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Financing Force Modernization and Troops Welfare 163 6 Financing Force Modernization and Troops Welfare Although the national budget and government expenditure have never been a secret in Myanmar, any attempt to calculate Myanmar defence expenditure is fraught with peril. This is particularly true since 1988. The published figures are unreliable. Besides, there are several other factors that should be considered in calculating Myanmar defence expenditure. First, the defence expenditure itself is underestimated.There is heavy state subsidization coming from other ministries and agencies, rather than the Ministry of Defence. For example, the armed forces get subsidized fuel from Ministry of Energy. Second, some of the expenditure in foreign currencies is calculated on the basis of the official exchange rate, which is more than 200 times lower than the market rate in early 2000s. Third, some expenditure comes from other agencies, such as home affairs and forestry. And fourth, some expenditures are paid by military businesses. Finally, some expenditures, such as payment for overseas suppliers, are made in kind under a barter system. (Some claim that some of the military hardware bought from the PRC are paid for in teak and other natural resources.) Defence Expenditure Financing the force modernization programme in Myanmar has always been a major issue.The defence budget takes the lion’s share in theTotal Government Expenditure (TGE) or Central Government Expenditure (CGE). In the first 163 06 Bldg Tatmadaw.indd 163 12/29/08 8:55:25 AM 164 Building the Tatmadaw two years immediately after the nation’s independence in 1948, the defence expenditure in momentary terms amounted to 40 per cent of the TGE. And it remained relatively high throughout 1950s — about 32 per cent of the TGE. Between 1948 and 1961, the Myanmar government spent Kyat 4,067.7 million (in current price terms) or Kyat 880.8 million (in 1960 constant price) on the defence. This budget was used mostly for equipment, salaries, rations, and medical facilities for the troops. The calculation of the percentage of defence expenditure to the TGE or CGE was simply for the period between 1948 and 1962 when there was little state-owned economic enterprises (SEE). In the early 1950s, the Tatmadaw found a way to provide welfare services for its members and their families; it established a number of business firms, including stores to sell subsidized commodities for Tatmadaw members. The issue of military business will be discussed later in the chapter. Between 1962 and 1974, according to the SIPRI (Stockholm International Peace Research Institute), Myanmar’s military expenditure in current price amounted to about Kyat 7,055 millions; it was US$1,425.1 million in the 1970 constant price (see Table 6.1). The percentage of defence expenditure TABLE 6.1 Defence Expenditure (1962–74) Year Current Price 1970 Constant Price % GDP Kyat Million US$ Million 1962 432.0 89.5 6.3% 1963 478.0 90.5 6.4% 1964 455.0 97.7 6.5% 1965 511.0 107.0 6.6% 1966 502.0 105.2 5.7% 1967 486.0 101.8 5.7% 1968 498.0 104.3 5.3% 1969 545.0 114.1 5.4% 1970 582.0 121.9 5.7% 1971 599.0 125.5 5.7% 1972 581.0 121.7 5.3% 1973 739.0 117.1 5.9% 1974 647.0 128.8 4.3% TOTAL 7,055.0 1,425.1 — Source: SIPRI Yearbooks. 06 Bldg Tatmadaw.indd 164 12/29/08 8:55:26 AM Financing Force Modernization and Troops Welfare 165 in the GDP declined from an average of 6.5 per cent in early 1960s to an average of 5.5 per cent in the late 1960s and early 1970s, despite heavy military operations in the central or lower and northeast Myanmar, while the absolute of expenditure had steadily increased. In terms of the percentage of the defence expenditure in the TGE, the estimation varied, reflecting the different ways of calculation. In terms of expenditure by State Administrative Organizations (SAO), the military expenditure stayed an average of over 30 per cent. In the period between 1975 and 1980, while the defence expenditure continued to grow in both current and constant price terms, its share of the GDP declined and remained on average of about 4 per cent (see Table 6.2). TABLE 6.2 Defence Expenditure (1975–80) Year Current Price 1980 Constant Price % GDP Kyat Million US$ Million 1975 886.0 162.0 3.9% 1976 1...


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