“We
taught and we have learned our lessons well that we
should never build our defenses on the shifting sands
of mutual defense agreements, and it is time we build
it on firmer foundations. For while we have faith
in our allies, we should not be completely dependent
upon them. For while we believe in their courage and
their capability, they also have their own national
interest that may sometime conflict with ours. For
in matters of defense the guarantee of friends can
be modified to suit their needs and interest, as the
history of nations vividly show.”
These
words of the late President Ferdinand E. Marcos, President
of the Republic of the Philippines, laid the foundation
of a vigorous attempt to develop a defense system
of a self-respecting, independent nature, relying
solely on the country’s capabilities and resources:
The Self-Reliant Defense Posture Program (or SRDP)
of the Republic of the Philippines.
I. A Brief History of the SRDP
The
AFP Under the Care of Uncle Sam. In its early years
after the enactment of Commonwealth Act Number 1 –
the National Defense Act -- the Armed Forces of the
Philippines received a good number of Defense Equipment
from the United States under the RP-US Defense Assistance
Agreement of 1947. The acquisition of these equipment
was funded out of a US aid grant called the Foreign
Military Funding (FMF) -- the fund used to name what
otherwise would have been payment for the use of Philippine
land to house bases. Acquisition of military hardware
was sourced solely from the U.S. government through
a system called the Foreign Military Sales (FMS).
With these funds and systems in place, U.S. Defense
Industries monopolized the inventory of the Armed
Forces of the Philippines.
The
Call for Self-Reliance. In the early 70’s, the
escalation of the Muslim secessionist movement in
Mindanao and the immediate need for military hardware
came as a wake up call for the Philippine Government
to provide its own Armed Forces with the necessary
materiel to accomplish its mandate of upholding the
sovereignty of the state and protecting the national
territory.
The
Birth of the SRDP Program. In 1974, the Self-Reliant
Defense Posture (SRDP) Program was conceptualized
and implemented through the enactment of Presidential
Decree 415, otherwise known as the SRDP law. The program
envisioned the attainment of local production capability
for war materiel while conserving foreign exchange
and, in the process, spur industrial and economic
growth. The underlying concept of the program was
the development of a local defense industry that can
support the materiel requirements of the AFP.
The
underlying concept was to produce locally, when feasible,
materiel for our defense forces through partnership
between the military and civilian establishments,
while importing those that cannot be locally produced
with the ultimate objective of acquiring the technology
for the production of these materiel. Paramount to
this objective is the primordial role of the military
and government agencies of providing technical and
financial assistance to civilian defense manufacturers.
To effectively implement the program, the Joint Staff
for Materiel Development and its implementing arm,
the Research and Development Center, were established.
Project managers were also designated to manage the
various projects. A memorandum of agreement between
the Department of National Defense and the Department
of Science and Technology provided the network for
the support of the program, which also included the
Department of Trade and Industry and the Department
of Finance.
To
pump-prime the Defense Industry, an annual appropriation
of at least 100 Million Pesos was legislated. This
provided the needed financial support to fund research
and development projects, which were done in cooperation
with industry. Tax holidays and other investment incentives
were also afforded to those undertaking production
of defense materiel. With the entire support infrastructure
in place, there were bright prospects for the birth
of several industries.
II. The Rise and Decline of the Defense
Industry
Success
Stories. The early years of the program ushered in
several success stories in the AFP’s drive to
provide a medium for the development of the industry
while meeting its basic requirements for materiel.
Notable among the industries developed in line with
the SRDP Program were:
(a)
the military vehicle industry where the Delta Motors
Corporation, in a joint venture agreement with Toyota
of Japan, produced the Mini-Cruiser, a ¼-Ton
all-terrain light vehicle most suited for AFP ground
forces which provided a worthy substitute for the
M151 (Kennedy vehicle);
(b)
the communications industry, specifically with the
establishment of Veterans Electronics (VETRONIX) –
under joint venture partnerships with several communications
industries of UK and the US -- manufacture UHF and
VHF radios for the operating troops;
(c)
the firearms and ammunitions industries with ELITOOL,
ARMSCOR, CRESER to name a few, designed and manufactured
rifles, pistols, small arms ammunition, and fuses
for mortar and other ammunition with export markets
all over the world; and,
(d) the textile
industry which now supplies close to 100 percent of
the AFP’s clothing requirements like the Office
and Fatigue uniforms, shoes, and other individual
equipment.
There
were a total of 15 corporations registered as members
of the Philippine Defense Industries. These companies
were producing materiel for the Armed Forces of the
Philippines, from Combat Rations to Track Assemblies,
and from small arms ammunition, radio sets, to Assault
Rifles.
III. AN ANALYSIS OF THE CAUSES OF DECLINE
After
more than two decades and a little over four billion
pesos spent for various SRDP Projects, the program,
apparently, failed to achieve its main objective.
Several industries that were already established were
not sustained.
Problems
with Sustaining Demand for Industry. The decrease
in the Annual Appropriations for Capital Equipment
and the continuing depreciation of the Philippine
Peso forced the AFP to rely heavily on the items that
were made available via the US Foreign Military Sales.
Therefore, several multi-year manufacturing supply
contracts were not renewed to replace existing inventory,
which were approaching the disposal stage. As a result,
fledgling industries found it difficult to sustain
production due to the pressures of economics of scale.
The very first activities that faced attrition were
the Research and Development Activities. This gave
rise to problems of obsolescence and therefore reduction
in demand.
Declining
Government Support. Some studies conducted about the
program attribute this failure to the lack of clear
strategic direction, and to either excessive political
intervention or lack of support from the national
leadership. There was also a decline in the appropriations
for the SRDP Program towards the middle of the 1990’s(Figure
1).
Figure
1. Annual SRDP Appropriations
Additionally,
the office in the AFP primarily tasked to manage and
implement the program, the Office of the Deputy Chief
of Staff for Materiel Development, J9, was deactivated
in 1999, relegating its main function to a division
of the Office of Deputy Chief of Staff for Logistics,
J4.
Lack
of Upstream Industries. Although manufacturing and
assembly plants were growing at an enormous rate,
the technology of upstream industries were not able
to cope with the demands for specialized materials
such us high-grade metal alloys and rubber, to name
a few. Thus the local defense industries were hostage
to the prices of raw materials in the global market
despite the abundance of ores and other natural resources
in the country.
The
Lack of an Explicit Self-Reliant Defense Posture Program.
Although the SRDP Law contained the underlying objectives
and basic principles of the SRDP program; and the
Department of National Defense Circular 24 prescribed
policies, organization and procedures in the management
of SRDP Projects, there is a perceived lack of an
explicit program that defines priority areas for development
and the manner by which these areas are to be addressed.
There is also a gap between the development stage
and the independence stage of the industry where fledgling
companies are weaned from government subsidy so that
they can evolve into a globally competitive entity.
Corollary to this is the lack of an effective monitoring
system on the part on the management of the program.
IV. PROSPECTS FOR THE SRDP PROGRAM
The
Weaning Years for the AFP. The pullout of the U.S.
Bases in 1992 and the subsequent withdrawal of Foreign
Military Funding (FMF), which the AFP heavily relied
on for capital equipment and maintenance support,
resulted to the continuing decline of the operational
readiness status of its inventory, and consequently
its operational readiness. With the FMF funds for
FMS items ebbing, there was a popular clamor to fund
a modest modernization program for the Armed Forces
of the Philippines. Thus, in February 23, 1995, Republic
Act 7898, otherwise known as the AFP Modernization
Act, was enacted, declaring as a state policy to modernize
the AFP to a level where it can effectively and fully
perform its constitutional mandate of protecting the
people, upholding the sovereignty, and preserving
the patrimony of the republic. The total cost of the
modernization programmed was 331 Billion Pesos spread
over a period of fifteen years.
The
AFP Modernization Program -- A Boost to the SRDP.
With the implementation of the AFP Modernization Program,
new demand is created for existing industries. This
has also raised the prospect of a rebirth of old industries,
or the creation of new ones.
Article
3.6 of the Modernization Act explicitly declares,
“A self-reliance policy shall as much as possible,
be pursued in materiel and technology development
for the country’s defense requirements in order
to reduce dependence on foreign sources and at the
same time boost the local defense industry.”
Furthermore, the same article stresses that, “The
acquisition of major equipment and weapons systems,
shall, wherever feasible, provide arrangement for
the production of lead items by the foreign manufacturer
in the country of origin, and the subsequent production
in country (Philippines) of the rest of the series
under such schemes as transfer of technology; joint
venture, or co-production.”
To
add teeth to this declaration, the Republic Act 7917,
amending Republic Act 7227, otherwise known as the
Bases Conversion Act, allocates 35 percent of the
proceeds of the sale of Military Camps, Bases, and
other Real Estate Properties “to primarily finance
the self-reliance and modernization programs of the
AFP, . . . . and the modernization of the government
arsenal.”
V. DND-AFP INITIATIVES FOR SRDP
Pump-priming
the Defense Industry. Recognizing the need to revitalize
the SRDP Program and the opportunity that the AFP
Modernization Program offers, the Department of National
Defense has declared as one of its major thrusts for
the next 5-10 years, the pump-priming of the Philippine
Defense Industry, in cooperation with local and foreign
industry partners. Further realizing that a sustained
AFP Modernization Program is hinged on a robust SRDP
Program and a responsive local defense industry, the
Department reactivated the Office of the Deputy Chief
of Staff for Capability, Materiel, and Technology
Development, J9 as one of the members of the Joint
Staff of the AFP. The objective was to integrate and
consolidate the strategic efforts towards modernizing
the AFP and at attaining a Self-Reliant Defense Posture.
Re-directing
Strategies. In as much as the successful implementation
of the SRDP Program is essential to the sustainability
of the AFP Modernization Program, the DND-AFP has
embarked on a study for a comprehensive assessment
of SRDP Program and the strategic environment in which
it operates. Benchmarking studies were also being
conducted to identify areas where the Philippine Industries
can focus to address niches in the regional market.
This provided the basis for the 20-year SRDP Strategic
Plan published in June of last year.
Organizational
Audit. An audit of the Research and Development Centers
of the Armed Forces of the Philippines reveal that
these units tasked to manage SRDP Projects had strong
Organizational Motivation due to a strong and clear
internal leadership structure that was able to provide
a clear strategic path; however, lack of strategic
guidance from higher echelons and the bureaucracy
weaken the R&D Capability of the AFP. Limited
funding continued to plague the RDCs resulting in
inadequate infrastructure and technological resources
for it to effectively undertake significant Research
and Development activities. In the light of these
concerns, the RDCs failed to strengthen their linkages
with other R&D organizations, thereby negating
opportunities for collaborative R&D efforts for
defense.
Defense
Industry Assessment. Several assessments of the SRDP
Program and its impact on the defense industry show
that the defense industry that was developed two decades
ago retained a considerable portion of its capabilities.
However, progress in terms of materiel and manufacturing
technology was rather slow. A study conducted by Col
Sylim categorizes the Philippine Defense Industry
as belonging to the Second Tier of the Supply Chain
Pyramid. (Figure 2)
FIGURE V-1.
The Supply Chain Pyramid
The
20-Year SRDP Strategic Plan. The studies conducted
by the AFP to assess the strategic environment of
the SRDP program led to the formulation of a 20-year
SRDP Strategic Plan, with the vision of attaining
a “Self-Reliant Defense Posture through a Local
Defense Industrial Base that is sustainable, competitive,
and responsive to the defense needs of the country”,
and a mission of “Orchestrating the development
of the Local Defense Industrial Base that can provide
and sustain the materiel and technology requirements
of the AFP.”
The
accomplishment of the mission and the attainment of
this vision is hinged on key concepts which, we believe,
will be the foundation of our efforts to revitalize
the SRDP Program. A centralized management structure
has been identified as a viable structure in the management
of R&D and production, which is capital intensive,
has long-gestation and is high-risk in nature. Collaboration
and Partnership has been identified as a catalyst
for effective R&D by increasing the level of participation
of the private sector in the local defense industry.
A major trend in the global defense industry is the
consolidation and focus of resources and R&D efforts.
This is in response to the declining operating profitability
of the industry due to reduced defense spending, increases
in capital investment required, and heightened competition.
Core Technology Development is one concept recognizing
that resource constraints dictate that technology
development shall be focused on core technology areas
that will provide significant impact on defense operations.
Lastly, the concept of Consistency and Predictability
in the management systems and policies of the SRDP
program will stabilize the business environment in
the local defense industry and encourage more defense
investors.
Following
these strategic concepts, a comprehensive effort to
orchestrate the development of the Defense Industries
requires the accomplishment of certain strategic goals.
First, is an Effective, Efficient, and responsive
SRDP Program Management Structure through organizational
reengineering and networking. Second, is a Positive
Environment for the Development of the Local Defense
Industrial Base. This will require collaboration and
partnership with the defense industry, policy interventions,
the formulation of clear and consistent policies,
and strong public support. Third, is the Capability
to Address the Materiel and Technology Requirements
of the AFP by focusing on critical capability areas
to optimize meager resources, and by developing local
service and production capabilities in these critical
areas. Fourth is the Enhanced Defense Technology for
R&D and Production, by implementing defense technology
acquisition programs, and undertaking collaborative
R&D with public and private entities. Fifth, is
the acquisition and mobilization of Adequate Resources
to Support the SRDP Program.
VI. CONCLUSION
Developments
in the domestic and regional environments call efforts
for the promotion of research, development, and innovation
for the benefit of national wealth and self-sufficiency.
However, in our efforts to attain this objective,
domestic as well as regional players, should not venture
on competition, but rather, on the establishment of
ecosystems that will create demand, foster cooperative
undertakings for products and services, enhance core
competencies in the business as well as public sectors,
improve the quality of products and services, and
ultimately benefit the components of the ecosystem.
This is the essence of the new direction of the SRDP
Program. We now realize that not only new strategic
directions are necessary, but equally important is
strategic thinking where we will be able to continually
re-invent ourselves and our environment.
The
AFP SRDP has been afforded a new lease at its own
survival with the advent of the AFP Modernization
Program. The DND-AFP is confident that we will be
able to provide the proper foundation for its rebirth
and sustainment.
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