BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 1

Building and maintaining operational military capabilities in Albania in the face of current and expected security challenges Foto Duro Executive summary Currently, all Albanian Armed Forces(AAF) activities are funded via seven major budgeting programs, made up of 237 subprograms. An in-depth analysis unveils some discrepancies within programs and budget categories, as well as expenditures, which should be handled by other ministries. Consequently, about 25% of the defense budget is not used to fund the building, maintaining and/or use of operational capabilities or other normal activities of the AAF. Furthermore, a number of specialties or supporting services and their respective units either have disappeared or have been reduced to minimal levels, clearly offering inadequate support to accomplishing the objectives of major units. The study suggests that this situation is related to the weakness of defense resource management system in Albania, especially“capability/scenario based planning”, as well as numerous burdens exerted in this process by“budgeting”. This paper ends with recommendations regarding normalization of the defense resource management system, giving special emphasis to planning, based on realistic and most likely scenarios threatening Albania’s security, as well as the need of building a proper managers’ corps at all levels of the AAF, who should be proficient in both operational and financial areas. BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 3

Introduction The Albanian Security Barometer – 2022 , conducted by the Tirana-based Center for the Study of Democracy and Governance, among others, found that 88.5% of respondents think that Albania cannot guarantee its security without the support of allied countries 0F 1 . This skepticism regarding the Albanian security institutions and their capacity to autonomously accomplish their mission, has surfaced repeatedly in several other surveys. This led to the following in-depth analysis on how the AAF build and maintain their operational capabilities, as seen from a resources management perspective. As the title suggests, the analysis is focused entirely on the defense sector. Planning, funding and building/maintaining of the operational capabilities in the AAF Midterm budgeting planning(MBP) in the AAF, as part of the national MBP, consists of seven major rolling programs 1F 2 with a 3-year timespan and which are revised annually. Introduced in 2006, concomitantly with the national MBP, the AAF MBP was accompanied by some setbacks in addition to successes. First, the AAF were still straggling to fully absorb and adopt the American system(PPBES 2F 3 ) in managing their defense resources(introduced in 2002). The AAF’s urgent request to apply MBP was wrongly perceived by the involved people within the AAF as the MBP was replacing the PPBES. However, while MBP is simply“budgeting”, the PPBES is more than that. It includes three major components: Planning(certain strategic plans), Programming (6-year rolling defense programs) and Budgeting, which, in this case, could be MBP. Secondly, the MBP received all of AAF’s attention, actions and energy, causing the PPBES to be set aside(at least temporarily). Thirdly, in the absence of defense programs(the strongest stage in the PPBES) as the link between strategic plans and budgeting, the MBP lost its orientation, and not seldom, was used by itself to impose decisions, causing funding mismatches and allocation towards activities unrelated to the AAF’s operational capabilities and missions. Currently, all the NATO members(and others) organize their defense programs(not to be confused with the budgeting programs 3F 4 ) into four major categories: Personnel, Operations and Maintenance(O&M – where training and military exercises have an important role), Equipment and Infrastructure 4F 5 . There is also currently a general 1 “Albanian Security Barometer”, 2022, pg. 34, at http://csdgalbania.org/wp-content/uploads/2022/06/ASB-2022ENG.pdf. 2 Namely 1) Planning-Managing-Administration; 2) Combat Forces; 3) Combat Support; 4) Military Education; 5) Medical Support; 6) Civil Emergencies; 7) Military Social Support. 3 PPBES: Planning, Programming, Budgeting, Execution System. 4 The former are produced during the programming stage, while the latter are produced during the budgeting stage, both parts of the PPBES. 5 In some cases, the category of Research& Development is included as well. BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 4

consensus among NATO members regarding the budget share of the above categories, with Personnel taking the largest part, about 50%, then 30% and 20% for O&M and Equipment respectively and a minimal share of about 1% to 3% for Infrastructure. Structurally, defense programs are organized in two parts: nonfinancial(activities and materials by quantities and years) and financial(corresponding funds per each planned activities/materials). An analysis of the AAF MBP during 2019–2025 5F 6 shows that its seven major programs are made up of 237 subprograms, namely: Planning-Management-Administration(9 subprograms), Combat Forces(84), Combat Support(91), Military Education(17), Civil Emergencies,(17), Medical Support(14) and Military Social Support(5). Appendixes 1 and 2 provide a more synthesized view(tabular and graphical) of the major MBP programs for the period 2019–2025 as planned over the respective years. Unfortunately, due to the lack of reliable data, it was not possible to include an analysis of budget execution here. Nevertheless, some important conclusions might be drawn despite such methodological limitations. As shown in Appendix 1, 42.4% of defense funds are allocated for the Combat Forces program, showing the importance of this component within the AAF. This is also graphically shown in charts 1.a and 1.b(red column). Within this program, 25.7% of the funds are allocated for Equipment(exceeding the optimum); however, a more in-depth look reveals some problems. Thus, as seen in charts 2.a and 2.b, a steep increase was planned starting in 2022. Consequently, the equipment-related budget allocated in 2022 was 33.4% higher than 2021, while in 2023 they were 89% higher than 2022. There is a slight decrease of such funds in 2024, to increase again by 6.6% in 2025. Even though the figures for 2024 and 2025 are still aspirational(waiting for government and parliamentary approval), the execution of budgets at such an increasing pace would constitute real challenges even for more consolidated organizations. As past records show, the gap between planning and execution has been a constant concern for the AAF. Thus, even in the sensitive years 2008 and 2009 (Albania’s invitation and accession to NATO), defense budget execution was around 80% but for Equipment, this number fell to around 50% of the plan 6F 7 . Further, as seen in Appendix 1, after Medical Support, the Combat Forces program provides the lowest percentage of funding for Personnel and O&M activities, respectively 21.3% and 19.1%, which is clearly anomalous(compared to the agreed-upon NATO funds’ threshold of respectively 50% and 30% for these budget categories) and will be elaborated below. Following its content, the Combat Support program should be titled Combat Service Support because, conceptually,“combat support” is related to all units/services that provide support related to artillery, air defense, engineering, nuclear, bacteriological and chemical(NBC), communication, reconnaissance& intelligence, 6 Albanian MBP, at https://financa.gov.al/programi-buxhetor-afatmesem-ne-vite-2/. 7 Due to the author’s positions in the AAF, he was deeply involved in the MBP process during 2006–2012, and was well informed on the budget execution problems of that time. BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 5

etc. No activities for these services have been planned in the defense budget for the entire analyzed period(2019–2025) despite some subprograms in communication (however, they are all related to strategic communication among the major commands, while little is planned for communication of tactical units in front). Furthermore, as elaborated below, in the analysis of the Military Education program, almost all of the above specialties have already disappeared from the AAF, or are in an underdeveloped state. The above-described Combat Service Support is related to logistic support, such as field services(food, clothing), medical, transportation (beyond what the combat units can do with their organic transport capabilities), ammunition and fuel supply, materiel repair, mortuary, and postal services. Despite the variety of services, this program has 52 subprograms(out of 91 in total) related to Infrastructure(offices, depots, fencing) with a total cost of about 8 billion ALL (14.1% of the whole program), while only 4.7 billion ALL(8.4% of program funds) is allocated for Equipment, divided in 22 subprograms. Only 2.9% of the defense budget for 2019–2025 was allocated for the Military Education program. Furthermore, 29% of these funds(Appendix 1) is planned for Infrastructure(building reconstruction, etc.), while 3.9% of the program’s budget is allocated to Equipment. A closer look at this category in the Military Education program reveals that a significant part(minibuses, small water/oil tankers, etc.) is not directly related to education. In addition, a number of military specialties, such as field and antiaircraft artillery, engineering, reconnaissance, armament& ammunition, are missing now from Military Education and the AAF, while others, such as chemical and communication specialties, are only in a rudimentary state. For the latter specialties, personnel is recruited from civil university graduates in civil chemical engineering(for chemists) and electronic engineering(for communication), but their specialized military training of 12 to 24 weeks 7F 8 is considered by some specialists as not sufficient to prepare them for managing combat scenarios(in the past, such training lasted 3–4 years). Responding to civil emergencies is part of AAF’s mission, but as the experience of other countries suggests, the first groups to react in such situations are the local government and the civil emergency agencies, which should build and maintain their own emergency management capabilities and reserves. The AAF should be the last to be involved, taking part only when efforts to manage catastrophes exceed the capacities of the former organizations. Indeed, inclusion of the Civil Emergency program in the AAF MBP and the Civil Emergency Agency under the MoD’s authority has burdened the defense budget with activities not related to the AAF’s operational capabilities or mission. Thus, there are subprograms for buying fodder for cattle, as well as shelters, food, and beds for the civilian population(potentially subjected to 8 “Albanian military education policies”, 2021, pg. 12, at https://www.mod.gov.al/images/akteligjore/rekrutimenaxhimpersoneli/2021/urdher-765-080621-politikatarsimimit.pdf. BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 6

emergencies) that, for the period 2019–2025, are budgeted at about 7 billion ALL. The entire Civil Emergency program makes up about 7.5% of the defense budget. The military supplement 8F 9 to pensions given to about 23,000 retired military personnel and police officers(with an unclear distribution) and the pre-pensioning of about 7,000 retired military service members(ineligible for normal pensions due to their age, under 65) are paid via the Military Social Support program, costing respectively 2.6 and 2.4 billion ALL/year. Together with other auxiliary payments (for retired military pilots and submarine officers), this program comprises about 15% to 17% of the entire defense budget(depending on whether or not foreign grants are included). Inclusion of this program in the AAF MBP is debatable(having only the “Personnel” category, it is not a typical budget program). It was excluded in 2015, only to be included again in 2018. While NATO accepts such practices, in Albania’s case, more transparency is needed regarding the real weight of this program within the AAF MBP. However, the inclusion of police officers here is quite unjustifiable. Appendix 1 shows that together with Civil Emergencies, these two programs make up about 23% of the defense budget(with no effect on operational capabilities). Practically, the real weight of these two programs is greater when it comes to budget execution because typical budget reductions or non-realizations do not affect Social Support and only slightly affect Civil Emergencies. Without these two programs, the defense budget would consequently drop from about 1.62% to about 1.4% of GDP, further below the agreed upon NATO target of 2%. On the other hand, Civil Emergencies, as a structure(agency) and function, should inherently be under the authority of the MoI. The Planning-Management-Administration and Medical Support programs make up respectively 3.4% and 5.7% of the total defense budget. Almost 100% of the activities of the latter entail the Trauma Hospital(infrastructure, hospitalization, surgeries), in fact under the authority of the MoH. On the other hand, there are no planned actions related to an AAF mobile hospital or capabilities for medical support of troops on missions. The above facts demonstrate the lasting tendency for the defense budget to be charged with expenditures belonging to other ministries(namely MoH and MoI). A transversal look of the AAF MBP programs through the main budget categories (Personnel, O&M, Equipment and Infrastructure) reveals some other concerns. Planned Personnel expenditures(Appendix 1) make about 38.2% of the total, but if Social Support funds are excluded(about 5 billion ALL/year, partially for retired police officers), Personnel expenditures would drop to 23.5% of the Defense Budget. In reality, personnel expenditures are higher, due to the abovementioned budget reductions and non-realizations(which usually do not affect the personnel budget), as well as salary increases/indexing and other bonuses occasionally applied by the 9 Supplementary pension comprises roughly 1/3 of the full pension(for retired service members older than 65). BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 7

government. A NATO communique 9F 10 shows that most allies’ defense expenditures for Personnel are 40% to 50% of the defense budget, with many of them, including Albania, exceeding that level. The O&M category(“Goods and Services” in Albania’s system) includes a broad spectrum of activities and products; due to limited data, an in-depth analysis would be very difficult. However, the 20.7% of total defense expenditures that this category reaches(Appendix 1) is below the agreed upon NATO threshold of 30%, despite such expenditures having increased slightly over 2019–2022, reaching about 25% to 26% of the defense budget. Additionally, the experience of the past has shown that budget cuts and non-realizations have affected O&M the most(along with the Equipment); unfortunately, training and exercises, within the O&M, have borne the brunt. Often, hours spent over civil emergency operations in Albania are automatically considered as training hours for the crews of helicopters and patrolling vessels, as well as for the land forces, with a negative effect on their operational capabilities since training should be conducted for a broader spectrum of missions than civil emergencies. In the Albanian budgeting system,“Equipment” and“Infrastructure” are housed in the same category(under the code“231”). Thus, to separate and analyze them independently, we needed to go through each of the 237 defense subprograms. According to Appendix 1, about 17.3% of funds(including foreign grants) are allocated for Equipment for 2019–2025 period(near the 20% NATO threshold) with lowest level of 6.4% in 2019, to have been increased to 12%–13% in 2020–2022. Nevertheless, the capacity of the AAF to absorb such funds remains unclear given some ambitious plans, with an increase of up to 80%(versus the previous year) mentioned in the Combat Forces program. On the other hand, there some weaknesses in understanding the lifecycle cost of a piece of equipment or system(in service for to 20–30 years). In that cycle, Acquisition represents about 15%–20% of the costs, and the rest is systems’ O&M. This has caused numerous challenges, the most serious being the situation of the Cougar helicopters, currently all grounded due to the lack of maintenance funds. In general, the types of equipment acquired/planned to be acquired seem to follow the required operational capabilities, despite some unnecessary priority given to the communication(as well as some auxiliary equipment, like small water/oil tankers). Appendix 1 shows that a relatively large part of the defense budget is allocated for Infrastructure , which reaches about 9.2% for the period 2019–2025(if foreign grants are included, allocation reaches about 20% of the total). According to the abovementioned NATO communique(page 14), most member countries spend about 1% to 3% of their respective defense budgets on Infrastructure. The communique’s figures (with the exception of 2022) are almost at the same level for Albania(1% to 3%) which, as our in-depth analysis shows, is not accurate. Several reasons have caused such high Infrastructure expenditures in the AAF: 1) prevalence of current needs, 10 Defence expenditures of NATO countries, 2014-2022, pg. 13, at https://www.nato.int/nato_static_fl2014/assets/pdf/2022/6/pdf/220627-def-exp-2022-en.pdf. BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 8

without much regard for lasting mission-related capabilities; 2) preference for heavy and expensive builds – a legacy of the past – over light and cheaper ones; 3) cases where newly reconstructed military compounds are transferred to other ministries, while the AAF have started anew reconstructing other garrisons; 4) likely corruption; 5) inclusion of Equipment and Infrastructure in one budget category(hiding data on disproportionate expenditures). All the above shortcomings have caused that some vital functions are missing now in the AAF. Thus, there is no organic air defense(especially against low air attacks). There is only one NBC company(at about 40% strength) reportedly with acceptable anti-chemical capacity, but uncertain bacterial and nuclear protection capabilities. Artillery support is planned with one 81 mm caliber mortar company(6 pieces), which is quite insufficient due to its limited fire volume and range. In addition, there are no(light) armor systems providing protection and fire support for troops in operation. The priority unit, known as“Battalion group”, is reportedly suffering from personnel shortages and a lack of sufficient training for a broad range of missions. In general, the AAF lack scenario-based planning. To do that, the AAF, after producing a list of the most realistic and plausible scenarios threatening the country’s security, should plan the respective capabilities with(as much as possible) the participation of other security institutions. This modern security approach, applied by a number of developed countries in managing their security resources, has confirmed the advantages of capability-based (scenario-based) planning, with the possible participation of all the security institutions. This is because, on one hand, it enables the prediction of realistic and most likely scenarios facing the country’s security, along with the respective capabilities to manage them and, on the other hand, through“comprehensiveness”, these capabilities(or part of them) are built into/by those institutions that are inherently more adept, avoiding thus unnecessary duplications. In such a way, the resulting security system is both cheaper and more effective. This is also the path to be followed by Albania. Conclusions • There is disproportionate spending in the Albanian defense budget planning. In addition, part of the defense budget is allocated towards funding activities and capabilities that are the responsibility of other ministries(MoI, MoH, etc.). Consequently, the planned defense budget, officially declared as 1.62% of GDP, is practically only about 1.4% of GDP. In fact, the budget executed is lower, due to recurring cuts and non-realizations. BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 9

• Defense expenditures planned for Personnel and Equipment are close to optimal, but Infrastructure-related expenditures, at over 9% of the defense budget, are evidently too high, and at the expense of Equipment(in most NATO countries defense expenditures in infrastructure are under 3%). • Expenditures related to“Training and Exercises” remain low and cannot be easily tracked under the large category of“Goods and Services”. • Among other considerations, the above problems are consequences of the fact that the defense management system(PPBES) remains unconsolidated. Consequently,“budgeting” continues to impose its decisions, which lack strategic, long-reaching objectives. On the other hand, the AAF suffer from the lack of experience and absence of the managers’ corps, mastering both operational and financial skills. • The above shortcomings have caused certain supporting units and services, such as air defense, bacteriological and nuclear protection, reconnaissance, are missing in the AAF, while some others, such as field artillery, medical and engineering support, chemical protection, seem to be insufficient. Subsequently, the respective specialties and skills are diminishing as well. • Despite recent measures undertaken by the government to increase military wages and other personnel benefits, it seems that the AAF remains unattractive to qualified newcomers. As such, a number of units, including some priority ones, remain short-staffed. • The AAF are considered the first and(sometimes) only responder in case of civil emergencies, while all expenditures for the Albanian Civil Emergency Agency are being borne by the defense budget, a bill that consists of about 7.5% of the whole defense budget. Recommendations • The Albanian defense resource management system(PPBES) should become fully operational at all levels and should guide“budgeting” in funding priority capabilities and units, allowing the AAF to fulfil their constitutional mission. • A successful PPBES implementation requires, among other things, building and consolidation of the managers corps at all AAF levels. They should master both operational and financial concepts and skills, while high political and military leadership in the AAF should grant them the necessary authority to fulfil their tasks. BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 10

• As soon as possible and through an in-depth analysis, the defense budget should be freed from funding activities, capacities and structures that belong to other ministries. • The defense budget should reach(at least) 2% of GDP. • Planning of operational capabilities should be done based on security scenarios, preferably with participation and contribution of other Albanian security institutions. • The legislature should unceasingly exert its supervisory and controlling role over the MoD and the AAF(via periodical hearings, inspection visits, etc.). Abbreviations AAF ALL GDP MBP MoD MoH MoI NBC O&M Albanian Armed Forces Albanian lek(100 ALL= 0.95 EUR as of 18 October 2023) Gross domestic product Midterm budgeting plan(ing) Ministry of Defense Ministry of Health Ministry of the Interior Nuclear, bacteriological, chemical Operations and maintenance BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 11

Appendices Appendix 1. Fund allocation in budgeting programs of the AAF, 2019–2025(in Million ALL). BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 12

Appendix 2 . AAF Budgeting Programs, 2019–2025(in Million ALL). BUILDING AND MAINTAINING OPERATIONAL MILITARY CAPABILITIES IN ALBANIA IN THE FACE OF CURRENT AND EXPECTED SECURITY CHALLENGES | 13