PLA streamlines arms purchases to stamp out waste and corruption

PUBLISHED : Wednesday, 02 December, 2009, 12:00am
UPDATED : Wednesday, 02 December, 2009, 12:00am

The People's Liberation Army is to reform its procurement system in a bid to stem widespread wastage and corruption.

The change in procurements, which involve a third of the military budget, is also intended to push the fast-growing defence industry in a more market-oriented direction.

The Ministry of National Defence said it would establish a new system for purchasing weapons that would ensure all deals were transparent and provided value for money, a directive posted on the ministry's website said.

It would also be introducing a bidding system for weapons procurement, bringing some market mechanisms into the strictly controlled defence industry.

The directive acknowledged flaws in the old system of procurement, including monopolies, price gouging and arbitrary price changes. The ministry said the reform would lead to standardised management of PLA equipment, strengthened maintenance and less waste.

The directive said the reform had the support of key military industry groups and procurement departments of the land, naval and air forces. No start date was given.

The PLA will spend up to 160 billion yuan (HK$181 billion) on weapons procurement this year, a third of the official defence budget of 480.6 billion yuan. This figure does not include logistical costs.

Xu Guangyu , a retired PLA general and board member of the China Arms Control and Disarmament Association, said the reform would save the PLA money and root out corruption in weapons deals.

'Weapons procurement is a major issue facing the PLA's development because it takes up one third of the military budget,' he said. 'It is easy to foster corruption and illegal operations as every deal involves a great amount of money.

'Under the new system, all weapons deals should be checked by a strict accounting procedure,' Xu said. 'The comprehensive checking system will reduce collusion between weapons producers and officials.'

Before 2001, each unit was allowed to purchase its own equipment. Buyers from units and regional military command procurement departments were appointed to negotiate with manufacturers.

'The old system allowed different army units to pay different prices, which meant we could not be sure whether anyone received kickbacks during the deals,' Xu said.

In 2001, the Central Military Commission announced procurement reforms that meant working units had to provide an equipment list to regional procurement centres. A central procurement centre ordered all the equipment, using an official internet network to list prices, according to Xinhua. The reform was estimated to have saved 5.3 billion yuan over its first six years.

Professor Ni Lexiong , a PLA specialist at East China University of Political Science and Law, said the latest reform would help standardise procurement.

'A systematic equipment procurement process is the basic foundation of building a modern army, according to the experience of the US and other Western countries,' Ni said. 'The reform will definitely help the PLA's long-term development because it will not only save money, but also clean up the system.'

The procurement and logistics functions of the PLA have become a hotbed of corruption. President Hu Jintao vowed to stamp it out when he took over as chairman of the CMC in 2004. He ordered an audit of more than 4,000 military officials, including 100 senior officers.

Deputy navy commander Wang Shouyue received a suspended death sentence in April for embezzling 160 million yuan.

In early 2007, Hu issued a set of 11 new rules for the logistics department, ordering it buy non-essential materials on the open market and allow outside companies to bid for infrastructure projects.

Anthony Wong Dong, president of the International Military Association, an independent group of observers based in Macau, said the reform would help the development of China's military industries.

'Thousands of arms factories have been shut down since the advent of the market economy,' Wong said.

'Existing producers have to deal with more challenges today, including soaring labour and material costs as a result of the PLA's demand for sophisticated products requiring more technologies.'

While the reform was welcomed, corruption remains deeply rooted in the PLA, helped by a lack of transparency, checks and balances.