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Rise and Decline of the Defense Industry

The early years of the program ushered in several success stories in the AFPs 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:

  1. the military vehicle industry where the Delta Motors Corporation, in a joint venture agreement with Toyota of Japan, produced the Mini-Cruiser, a -Ton all-terrain light vehicle most suited for AFP ground forces which provided a worthy substitute for the M151 (Kennedy vehicle);
  2. 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;
  3. 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,
  4. the textile industry which now supplies close to 100 percent of the AFPs 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. 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.

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.

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 1990s. 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.

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.

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.

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.

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Page last modified: 03-08-2012 19:21:32 ZULU