces

Precision Guided Munitions

Large air transport capacity

Additional air tanker capacity

Increased deployable combat

service support

slide38

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

slide39

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 budget resources management40
NATO BUDGET & RESOURCES MANAGEMENT

- 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

slide41

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