This Ministry is not only the Armed Forces. It is one of the largest economic groups in the country and one of the most robust structures in terms of resources. How does it work and what will be its strategy in an eventual post-conflict scenario?
The Defense sector faces the greatest challenge in its history. The announcement by President Juan Manuel Santos to begin at the negotiation table in Havana between the Government and the FARC the discussion on the point of bilateral and definitive ceasefire and hostilities, places the Ministry of this sector before the possibility of a scenario that had not been seen in more than 50 years: the end of the armed conflict.
Therefore, one of the big questions in this new stage is related to the future of the Armed Forces and the role of the Ministry of Defense in a post-conflict scenario.
However, just as the peace talks are advancing and would enter their final stage, the Public Force has not been left behind: its modernization process is more advanced than is believed. In this field, the seeds have already been sown for the construction of a modern Armed Forces, seeking innovative alternatives to relate to society and serve the interests of the country in this new context.
The peace process is no small challenge for what can be considered one of the largest companies in Colombia. And this managerial and practical aspect is sometimes lost from sight. «When we refer to the Ministry of Defense of Colombia we are perhaps talking about one of the largest companies in the country and the region, and the largest employer in Colombia: half a million people – military, police and civilians –, a budget of the order of $28 billion, a sector that has 19 companies concentrated in the Defense Business and Social Group –GSED–, with income of $7 billion, obviously an important percentage in pension issues, but which generated at the end of 2014 profits higher than the $180,000 million. In addition, it has what may be the largest EPS in the country, with close to 1.4 million users," says the Minister of Defense, Juan Carlos Pinzón.
In the last five years, the Ministry of Defense has achieved the best results in terms of operations and, although there has been talk of a possible growth of the economy of 1 additional percentage point in a peace scenario, different analysts consider that the growth will not be so high, given that the country has already benefited from the security policy of recent governments. For example, Merryll Linch assures that it would be a little less than a third of this figure.
A managerial vision.
The conflict has led Colombia to allocate 3.4% of GDP to defense and security spending, one of the highest participation percentages in the national budget. However, in the international context it is lower than other countries: military spending is 1.8% of GDP (below countries like Chile, which is 1.9%) and spending on police is 1.6.
Despite the volume of resources, as this expense includes pensions and payment to personnel, most of the Ministry of Defense's spending is not flexible: salaries, health, pensions and expenses associated with the operation represent almost 95%. The only thing that could be adjusted is the investment, which is only 5%. And much of it is the purchase of material, recurring expenses and maintenance.
This being the case, there is not ample room for maneuver to think about reducing resources, even more so in the midst of an austerity policy; and, on the contrary, the message is to strengthen them. “The country has to ensure that having a strengthened and credible Armed Forces is an asset that it must preserve to maintain peace, security and its regional influence,” says Minister Pinzón.
Furthermore, as stated by expert Héctor Villalobos, former FMLN peace negotiator in El Salvador, when the peace process is signed, the presence of public forces should be increased instead of reduced, since generally a significant part of the ex-combatants ends up involved in illicit activities, exacerbating the problems of violence within the country.
How can you do more with the little flexibility of resources you have? Like any company, the challenge is to make the operation more efficient and achieve economies of scale to achieve better management indicators. It is necessary to make efforts with a medium-term vision with the objective of having a spending efficiency plan and making the capabilities of the Armed Forces sustainable.
In that sense, the management and administrative structure of the Ministry of Defense is also in a process of modernization, adjustment and growth. GSED companies record revenues that last year were around $7 billion – nearly 65% correspond to contributions from the Nation –, profits of more than $180,000 million and exports close to $30,000 million.
The GSED has companies that are growing and others, even newborns, with valuable contributions in terms of technological development and strengthening of local engineering. Various buttons for sample.
INDUMIL is in the process of fine-tuning the production line for the Córdova 9 mm pistol and the repeating shotgun. It is also advancing in the modernization of the explosives production line and evaluating the possibility of building an ammonium nitrate and urea plant to reduce production costs and enter new markets.
For its part, the CIAC is manufacturing the T-90 training aircraft, the first aircraft made of composite materials manufactured in Colombia. 25 aircraft have been built and it is expected this year to deliver the 26th prototype to begin marketing.
In turn, the Navy received three new patrol vessels designed by Cotecmar last year. Two of them were built by STX Offshore & Shipbuilding in South Korea – in a technology transfer agreement between that country and the Ministry of National Defense – and the third in Colombia. It also manufactured the first amphibious landing ship and two larger ships of more than 2,000 tons.
Codaltec – the most recent bet in the sector – is a start-up that operates in Meta and was born from the allocation of royalties to science and innovation projects. In just a couple of years of creation, it has already delivered four simulators, among which stands out one for 4X4 armored vehicles – the first of this type to be developed in the world –, another for Caravan aircraft, and one more for remotely piloted aircraft.
Added to these are the operations of the Logistics Agency; of the hotels in Bogotá, Buenaventura, Bocagrande and Santa Marta; of the Military Hospital; of the Civil Defense; from Satena and the Military University, among others.
But, in addition to companies, the Ministry of Defense has gone from being a recipient of military aid and training to becoming a provider of such services. For example, in the last five years it has trained 18,000 soldiers and police from 63 countries and in Colombia it has carried out works by military engineers for $260,000 million.
Another vital issue is the education plan, in which with Colfuturo it has 60 military and police officers spread around the world training in areas from naval engineering and political science to international relations.
And in terms of planning, the Ministry of Defense is on the frontier of the public sector in terms of spending. Under the direction of Vice Minister Diana Quintero, it has been possible to carry out unit costing throughout the useful life of the assets. For example, on average the acquisition of a helicopter costs 30% of its total value while the maintenance cost reaches 70%.
The transition.
Clausewitz, perhaps the greatest military theorist, said that war was the extension of politics by other means and, in the case of Colombia, the project of the current Colombian leader is focused on achieving a peace agreement with the insurgency. In this order of ideas, it is hardly normal for public forces to be subordinated to the political agreements that are signed. However, the role and challenges that the Armed Forces will face as a result of the negotiation with the FARC will not only represent an institutional change, but also a business transformation.
In the event that the peace process crystallizes and demobilization occurs, the Ministry of Defense created a Strategic Transition Command -CET- and is currently speaking with the main experts in the world about these issues to develop the programs. to adapt to that moment.
Today the Command – in which more than 45 first-level officers are linked – is planning the different stages of the transition that may occur: either a permanent one or a process where certain aspects are de-escalated, but in which it is necessary to guarantee In any case, the security of Colombians.
At the same time, issues of the military and police institutions are visualized, such as those of historical memory and transitional justice for members of the Armed Forces, but without ceasing to face in the transition the realities that the country is experiencing today: extortion, smuggling , illegal mining and drug trafficking, which affect business and corporate life. “It is necessary to focus on these crimes in the present and as part of the transition to be able to confront them. Once the armed groups are gone, it is a strategic issue for the country,” says the Minister.
In administrative matters, the Ministry hired the consulting firm McKinsey to do spending efficiency work, similar to what they did in the United Kingdom, Israel and the United States to be more efficient in the future and make appropriate adjustments under a motto: cut the fat but not the muscle. And, on the health side, Ernst & Young (E&Y) was also hired to evaluate reforms that can be made in the future
Another important issue is the design of what has been called the defense industrial base policy in association with the private sector. A few years ago only a few companies were talked about: Indumil, Cotecmar, CIAC and the Logistics Agency. Today there are several companies in different cities in Bogotá, Medellín, Cali, Barranquilla, that have been advancing. In the fourth Expodefensa there were about 200 companies, of which 130 were Colombian and several already industrial, not only providers of services, but also of parts and equipment. The idea is to highlight the presence of the private sector so that it can ally itself with public companies and so that they are sustainable suppliers, but of national production.
In the sector, the global trend in the defense industry points to a greater role for private companies and that has allowed these countries to progress, improve, achieve significant capital investments, bring the latest technology and be in the market of the large companies. . There are many examples. Israel created a defense industry just to survive and over time it privatized it. Today it is not completely so, but the most sophisticated capabilities are made by private companies with government contracts. In Brazil, Embraer was a CIAC 30 years ago and today it is the first regional aircraft company in the world, private, with a small stake left to the government and with a business with the IFC, which capitalized the firm with a guarantee of government of Brazil.
The other example is South Africa. Today there are a number of small private companies that were born from the public cluster that existed there. The United States is the extreme case, no company is public, of those with military capacity, and they all live on contracts with the government.
Already in Colombia, the Public-Private Alliances scheme has been developing in science and technology projects. For example, the production of UAVs, which the CIAC does, has an external partner, and Codaltec is a successful model of University-Business-State relationship.
Regarding Satena, the idea is to maintain it and look for a strategic partner. With the IDB, the Ministry is building a State policy on air transport. Satena would be dedicated solely to social routes and would not compete with commercial airlines. It is the first time that the defense sector has managed to access a multilateral
In terms of corporate governance, the World Bank is advising all the Ministry's companies on this vital issue in the future to access strategic partners or innovative financial ideas. Precisely, one of the demands of the OECD is that the boards must be composed of individual experts.
The Armed Forces and Peace.
Despite all the advances described above, the eventual signing of a peace process with the FARC has filled the Public Force, and more particularly the Military Forces, with a feeling of anxiety and uncertainty. On numerous occasions the left and the FARC themselves have stated that the Armed Forces must be restructured and their doctrine changed. For an institution that has been involved in an internal conflict for more than fifty years, these statements threaten its existence.
How to plan an eventual post-conflict stage? Guaranteeing today, for the future, a scheme that allows it to strengthen its core business –security–, and also generating development possibilities.
Furthermore, as some experts assure, after the signing of a peace process, the Military Forces should emerge strengthened instead of reduced. Even key issues are already visible in the post-conflict scenario. One, for example, that 1.6% of GDP representing Police spending must increase to approach international standards.
The case of the Military Forces is more complex. For the peace process to work, your commitment to it is essential. If the military cannot be sold a vision of how the Armed Forces would operate and modernize, the process is doomed to failure. As French Marshal Ferdinand Foch stated, when warning that the Peace of Versailles signed in 1919, which ended the First World War, was only a 20-year armistice: “peace is too important to be left to civilians.” A statement that included historical experiences such as that of the end of the Civil War in the United States, when, after the Peace of Appottamox was signed and after the assassination of Lincoln, it was Generals Sherman and Grant who forced the new President Johnson to respect agreements. Talking about the future of the Armed Forces in the post-conflict is complex, since respect for the agreement will fall on them.
From restructuring to rebalancing.
The construction of a vision of the Forces in a peace scenario is key not only to consolidate the process but also to capitalize on the knowledge of more than five decades of conflict. For this reason, it is essential to redirect military spending or, as they say in technical jargon, rebalance it. What is not desirable is that they want to dismantle the Army.
The Ministry advances the so-called Modernization and Transformation Plan. For these purposes, the Ministry created a board in which international and local experts participate to provide guidance and ensure strong Armed Forces.
A forward-thinking example today is the strengthening of military engineers. The engineering command has already been created to coordinate the 38 engineering battalions that exist throughout the country and that carry out more than 200 works in the most difficult and remote places, such as Roncesvalles, at the upper entrance to the Las Hermosas Canyon or in La Uribe, in Meta. As a senior officer stated to this publication: “the mobile brigades are leaving, but the pavement remains.”
On the other hand, the role and knowledge of the Armed Forces can be capitalized abroad, where Colombia has already signed several agreements, such as those it has developed with the European Union and NATO. In fact, Minister Pinzón, after Davos, will travel to New York to sign an agreement with the United Nations.
The transformation of the Public Force will also require a change in the relationship between human resources and technology. Until now, Colombia has opted for a model based on the use of human mass and some technological elements. Something that is very common in counterinsurgency strategies. But looking to the future, the logical thing would be to evolve towards a model that is more based on technology and progressively smaller in terms of personnel.
Another topic to discuss is the recruitment model; That is, whether we move towards a completely professional force or a mixed model of professionals and conscripts. The Military Forces are evolving towards completely professionalized forces, which are more effective, and whose employment is less politically costly. However, it is also worth considering the arguments of defenders of conscription who consider that it is an economically cheaper model and that it strengthens national cohesion.
In terms of collaboration with the private sector, there is still much to do. For example, the whole issue of infrastructure modernization. The way to do this will be with public-private alliances where the value of the land that the Ministry of Defense currently owns is maximized and seeks strategic partners who want to carry out construction developments. There is always talk of the Cartagena Naval Base, the CAN, the International Center, El Pedregal – next to the infantry school – as developments that can be seen – some of them – this year, and they are the beginning of new forms relationship between the Armed Forces and the private sector.
The modernization of the Armed Forces, combined with the consolidation of its business base, must serve to produce a more trained, more efficient and more solid Public Force. The eventual consolidation of the peace process with the FARC guerrilla will force the Armed Forces to look for new ways of relating to the community, seeking to bring with it security and development. The important modernization of the business base of the defense sector will serve to produce more modern and professional Armed Forces. A clear vision in this sense, understood and internalized by members of the Public Force, is essential for a successful end to the peace process.
Source: Dinero Magazine
