The Military as an Economic Actor Soldiers in Business Jörn Brömmelhörster and Wolf-Christian Paes International Political Economy Series General Editor: Timothy M. Shaw, Professor of Commonwealth Governance and Development, and Director of the Institute of Commonwealth Studies, School of Advanced Study, University of London Titles include: Leslie Elliott Armijo (editor) FINANCIAL GLOBALIZATION AND DEMOCRACY IN EMERGING MARKETS Robert Boardman THE POLITICAL ECONOMY OF NATURE Environmental Debates and the Social Sciences Jörn Brömmelhörster and Wolf-Christian Paes (editors) THE MILITARY AS AN ECONOMIC ACTOR Soldiers in Business Gordon Crawford FOREIGN AID AND POLITICAL REFORM A Comparative Analysis of Democracy Assistance and Political Conditionality Matt Davies INTERNATIONAL POLITICAL ECONOMY AND MASS COMMUNICATION IN CHILE National Intellectuals and Transnational Hegemony Martin Doornbos INSTITUTIONALIZING DEVELOPMENT POLICIES AND RESOURCE STRATEGIES IN EASTERN AFRICA AND INDIA Developing Winners and Losers Fred P. Gale THE TROPICAL TIMBER TRADE REGIME Meric S. Gertler and David A. Wolfe (editors) INNOVATION AND SOCIAL LEARNING Institutional Adaptation in an Era of Technological Change Mary Ann Haley FREEDOM AND FINANCE Democratization and Institutional Investors in Developing Countries Keith M. Henderson and O. P. Dwivedi (editors) BUREAUCRACY AND THE ALTERNATIVES IN WORLD PERSPECTIVES Jomo K. S. and Shyamala Nagaraj (editors) GLOBALIZATION VERSUS DEVELOPMENT Angela W. Little LABOURING TO LEARN Towards a Political Economy of Plantations, People and Education in Sri Lanka John Loxley (editor) INTERDEPENDENCE, DISEQUILIBRIUM AND GROWTH Reflections on the Political Economy of North–South Relations at the Turn of the Century Don D. Marshall CARIBBEAN POLITICAL ECONOMY AT THE CROSSROADS NAFTA and Regional Developmentalism Susan M. McMillan FOREIGN DIRECT INVESTMENT IN THREE REGIONS OF THE SOUTH AT THE END OF THE TWENTIETH CENTURY James H. 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Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England The Military as an Economic Actor Soldiers in Business Edited by Jörn Brömmelhörster and Wolf-Christian Paes in association with the BONN INTERNATIONAL CENTER FOR CONVERSION Editorial matter,selection and Chapters 1,6,7 and 10 © Bonn International Center for Conversion 2003 Chapters 2–5,8 and 9 © Palgrave Macmillan Ltd 2003 All rights reserved.No reproduction,copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced,copied or transmitted save with written permission or in accordance with the provisions of the Copyright,Designs and Patents Act 1988,or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency,90 Tottenham Court Road,London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2003 by PALGRAVE MACMILLAN Houndmills,Basingstoke,Hampshire RG21 6XS and 175 Fifth Avenue,New York,N.Y.10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St.Martin’s Press,LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States,United Kingdom and other countries.Palgrave is a registered trademark in the European Union and other countries. ISBN 0–333–99928–2 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data The military as an economic actor :soldiers in business / edited by Jörn Brömmelhörster and Wolf-Christian Paes. p.cm.– (International political economy series) Includes bibliographical references and index. ISBN 0–333–99928–2 (alk.paper) 1.Military-owned business enterprises—Case studies.2.Military-owned business enterprises—Africa.3.Military-owned business enterprises— Asia.4.Military-owned business enterprises—Latin America.5.Military- owned business enterprises—Russia (Federation) 6.Armed forces—Finance.I.Brömmelhörster,Jörn,1961– II.Paes,Wolf-Christian. III.International political economy series (Palgrave Macmillan (Firm)) HD2731.M55 2003 338.6’2—dc21 2003046915 10 9 8 7 6 5 4 3 2 1 12 11 10 09 08 07 06 05 04 03 Printed and bound in Great Britain by Antony Rowe Ltd,Chippenham and Eastbourne Contents List of Tables and Figures vii Acknowledgements viii Notes on the Contributors ix List of Abbreviations xi 1 Soldiers in Business: An Introduction 1 Jörn Brömmelhörster and Wolf-Christian Paes 2 Military Business in Argentina 18 Thomas Scheetz 3 Soldiers as Businessmen: The Economic Activities of Central America’s Militaries 32 Arnoldo Brenes Castro and Kevin Casas Zamora 4 The Rise and Fall of the Chinese Military Business Complex 52 Tai Ming Cheung 5 The Economic and Commercial Roles of the Vietnam People’s Army 74 Carlyle A. Thayer 6 Trifungsi: The Role of the Indonesian Military in Business 94 Lesley McCulloch 7 Power, Perks, Prestige and Privileges: The Military’s Economic Activities in Pakistan 124 Ayesha Siddiqa-Agha 8 Praetorians or Profiteers? The Role of Entrepreneurial Armed Forces in Congo-Kinshasa 143 Wolf-Christian Paes and Timothy M. Shaw 9 The Largest European Army in Business: The Case of Russia 170 Ksenia Gonchar v vi Contents 10 Conclusion 187 Jörn Brömmelhörster and Wolf-Christian Paes Notes 197 Bibliography 204 Index 213 List of Tables and Figures Tables 2.1 Argentina: military-run industries, privatizations 23 2.2 Argentina: military-run industry at moment of privatization 25 3.1 Armed forces in Central America: basic facts 34 5.1 Estimated revenue earned by military-run enterprises, 1990–8 87 6.1 Sample of military salaries 104 7.1 Major projects of the Fauji Foundation 126 7.2 Major projects of the Army Welfare Trust 127 7.3 Major projects of the Shaheen Foundation 128 7.4 Major projects of the Bahria Foundation 128 9.1 Main indicators of the Russian armed forces 172 9.2 Distribution of extra-budgetary revenue by spending category, in per cent 177 9.3 Commercial revenue of the armed forces by source, in per cent 178 9.4 Military business fields 179 9.5 Military business: strengths and weaknesses 184 10.1 Factors motivating military business 189 Figures 1.1 Primary and secondary roles of armed forces 8 1.2 Military business as part of military expenditures 12 7.1 Overview of military business activities 129 vii Acknowledgements The editors would like to thank the John D. and Catherine T. MacArthur Foundation for the generous funding which helped to make this book a reality. The conference in Jakarta, Indonesia, which brought together the contributors to this volume was supported by the local office of Development Alternatives Inc. A special thank you goes to the staff at the Bonn International Center for Conversion (BICC) who collaborated in this project, in particular research assistants Cheryl Loeb and Zackary Moss for their sterling support. Finally, we would like to thank our principal editor, Natalie Pauwels, for ensuring that the authors’ diverse styles would not prove too trying for the reader. JÖRNBRÖMMELHÖRSTER WOLF-CHRISTIANPAES viii Notes on the Contributors Jörn Brömmelhörster works as a governance specialist with the Asian Development Bank in Manila, Philippines. Previously, he worked as a senior researcher and project manager at the Bonn International Center for Conversion (BICC), and as a freelance consultant. He has published widely on defense spending and conversion. Arnoldo Brenes Castro serves as an adviser to the Ministry of Foreign Affairs and Culture of Costa Rica. Formerly, he worked as the pro- gram director for the Central American Dialogue for Security and Demilitarization at the Arias Peace Foundation and co-edited the book Soldiers as Businessmen: The Economic Activities of Central America’s Militaries(San José, 1998). Tai Ming Cheung is a PhD student at King’s College, University of London, working on a thesis on Chinese defense economics. Previously, he worked as a consultant for PricewaterhouseCoopers, as a senior director for Kroll Associates and as an investigative journalist for the Far Eastern Economic Review. He has published the book China’s Entrepreneurial Army(Oxford, 2002). Ksenia Goncharworks at the Russian Academy of Science in Moscow and as a research associate at the Bonn International Center for Conversion (BICC). Her research is focused on Russian defense conversion. Lesley McCullochis a writer and former lecturer in Asian Studies at the University of Tasmania in Australia. Previously, she worked as a researcher at the Bonn International Center for Conversion (BICC) and has published widely on Indonesia. Wolf-Christian Paes works as a senior researcher and project manager at the Bonn International Center for Conversion (BICC), and as a consultant for various development organizations in the field of demo- bilization, disarmament and security sector reform. Timothy M. Shaw is the Director of the Institute for Commonwealth Studies at the School for Advanced Study of the University of London, ix