Economic Dimension of Conflicts in South Asia

By Ram S. Mahat 

At the start of the new century, the world does not appear any more secure than ever before. The transition from the cold war to the 21st century has been marked by deadly conflicts, which are overwhelmingly concentrated in developing countries. Only the character of conflicts has changed. During 1987-1997 more than 87 percent of conflicts were fought within national borders - 14 in Africa, 14 in Asia and 1 in Europe. The nature of war victims has also changed. Vast majority of the casualties are no longer combatants, those who suffer the most are the civilians - mostly children and young at the formative and  productive period of their lives, women, elderly and infirm.

After more than a decade of reduction, world military expenditure has started rising since 1998. Stockholm International Peace Research Institute (SIPRI) estimates the world military spending in 2001 at US $ 839 billion in current prices, representing an increase of 2 percent in real terms compared to the previous year. As a global average, it accounted for 2.6 percent of the world GDP and US $137 per capita. Even these figures are an under representation, since supplementary spending since 9/11 and subsequent war on terrorism is not properly reflected in these figures. The regions with the strongest growth in military spending are: Central and Eastern Europe, Africa, South Asia and Middle East, where an aggregate growth of more than 25 percent in real terms has been recorded between 1998 and 2001. The reasons for this increase are: internal and external armed conflicts, or threats of new conflicts, war on terrorism and continuing modernization of military arsenal, etc. The US-led war on terrorism marked the start of a new approach to combating terrorism with a heavy emphasis on military force. This will involve heavy increase in internal security cost, which would include strong counter terrorism measures. The massive cost borne and being borne by USA and coalition partners in the Iraq  conflict would provide an indication of the nature and magnitude of the cost involved. By contrast, worldwide spending on weapons and forces had fallen by one-third between 1987-97, reflecting not only the disarmament after the cold war, but also a higher efficiency in the use of resources for military purposes.

South Asia Defies the Global Trend

Defying the global trend, military spending in South Asia shows a consistently increasing trend. Military spending in South Asia increased from US $ 11.3 billion in 1992 to US $ 13.8 billion in 1998 when the global spending declined from US $ 847 to US $ 719 billion. The region's share in the global military spending during this period increased from 1.3 percent to 1.9 percent. South Asia's military budget further rose to US $17.4 billion at 1998 prices in 2001 accounting for 2.3 percent of the global military expenditure. The secularly increasing trend in military expenditure in South Asia is mainly attributed to the armed race between India and Pakistan, which account for 93 percent of the total spending and, therefore, dominate the trend for the whole region. India and Pakistan belong to a group of countries, which boasts of 10 largest armies of the world. India ranks 11th position among the major military spending countries in the world, accounting for US $ 12.9 billion.

The South Asia Human Development Report in 1997 said: South Asia is one of the most militarized regions in the world. In marked contrast to the global trend, the region is expanding the standing armies at the time when other nations are reducing the same, acquiring a range of modern weapons when military holding of combat aircraft, artillery, ships and tanks have declined elsewhere. The Indo-Pakistan tension and rivalry largely shape the total shape and size of military spending in South Asia. Although both India and Pakistan carry a heavy burden of defense expenditure, the overall impact is much heavier on Pakistan in view of its smaller size, which is about one fifth of the Indian economy, and contains one-seventh of the Indian population. India spends 3.6 percent of its GDP on defense, while for Pakistan it is as much as 7 percent. In per-capita terms, India's defense expenditure US $ 10, while for Pakistan it is US $ 26.

Increasing security expenditure of South Asia, however, is not a phenomenon limited to India and Pakistan only. Smaller countries like Bangladesh, Sri-Lanka and Nepal also follow this general pattern. The increases in military expenditure for Bangladesh, Sri-Lanka and Nepal during the period 1987-94 were 7.5 percent, 108 percent and 43 percent respectively. Faced with continuing ethnic insurgency over the last twenty years, Sri-Lanka's security spending has dramatically increased to 5 percent of GDP; and its per-capita defense expenditure is higher than that of Pakistan. Traditionally speaking, Nepal's defense expenditure has been one of the lowest in South Asia, by any indicator. Nepal's share in total military spending in South Asia was 0.2 percent in 1991.  According to the World Development Report 2000-1 by the World Bank, Nepal's military spending as percentage of GDP was 0.8 percent in 1997 as compared to 5.7 for Pakistan, 2.8 percent for India and 5.1 for Sri Lanka, and 1.4 percent for Bangladesh. Human Development in South Asia 1997 shows that its share in total government expenditure in 1995 was 5.9 percent, as compared to 17.6 percent for Bangladesh, and 11.6 percent for Sri-Lanka. The military-social spending ratio in 1991 was 35 as compared to 41 for Bangladesh and 107 for Sri-Lanka.

The increasing intensity of the Maoist violence changed Nepal's budgetary pattern, with increased emphasis on security spending in recent years. The combined police and army budget never exceeded 10 percent of the total government spending in the 1990s. In the year 2002, it increased to about 18 percent. The figures presented in the budget are an under-representation, since a significant portion of additional security demand is met through extra-budgetary decisions. In the year 2002-3, about 20 percent of the security demand was met outside the budget - not including the hardware and technical assistance under bilateral assistance as part of counter terrorism measures. Since 1996 the total strength of the army and police has increased by about 40 percent.

Cost of Conflict: Poverty and Underdevelopment

The conflict situation in South Asia - both inter-state and intra-state - has contributed to increased securitization and militarization. Pre-occupation with national security has guided all governments to spend more on this subject. While inter-state confrontation, mutual rivalry and tension guide the defense requirements of India and Pakistan whose military spending spiral have led them to build up sophisticated arsenal with capabilities on land, air and sea, intra-state conflicts have led to increased securitization and military spending in Sri-Lanka and Nepal.

High security spending has its own economic and human costs. Military security alone cannot ensure national and human security. National security is increasingly dependent on human security, which in turn is linked with job security, income security, environmental security, security against crimes etc. Mahbub Ul Haque says:

Ideally, there need not be a conflict between national and human security, since the essence of real security lies in safeguarding peoples not just in safeguarding borders. But a conflict can arise if the military/social spending tilts in favor of military spending and if a delicate balance between defense and development is disrupted.

This is what happened in the USSR before its break-up in 1990 when, despite having nuclear weapons to destroy the world ten times over, it could not feed its own people or provide them with productive jobs and satisfactory services. This is what has happened in countries, which have invested heavily in the armies, rather than in their people. For example, the military to social spending ratio in 1980 was among the highest in Iraq (8 times), Somalia (5 times), and Nicaragua (3.5 times). All three countries failed to protect their national sovereignty, their territorial integrity, and the welfare of people, despite liberal acquisition of arms and expanding armies. On the other hand, Costa Rica, which spent nothing on the military, having abolished its army in 1948, and spent one-third of its national income on education, nutrition and health during the last few decades was the only prosperous democracy in a troubled Central America.

Higher military spending preempts resources from more productive investment in social and economic sectors; and thereby reduces the share of scarce public resources available for sustainable development. This creates economic insecurity, which could be source of internal instability, thereby leading to a vicious circle of enhanced military spending to contain social unrest. A disproportionate share of public spending on defense will mean foregone social and economic opportunities for people, leading to lower economic growth, and higher levels of illiteracy, infant mortality and short life expectancy. Higher military spending is generally recognized as one important factor in limiting poverty reduction.

On the positive side, military spending can also offer some economic boost through technological innovation and modernization of civilian industries, building of physical infrastructure; however this is possible only in countries with relatively developed military industry and a good manufacturing base. But in small countries with low industrial base like Nepal with high import intensity of military hardware, such positive impact is negligible.

Furthermore, corruption in arms procurement deals is too well known to be recounted here. There is a tendency to treat security spending with secrecy. Procurement decisions are often based on foreign policy preferences rather than technical criteria. This allows the military decision-makers and their civilian counterparts to hide financial interests behind the claim of national security. "The global arms bazaars, underpinned by powerful economic interests, reinforce excessive secrecy and corruption in many countries' security sectors."

It may be too simplistic to attribute South Asia's poverty and underdevelopment to its conflict situation and militarization, since there are other strong reasons behind her backwardness. However, it would be interesting to make a comparison with East Asia which, starting her development under similar conditions in the 1950s, has now given to her people a high level of prosperity, with one of the highest economic growth rates in the World.

South Asia today is the most populous and poorest region of the world; with 22 percent of the global population it contains 40 percent of the world's absolute poor. Its adult literacy rate of 48 percent lags behind that of 55 percent of Sub-Saharan Africa and 89 percent of East Asia (excluding China). South Asia's per-capita income is 309, compared to   $ 555 in Sub-Saharan Africa, and more than US $ 10,000. The gap in the per-capita incomes between South Asia and East Asia (excluding China) has widened from US $ 200 in 1960 to US $ 9,700 in 1993. While factors like higher investment in human capital, outward looking trade strategies, land reforms, prudent fiscal and monetary management and investment friendly policies explain the success stories of East Asia, one important factor contributing to it is relatively high priority given to economic and development issues in relatively conflict -free conditions, unlike in South Asia. Public expenditure on education in South Asia as percentage of GNP in 1992 stood at 3.4 percent, compared to 2 percent in 1960, while East Asia was already spending 3.7 percent of GNP on education in 1980, in 1992 it had already risen to 4.4 percent. Military spending as percentage of combined expenditure on health and education in South Asia stood at 72 in 1991, down from 113 in 1960. In East Asia, the decline was much sharper from 273 in 1960 to 49 in 1990.[1] World Development Report 2000/1 by the World Bank estimates that military spending as percentage of GNP in South Asia has remained constant at 3.1 percent during 1992-97, while it declined from 2.9 percent to 2.5 percent in East Asia and the Pacific.

It is difficult to get reliable data on military spending. There is a general proclivity to hide and underreport the true level of military spending. Many items are camouflaged under heads of non-military nature. In Pakistan, the total defense spending is said to be summed up in a single line.

Conflict and Deprivation: Cause- effect Relationship

Poverty and economic deprivation need not necessarily be the prime cause of conflict in many situations, as ethnicity, language, religion and political philosophy have been the basis of most conflicts in developing countries. However, poverty conditions and deprivation, economic and social exclusion and a sense of discrimination among the excluded groups offer fertile ground for radical ideas and philosophies laying down the foundation for conflicts. Conflict and deprivation are mutually reinforcing. Conflict destroys the productive capacity, distorts resources allocation and hampers future growth, thus resulting in more deprivation and poverty. This further intensifies the conflict. Conflict is openly violent and economic deprivation is potentially so. South Asia with the highest concentration of global poverty and human deprivation, yet continuously investing disproportionate amount of resources on security and with its uneven distribution of development benefits is one of the conflict prone hotspots on earth.

Human Development Index of South Asian Countries 

Source: UNDP    Human Development Report 2002  

Disaggregated Human Development Status in Nepal, 2000 

Source: Nepal Human Development Report 2001
             Poverty Reduction and Governance

(The first part of an article written by Dr. Mahat. This article was presented at a paper in New Delhi).

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