In the ongoing mass arrests in Bangladesh, nearly 20,000 people have been put behind bars. These arrests started on May 28, 2008 after the ban on political activity was lifted. It was expected that after allowing political activity, the government will facilitate the electoral process leading to the holding of elections which were postponed in January 2007. But the mass arrests in the name of deteriorating law and order condition have made the political situation fluid.

The claim of declining law and order has been promptly refuted by the Inspector General of Police (IGP) Nur Mohammad. He in fact stated that the arrests across the country was a regular affair and launched with a view to further improve the situation. He also claimed that no 'wholesale arrest' is being made. The police chief's comment contradicted that of the Home Adviser, who earlier defended the ongoing countrywide arrests as an operation to check the deterioration of law and order ahead of the elections.

The Bangladesh National Party (BNP) has asked its leaders and cadres to prepare for an agitation. It appears that the release of Khaleda has become doubtful and the BNP is preparing for this upcoming battle in this regard with the caretaker government. The mass arrests are probably meant to blunt the edges of this agitation. The BNP-led four-party alliance, which faced some difficulty after the end of its term, has once again come together. After almost two years, the situation is nearly the same as it was in October 2006 when power was handed over to the first caretaker government.

Apart from the arrests, another development which may have a bearing on the murky political situation in the country deserves to be noted. Bangladesh Army Chief, General Moeen, removed two top-ranking generals from key positions. Principal Staff Officer (PSO) Lieutenant General Masud Uddin Ahmed Chowdhury, considered the second most powerful person in the military, was initially transferred to a low-key post of Commandant of the National Defence College. Within days, however, he was shifted to the foreign ministry. Major General Abdul Mubin, General Officer Commanding of 24 Infantry Division based in Chittagong, was appointed as the new PSO. While NDC Commandant Lieutenant General Abu Tayab Mohammad Zahirul Alam has been appointed as the new Bangladesh envoy to Australia, the area commander of the northeastern Bogra was transferred to replace Mubin in Chittagong. Masud Uddin Ahmed Chowdhury and Zahirul Alam were among the four senior generals whose positions were upgraded in May 2007.

Lieutenant General Masud Uddin Ahmed Chowdhury was the most powerful person in Bangladesh Army after General Moeen. He had held the crucial command of Nine Infantry Division based in suburban Savar during last year's proclamation of the state of emergency and installation of the current interim government. Moreover, he is also a relative of Begum Khaleda Zia. There was a possibility that Generals like him could have gone against Moeen. The reshuffle in the top brass of the army may have been brought about to pre-empt this possibility. It will also consolidate the hold of General Moeen. The changes came two months after President Iajuddin Ahmed extended the tenure of Army Chief General Moeen U Ahmed by a year.

In the political circles of Bangladesh and in the media there is also talk of a national government. Given the track record of political parties in Bangladesh the proposal of a national government may not be such a bad idea. There seems to be a general agreement that the actions taken by the caretaker government have been for the betterment of the country. The only thing that the public now desires is that the same approach be continued under a democratic government, so that their political rights are also protected. In this effort, the national government could be a middle path between a democratic government and a military-backed caretaker government.

There has also been talk of a “National Charter.” But the Awami League and BNP leaders have opposed any move by the caretaker government to formulate such a charter. If both mainstream political parties were to accept the national charter, it will mean that they have accepted all the actions of the caretaker government as legitimate and justified, something that they would not like to do.

The proposal of a national unity government was suggested by the Gono Forum leaders. They also proposed a review of the constitution. In their pre-poll dialogue with the caretaker government, they felt that a post-election national unity government would ensure a non-partisan commitment to good governance. They also proposed a four-point set of reforms including removal of black money, violence, militancy and partisan state mechanisms to ensure that the next elections are free, fair and credible.

The caretaker government’s rule in Bangladesh is entering a very important phase. They are under domestic and international pressure to hold the elections and hand over power. The political dialogue has started and a parallel dialogue is being held with members of the civil society. But this has so far not helped to sort out issues with the two main political parties in Bangladesh, whose participation is very important for holding a credible election. The caretaker government cannot succeed in its minus-two theory. Everything would thus depend on what conditions of the caretaker government Hasina and Khalida accept.

The civil society of Bangladesh including its business leaders are also in a dilemma. They do want elections, but neither do they want to go back to a chaotic and confrontational political climate. They want an election which will result in a smooth transition of power. In the prevailing conditions where a stalemate has been reached between the caretaker government and the two mainstream political parties, a solution is possible only if both sides show some flexibility in their stated positions. A rigid stand would lead the country towards political chaos. Most importantly, a breakthrough has to come soon as the elections announced are due in December 2008.

Recent announcements of major arms acquisition programmes by the Indian government must have given a sense of elation to the armed forces, which have been waiting for long for some of this equipment. These announcements also give greater confidence to the nation about the military’s capability to tackle national security challenges. But there are other long term implications of arms procurement largely through import.

India faces the dilemma of choosing to depend entirely on indigenous military production or resorting to import to meet its security challenges. The country has vast land borders, extended sea lanes and neighbours who are not so friendly. Given its size and location, it is expected to play a crucial role in the region. On the other hand, the domestic defence industry, though sufficiently large, is relatively weak and inefficient particularly in the context of fast changing defence technology. The resultant gap needs to be filled essentially by import of hi-tech defence equipment. But there are inherent problems with import of weapons and equipment.

The first and immediate problem associated with the import of arms is that it does not readily address the country’s long-term security needs. It is agreed that these procurements are expected to be futuristic in nature. However, even security calculations cannot accurately predict the future. Potential adversaries are unlikely to stick to the script and may acquire a new technology or weapon system. The factors pushing such decisions are beyond anybody’s control. This is further complicated by the constant evolution in technology. Under such circumstances, the defence system of a country largely built on imported arms and equipment becomes inflexible to meet new challenges.

Moreover, experience has shown that importing arms and equipment does not contribute to strengthening the domestic defence industrial base. This is so in spite of much hyped transfers of technology, license production, etc. as a part of import agreements. Ideally, a country’s defence industry should be dynamic enough to meet the peacetime requirements of the armed forces while at the same time being expandable to meet wartime needs or emergencies. But a defence system that purely relies on imported arms and equipment will not be dynamic in meeting such eventualities, but would instead be more of an impediment in handling unforeseen and unpredictable situations, which is the hallmark of security management. India has sufficient experience in this regard.

At the conceptual level, imported weapon systems skew the process of determining and conceptualising future equipment needs. Decision making of this kind is quite complex and even advanced countries like the United States finds it difficult to fine tune their policy in this regard. Defence requirements are determined by the interplay of the ‘user’s perception or interest,’ the interest and capabilities of defence companies or contractors and the interest of procuring authorities represented at the apex level by the concerned ministry or the political leadership. When these players throw their cards in the selection of technology and equipment for the armed forces in situations where imports predominate, the reference points and unseen actors are often the foreign suppliers. Instinctively, the sophisticated nature of imported arms plays a crucial role in the ultimate decision making. This is particularly so in India where there is a penchant for anything ‘foreign’. Consequently, the stranglehold of foreign suppliers proves to be more widespread though invisible. This adversely impacts upon the germination and growth of technology within the domestic defence industry, thus perpetuating underdevelopment.

The cost of importing arms and equipment is high. India spent over US $10.5 billion in arms imports during the last three years and is expected to spend another $30 billion in the next five years. In addition are the costs associated with installations, training manpower, and operating and integrating new acquisitions with existing weapons systems. This is why the concept of life cycle cost of equipment has become an important factor in decision making on arms procurement. It has been the general experience that for an aircraft with a lifespan of 15 years one has to add a further 30 per cent to its production cost for maintenance alone during this period, apart from other associated costs. The trajectory of maintenance cost is equally high if not more in the case of defence equipment. The longer one keeps equipment the greater its maintenance cost, whereas its effectiveness will remain constant or reduce vis a vis potential adversaries. This is often further compounded by the non-availability of spares and components, a situation which gets particularly worse when the supplier happens to be an integrator of various systems of different companies. Maintenance, substitution or upgradation, all become almost impossible. Under such circumstances, the equipment itself becomes the problem. India has encountered many problems of this nature.

The most crucial aspect, however, is that the import of arms and equipment ‘supplies technology’ but does not transfer technology. Even in cases of a contractual obligation for transfer of technology, the seller does not does transfer the ability to upgrade the technology when the need arises. The problem gets further complicated particularly when the original equipment manufacturer (OEM) happens to be only an ‘integrator’ as highlighted above, which is a growing phenomenon in defence technology. This again is amply proved by the Indian experience. It is true that the country does gain some technological skills through import, is able to build up its defence capability and gains a certain respectability in its international dealings. But the fact remains that in spite of the avowed policy of ‘self reliance’ and ‘indigenisation’ over fifty years, the periodically massive import of sophisticated defence equipment is a clear testimony to the fact that this policy has not helped the country to build up its domestic defence industrial base. Almost all major equipment used by the armed forces are of foreign origin, and as when even upgradation is considered the original suppliers have to be involved.

While it may be necessary to resort to arms imports to bridge the gap between perceived security threats and the immediate capabilities of the domestic defence industry, a serious review of the current policy is a must to overcome import dependence.

The practice of converting defence plans into publicly known defence budget is essentially a practice of democratic governments. One reason for public disclosure of defence spending could be that tax payers expect to know directly or through their representative how much is being spent on national defence and on other sectors of economy which affects their security and welfare. Disclosing the defence budget even to the domestic audience was rarely done in the past. In fact, even today, some major powers do not disclose their defence spending to the world. The immediate relevant questions then are: Does the annual defence budget serve as a tool of national security? Does it have strategic value to overall national security? A careful analysis of this practice of disclosing proposed defence spending with major break-ups on various branches and components of the armed forces shows that a country does convey an appropriate implicit message. To this extent, one can assert that the defence budget does have a strategic value.

What then are the essential ingredients or attributes of a defence budget for it to effectively serve as a strategic tool of national security? To be so, the defence budget must have, inter alia, the following attributes:

• Its total size should be substantial enough to inspire the confidence of the nation, deter potential adversaries and impress friends and allies by conveying an appropriate diplomatic image.
• Its structure and format must be revealing enough.
• It should have an inbuilt system with flexibility to incorporate the changing perceptions of national threats and interests.

A look at India’s defence budget in the above context indicates certain satisfying features as well as some specific areas of concern. At the outset, the total size of India’s defence budget could never have been a matter of serious concern to those who considered themselves as potential adversaries of India. Total defence spending have been hovering between 1.69 per cent of Gross Domestic Product (GDP) in 1961-1962 to the highest ever of 3.84 per cent of GDP in 1963-64, constituting 25.45 per cent of total Central Government expenditure in that year.1 But there are two other trends that have been consistently going in almost the opposite direction over the years. While the percentage of defence expenditure vis a vis the GDP has been fluctuating between the above two extremes, the actual quantum of expenditure had been significantly increasing over the years, from Rs.289.54 crore in 1961-62 to Rs.105,600 crore in 2008-09. On the contrary, the percentage of defence expenditure against total central government expenditure has been gradually declining over the years, from 25 per cent to around 14 per cent. This declining percentage per se does not mean a reduction in defence allocation. The actual quantum as indicated above has been increasing over the years and this does provide a reasonable sense of confidence to the nation. On the other hand, the trend also gives the message that the country can afford to spend more on defence than what had been spent over the years. This definitely sends out a clear message of India’s peaceful intentions, in that it is only interested in spending on its primary minimum defence needs and that it does have certain other priorities of nation building.

Equally important are the various components of the budget. Mere size may not convey much and does not necessarily mean enhanced military capability. Looking at defence spending over the years in this context conveys certain definite messages in terms of changing perceptions of threats and national interests. In the past, most of the capital expenditure used to be concentrated on arms and equipment for the Army. This has undergone substantial changes in recent years. The trend moved towards higher spending on the Navy and is now tilting heavily towards the Air Force. In the 1970’s, capital allocations among the three Services was broadly in the average ratio of 41 per cent for the Army, 42 per cent for the Navy and 17 per cent for the Air Force. After 2000-01, there has been a significant shift in the respective shares of the Services. The Army’s share went down to an average of about 31 per cent over a period of five years and the Navy’s share to about 28 per cent, whereas in the same period the average share of the Air Force increased to over 40 per cent. This changing profile has been further continued in the 2008-09 defence budget as well.

India’s defence budget for 2008-09 stands at Rs.105, 600 crore, with the following break up of capital component.

Source: Defence Services Estimates 2008-09.

This changing allocation in profile to different Services/Departments implies, amongst others, that contrary to the earlier focus on defending territorial borders, India’s defence policy is gradually looking beyond and is aiming to protect its vital interests of strategic nature. This could be achieved only with the increasing capability of the Navy and the Air Force.

In order to be an effective strategic tool, the defence budget needs to be revealing enough to both potential adversaries and friends so that they can correctly judge its strengths and weaknesses (miscalculation is most dangerous in security matters). In this context, India’s defence budget can be considered one of the most publicly revealed documents in the world. The entire ‘Defence Services Estimates’ are broadly divided into ‘Revenue’ and “Capital’ heads for each of the three Services and other allied establishments, some of which may, in fact, have only remote connection to defence capability building. These two major heads have similar corresponding minor heads, sub-heads and detailed heads.2 With the publication of Defence Services Estimates Volume-II since 2002-03, further detailed information is placed in the public domain. What really ails the document are on other accounts. There are items which perhaps should not form part of the defence services estimates and yet others which should not be clubbed together under the same demand or budget head. These include expenditure on accounts of civilians in various branches of the armed forces and other civilian organisations under the Ministry of Defence. Similarly, expenditure on accounts of certain organisations/departments such as the National Cadet Corps, Directorates of Quality Assurances, Military Farms, etc. may qualify to be treated separately under different ‘Demand’ within the overall defence budget structure. The hard core capabilities of the armed forces being arms and equipment and the quality of the men behind the machines, a new arrangement of the various items under different demands would greatly enhance the real and strategic value of the defence budget. In this context, the major items in the US defence budget for 2007, for example, are illustrative.

• Operation and maintenance $ 152 .2 billion
• Military personnel $ 110.8 billion
• Procurement $84.2 billion
• Research and development $ 73.2 billion
• Military construction $ 12.6 billion
• Family housing $ 4.1 billion

As regards the issue whether the defence budget is based on a well defined in-built system with the required flexibility, it is imperative to note that the defence budget is part of the larger budgetary system of the Union Government. The structure and formats are constitutionally mandated. As such the defence budget like the budgets of all other ministries needs to be in the formal structure of ‘Revenue’ and ‘Capital’, followed by other heads ‘minor’ ‘sub-head’ ‘details heads’ under the respective major heads. The rule also provides as to under what conditions and under whose authority funds can be transferred from one head to another called ‘Re-appropriation’.3 In addition to this formal structural requirement, the defence budget cannot escape the essential features of ‘Expenditure budget’ wherein the detailed proposals have to be fitted into the format.

While these structural impediments do prove stability to the system as a whole, it also suffers from lack of desired flexibility. Flexibility has come from the budgeting process itself, in the form of the preparation of the Budget Estimates, followed by Revised Estimates and the Final Budget – a practice that gives immense flexibility to the budgetary process. The process is further smoothened by the fact that these activities cover a period of three financial years.4 The process is so dynamic yet the format and the activities associated with it so inflexible that it renders the entire system rather less effective. The process, amongst others, conveniently can cover up excess spending under certain heads and surrenders under other crucial heads. This does not serve the budget well as a strategic tool of national security. A glaring example is the repeated surrender of substantial funds particularly under the ‘capital’ head over the years, the average of which has been over Rs. 4300 crore per year since 2002-03.5

In this connection it is imperative to recognise the fact that the issue of surrender of funds is not a problem within the budgetary framework itself. It essentially relates to those complex activities which need to be thoroughly done before they are converted into financial figures and brought on to the budgetary process. These would include the issue of defence planning with reference to threat perceptions, changing perceptions of vital national interests, the selection of the appropriate strategy to meet these challenges, the state of the defence industry within the country or the availability of the required technology and equipment from suitable sources, and the structure and processes involved in the acquisition and procurement of equipment and weapons. Only when these interconnected areas are set right can optimal spending of defence allocation be achieved to make it a more effective tool of national security strategy.

The budgeting framework and processes, however, can be considerably improved once these activities are set right and incorporated into the defence budget. The right size of defence budget, therefore, with appropriate components for different branches of the armed forces consistent with changes in the security situation and an effective working process would provide overall confidence to the nation and serve as an effective strategic tool of national security. The task is indeed difficult and complex, yet the challenges are quiet obvious.

N. Neihsial is on deputation from the Indian Defence Accounts Service to the Institute for Defence Studies and Analyses, New Delhi.

1. 2. In the detailed heads, for example, under Minor heads, even the budgetary allocations for porters and ponies, anti-malaria and anti-fly measures, ration and salt for animals, etc. are separately indicated.
2. 3. Appendix ‘C’ to the Defence Services Estimates: The cardinal principle of re-appropriation is that an authority can re-appropriate only in respect of savings arising out of the allotments placed at his disposal. The broad guidelines are: (i) Minor to Minor head under the same Major head: GOI, (ii) Sub-head to Sub-heads within the Minor heads under each demand: MOD (iii) Sub-head to sub-head under the same minor head: Services Headquarters, etc.
3. 4. A.K. Ghosh, India’s Defence Budget and Expenditure Management (Lancer Publishers, New Delhi, 1996), p. 34. The format of budget preparation contains or requires the following items/activities: (i) Actual of previous year (ii) Sanctioned Estimate of the current year (iii) Revised Estimate of the current year (iv) Budget Estimate for next year (v) Actual of the current year at the time of preparation of Budget Estimate for the next year.
4. 5. Defence Services Estimates. The average has been worked out by dividing the total amount of surrender by the number of years of the relevant period

• 1. Air commodore Jasjit Singh, India’s Defence Spending: Assessing future needs (Knowledge World, New Delhi, January 2000), p. 23.
• 2. In the detailed heads, for example, under Minor heads, even the budgetary allocations for porters and ponies, anti-malaria and anti-fly measures, ration and salt for animals, etc. are separately indicated.
• 3. Appendix ‘C’ to the Defence Services Estimates: The cardinal principle of re-appropriation is that an authority can re-appropriate only in respect of savings arising out of the allotments placed at his disposal. The broad guidelines are: (i) Minor to Minor head under the same Major head: GOI, (ii) Sub-head to Sub-heads within the Minor heads under each demand: MOD (iii) Sub-head to sub-head under the same minor head: Services Headquarters, etc.
• 4. A.K. Ghosh, India’s Defence Budget and Expenditure Management (Lancer Publishers, New Delhi, 1996), p. 34. The format of budget preparation contains or requires the following items/activities: (i) Actual of previous year (ii) Sanctioned Estimate of the current year (iii) Revised Estimate of the current year (iv) Budget Estimate for next year (v) Actual of the current year at the time of preparation of Budget Estimate for the next year.
• 5. Defence Services Estimates. The average has been worked out by dividing the total amount of surrender by the number of years of the relevant period.

The review of the composite bilateral dialogue process by the Foreign Ministers of India and Pakistan on May 22 at Islamabad was significant in many ways. This was the first ever review, that too during the course of the first ever high level visit by an Indian minister after the new government took power in Pakistan. Both countries have accepted a gradual process of resolving the outstanding issues between them. Pakistan has said that it is important to raise awareness among the people about their stake in the peace process. Arguably, a continuation of the peace process in itself would provide the atmosphere needed to resolve longstanding issues. The talks this time were devoid of polemic, which has many times in the past created unnecessary bitterness and hopelessness about such an exercise. Moreover, both countries were circumspect in their statements so as not to build up high expectations on these talks, thereby containing media hysteria. It also appeared that Kashmir is no more a yardstick to measure success or failure of talks. This is significant and in the long run would moderate expectations that are sometimes built only to result in frustration.

The Foreign Secretary level talks that preceded the Foreign Ministers’ meeting was also a testing ground to gauge whether there would be a shift away from the policy of the outgoing military-dominated government. The new government led by the PPP has expressed its commitment to the ongoing peace process. Its approach was made clear by Asif Zardari on March 1, when he said that he would give emphasis to the economic dimension of India-Pakistan relations. Though this had given rise to speculation and criticism that the PPP-led government would not give importance to the Kashmir issue, these have been laid to rest by Zardari’s subsequent statement that Kashmir is indeed an important issue that needs to be resolved.

The objective of the talks at the Foreign Ministers’ level, as Pakistan described it, was “improvement of atmospherics and abetment of tensions.” The talks resulted in agreements on some Confidence Building Measures. There were offers to increase the frequency of the Srinagar-Muzaffarabad and Poonch-Rawalkot bus services. There was also talk of granting tourist visas to enhance people-to-people contact as well as on consular access to prisoners in each other’s country. Both countries have also decided to maintain the ceasefire along the Line of Control, which recently witnessed some incidents of firing.

India and Pakistan have agreed to activate the anti-terrorism mechanism, which has been inactive for many months since its formation in 2007. For the first time, the two countries appeared empathetic towards each other’s concerns and problems. This was reflected by Indian Foreign Minister Pranab Mukherjee’s answer to the question pertaining to the extradition of Dawood Ibrahim, when he said that already an Interpol warrant has been issued. For his part, Pakistan’s Foreign Minister Shah Mehmood Qureshi, answering a question about whether India is engaging in an arms race, said that Indian government is concerned about pressing economic issues. Both Ministers avoided any statement that may vitiate the atmosphere of cordiality.

The window of opportunity for better bilateral relations lies in the statement of Pakistan’s Foreign Minister, when he said “Our government is ready for the grand reconciliation for the resolution of longstanding issues that need to be resolved peacefully through dialogue and in a manner that is dignified and commensurate with the self respect of involved parties.” This statement signifies the willingness to accommodate and the pursuit of a win-win solution on various issues and importantly on Kashmir. Pakistan continues to emphasise upon UN resolutions, with the new government trying to establish a balance between continuity and shift in its Kashmir policy while keeping various other interests in mind. It is cautious about pronouncing a major policy shift while heading a coalition government. However, the grand reconciliation could essentially indicate its preparedness to make some shift in Pakistan’s foreign policy of sixty years which was centred on UN resolutions. It also signals that Islamabad would continue the peace process initiated by the Musharraf regime. The talks also symbolises the fact that a popularly elected government in Pakistan has now given the sanction for the peace process that is under way, rather than disowning it or trying to start afresh. The PPP-led government is yet to consolidate itself and is facing a challenge to its stability over a host of internal political issues. Under these circumstances, a major change in India-Pakistan relations would be difficult to initiate. Nawaz Sharif, in his interview to the Hindustan Times on May 21, has also indicated that he would follow through with the peace process that is already under way.

Still, there are fears and apprehensions about the future of the peace process, and understandably so. The apprehension is whether a government that does not have a two-thirds majority in the National Assembly has the ability to carry along the religious parties and their prodigies in cultivating good relations with India. Another factor in this regard is the new government’s relations with the Army. Confrontational politics is increasingly appearing to become a reality in Pakistan as there are indications of a possible tussle between the President and Parliament. The only factor that is different this time around is the realisation among political parties that they should stand together and not to allow the military to take advantage of dissensions among them. And they know that raising the Kashmir issue when the government is fragile will give importance to the military at a time when the civilian government is trying to consolidate its position and control. The India-Pakistan bonhomie is therefore likely to continue notwithstanding the political crisis that Pakistan seems to be heading towards.