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Finland - Defense Budget

In 2015, Finland's Defense Ministry was instructed to develop a plan for saving the funds it was allocated. A savings of 60 million euros was planned for the 2016-2020 period. The savings were expected to be made possible through staff cutbacks and the reduction of working hours of staff involved in logistics and management. The Defense Ministry also expected to reduce the flight hours of McDonnel Douglas F-18C fighters and Airbus NH90 helicopters, as well as the cost of recruit training.

Finland's total defense expenditure stood at US$3.7 billion in 2014 and is expected to grow at a CAGR of 5.79% over the period 2015-2019, to reach US$4.34 billion in 2019. Finnish defense expenditure was primarily driven by participating in peacekeeping initiatives, the upgrade of military equipment such as F-18 Hornet jet fighters, the soldier modernization program, and the procurement of advanced technology equipment. The Finnish defense industry expected to focus its expenditure on NASAMS II missile system, Leopard 2A6 main battle tanks, soldier combat systems, transport helicopters, ballistic protection and smart munitions systems, cyber security, and C4ISR systems.

The country's defense budget stood at 1.16% of GDP in 2014 and was expected to increase marginally to 1.23% of GDP by 2019. During 2010-2014, the average capital expenditure allocation stood at 31.6% of the total defense budget, and this was expected to increase marginally over the forecast period to reach 32.1%. Revenue expenditure is expected to decrease from an average of 68.4% during 2010-2014 to 67.9% in the forecast period due to austerity measures by the government. The defense ministry planned to reduce the number of mobilized troops from 350,000 to 230,000 by 2015 and save on training costs by conducting joint activities with the Nordic partners.

The combined budget of the Defense Forces and the RVL remained fairly constant during the 1980s as a percentage of total government expenditures, in most years ranging from 5.5 to 6 percent. Defense costs generally constituted about 1.5 percent of gross national product (GNP), although they rose to 1.7 percent in 1983 before diminishing to 1.48 percent in 1987 as a consequence of budget cuts imposed on the Ministry of Defense. The defense budget totaled Fmk5.58 billion in 1987 and Fmk6.04 billion in 1988. In recent years the budget has averaged about 1.4% of GDP, with spending rising to 2.8 billion in 2013.

During the 1982-86 period, the principal expense category was equipment replacement and procurement (31 percent of the total budget), followed by payroll costs (25 percent). Upkeep of conscripts and training expenses averaged 13 percent of the budget; operations and maintenance, 16 percent; and real estate and other expenses, 15 percent. The procurement projection for the 5-year period, 1987-92, earmarked 48 percent for the army, 25 percent for the air force, 20 percent for the navy, and 7 percent for common-use equipment. This reflected increased emphasis on the acquisition of armor and firepower for the army and a diminishing rate of procurement for the air force. The air force share was expected to rise again after 1992, however, when the entire fleet of fighter aircraft was scheduled for replacement.

Although Finland's defense budget showed a slight increase during the 1980s, it failed to maintain the targeted annual real growth rate of 3.8 percent established by the Third Parliamentary Defense Committee in 1981. In both absolute and relative terms, Finland's defense budget continued to be among the lowest in Europe. A study prepared by the United States Arms Control and Disarmament Agency found that Finland's defense effort, expressed in terms of military expenditures as a ratio of GNP, was among the lowest of the developed countries of the world. Only Japan, Luxembourg, and Iceland had lighter defense burdens, based on 1985 data. Finland also ranked low in military expenditures per capita (US$156 in 1984, calculated in 1983 dollars) and as a percentage of central government expenditures (one hundred twenty-third in the world in 1985).

These low budget outlays presaged future deficiencies in modern arms when existing equipment had to be replaced. As senior military leaders pointed out, costs of new weaponry were increasing at a rate of 5 to 15 percent annually on world markets, with the result that new procurements could not keep pace with equipment obsolescence and deterioration, especially in the army. Finnish analysts argued, however, that the budgeted figures somewhat understated Finland's real defense effort compared with other Scandinavian countries, because of the low conscript pay and the fact that certain military infrastructure costs as well as military pensions were not included in the defense budget. Moreover, the RVL, which would be an important adjunct to the military in an emergency, was included in the Ministry of Interior budget rather than in the defense budget.

A survey was commissioned by the Advisory Board for Defence Information (ABDI) and it was conducted by TNS Gallup. The survey was conducted by interviewing 1039 persons September 9 - October 10, 2004. The present level of defence appropriations satisfies 53 per cent of citizens (57% in 2003). Raising the level is supported by 38 per cent (29%) and lowering it by seven per cent of citizens (11%). Of men, 43 support raising it (34%) and of women, 34 per cent ( 24%). Of National Coalition support-ers 48 per cent (40%) support raising the level, 43 (36%) of Centre Party, 39 (29%) of SDP, 32 (20%) of Left Alliance and 23 per cent (15%) of Greens supporters. Lowering the appropriations is backed by 26 per cent (22% in 2003) of Greens supporters, 19 (19%) of Left Alliance supporters, six per cent (9%) of the National Coalition, four per cent (10%) of SDP and two per cent (4%) of Centre Party supporters.

According to the Commander of the Finnish Defence Forces General Ari Puheloinen, Nordic Defence Cooperation (NORDEFCO) will not solve the financial challenges facing Finland's military national defence during this decade and at the beginning of the 2020s. The results of Nordic cooperation that Finland has reached so far are above all functional ones, said General Ari Puheloinen in his address at the opening of the 205th National Defence Course in Helsinki on 04 March 2013.

Results achieved include among other things the exchange of data regarding the recognised air and maritime pictures, the joint Nordic training plan for 2012-2016, the joint exercise plan for army air defence, artillery and the naval forces Also the exchange of information concerning mine counter-measures, diver cooperation, air force exercises that cross state boundaries and extensive cooperation in crisis management operations are already everyday activities for the Nordic countries. These results are significant, but they have not brought great financial savings.

However, considerable financial benefit has been gained in that Finland has been able to buy used armoured personnel and all-terrain carriers in good condition from Swedish and Norwegian surplus stocks. On the other hand, the extensive joint procurement of new equipment is more challenging.

A credible defence capability requires that approximately one third of the defence budget be allocated to materiel procurement in the future, too. The cost pressure is significant. In order to maintain the present level capability corresponding to future requirements, major re-evaluations of the system or considerable increases in defence appropriations are needed.

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Page last modified: 04-07-2016 19:40:53 ZULU