Saturday, November 01, 2008

Defense Spending

Armenia (population 3 million) faces tremendous pressure to increase its military budget. However, given the size of its economy, it is not in a position to engage in an arms race with its neighbors. Turkey's (population 71 million) military budget exceeds the country's entire GDP. As for Azerbaijan (population 8 million), the other Turkic state, its defense expenditures are as large as the government's entire budget.

The country maintains close ties with both Russia and the US. A small contingent of Russian troops guards its border with Turkey and Iran, and Armenian troops serve with NATO in Kosovo, and until recently in Iraq under Polish command before Poland withdrew its troops. In addition, the US has provided some $1.5 billion in economic aid over the past 15 years or so; the US is the only foreign donor to the Armenian enclave of Karabakh. Relying on others for its security and economic well being may not be a source of pride. But the government's role is to provide for the wellbeing of the people, and one hopes that the officials swallow their pride. Rather than expanding the defense budget, a more effective approach would be to spend more on education and health care. In the long run, it is likely that an expansion in investment in human capital could be far more effective in contributing to Armenia's security and prosperity than anything else the government can do.

State Budget, 2007 (in USD millions)
Defense ............................... 280.0 15.1%
Education and Science ................. 278.0 15.0%
Social Insurance and Social Security .. 184.4 9.9%
Public Services ....................... 181.8 9.8%
Public Order and Security ............. 152.0 8.2%
Transport and Communication ........... 140.3 7.6%
Public Health ......................... 137.1 7.4%
Fuel and Energy ....................... 85.9 4.6%
Agriculture, Forestry, Fishing ........ 80.7 4.3%
Housing ............................... 64.0 3.5%
Culture, Sport ........................ 48.8 2.6%
Industry, Construction, Nature ........ 22.8 1.2%
Other Expenditures ................... 199.4 10.7%
Total Expenditures .................. 1855.3 100.0%


Turkey: military spending was $11,066 million in 2007 (www.turkishdailynews.com, Jun 11, 2008)
Azerbaijan: military spending was $1.3 billion in 2007 and expected to rise to $2 billion in 2008.

Added Jan 18, 2009: Azerbaijan announces rise in military spending for 2009 to $2.3 billion (Yeni Azarbaycan, Azerbaijan, Jan 17 2009).