On 10 June 1999, at the EU's initiative, the Stability Pact for South Eastern Europe was adopted in Cologne. At a summit meeting in Sarajevo on 30 July 1999, the Pact was inaugurated.
The Pact is a political initiative to encourage and strengthen co-operation between the countries of South Eastern Europe as well as to streamline existing efforts to assist South Eastern Europe's political, economic and security integration in Europe. The Pact does not implement the projects that were placed under its auspices during the First regional Funding Conference of March 2000 but is an instrument to co-ordinate and facilitate the implementation of the projects of all its partners. These include the countries of Southeast Europe and neighbouring countries, the European Commission, NATO and OSCE, the International Financial Institutions, the member states of the European Union, the United States, Russia, Japan, Hungary, Canada, Norway and Switzerland.
The Stability Pact's three Working Tables for Democracy and Human Rights, Economic Development and Security have helped to develop projects worth EURO 5.4 bn, approved at two Regional Conferences in 2000 and 2001.
Within the activities of Table III on Security, Transparency-Building plays a special role. The Centre on Transparency-Building in Southeast Europe was founded in 2001 on a joint UK and Bulgarian initiative. It has been tasked by the Multinational Steering Group and its Academic Working Group to produce a Yearbook on Defence Budgeting and a Survey on Transparency-Building Practices in Southeast Europe.

On 10 June 1999, at the EU's initiative, the Stability Pact for South Eastern Europe was adopted in Cologne. In the founding document, more than 40 partner countries and organisations undertook to strengthen the countries of South Eastern Europe "in their efforts to foster peace, democracy, respect for human rights and economic prosperity in order to achieve stability in the whole region". Euro-Atlantic integration was promised to all the countries in the region. At a summit meeting in Sarajevo on 30 July 1999, the Pact was reaffirmed.
The Stability Pact is the first serious attempt by the international community to replace the previous, reactive crisis intervention policy in South Eastern Europe with a comprehensive, long-term conflict prevention strategy. The idea for the Stability Pact arose in late 1998 and thus predates the Kosovo war. But the NATO intervention undoubtedly acted as a catalyst in strengthening international political will for co-ordinated and preventive action in the region.

The Stability Pact is based on key experiences and lessons from worldwide international crisis management. Conflict prevention and peace building can be successful only if they start in parallel in three key sectors: the creation of a secure environment, the promotion of sustainable democratic systems, and the promotion of economic and social well-being. Only if there is progress in all three sectors can a self-sustaining process of peace be achieved

The Stability Pact is a political declaration of commitment and a framework agreement on international co-operation to develop a shared strategy among all partners for stability and growth in South Eastern Europe. The Stability Pact is not a new international organisation nor does it have any independent financial resources and implementing structures.

Organisationally, the Stability Pact relies on the Special Co-ordinator, Bodo Hombach, and his some 30-member team. His most important task is to bring the participants' political strategies in line with one another, to co-ordinate existing and new initiatives in the region and, thereby, to help avoid unnecessary duplication of work. The headquarters of the Special Co-ordinator and his office are in Brussels.

The Special Co-ordinator chairs the most important political instrument of the Stability Pact, the Regional Table. There are three Working Tables which operate under the Regional Table:

• Working Table I: Democratisation and Human Rights;
  
• Working Table II: Economic Reconstruction, Co-operation and Development;
  
• Working Table III: Security Issues (with two Sub-Tables: Security and Defence, and Justice and Home Affairs).

The structure and working methods of the Stability Pact are modelled on the CSCE process. A special feature is that at Regional and Working Tables, representatives of the South Eastern European countries are, for the first time, on an equal footing with those of international organisations and financial institutions in advising on the future of their region and in jointly setting priorities concerning the content of all three working areas.

The European Commission and World Bank were appointed to co-ordinate the economic assistance measures for the region. They jointly chair a High-Level Steering Group in which the finance ministers of the G8 countries, the country holding the EU presidency and the Netherlands, work together with the representatives of international financial institutions and organisations and the Special Co-ordinator.

Through its two Sub-Tables, Working Table III deals with questions of both internal and external security. The aim is to establish transparency and predictability and to promote regional co-operation in those two areas with the focus increasingly directed under the umbrella of Security Sector Reform.
The Sub-Table on Security and Defence deals, primarily, with the following areas:

• In the context of arms control and non-proliferation, Stability Pact partners co-operate on issues such as exchange of military information, notification and observation of military activities, restrictions on the location of heavy weapons, notification of the demobilization of special operations forces, and verification and inspection regimes, inter alia through the Stability Pact initiated RACVIAC centre in Zagreb with eighteen participating countries.
  
• The Regional Mine Action Group is a forum for co-ordination and information sharing in the area of mine action between the mine-affected countries of the region and other participants of the Stability Pact.
  
• Working Table III also pursues the objective of developing a unified regional approach to the excessive and uncontrolled circulation of small arms and light weapons in the region.
  

The Sub-Table of Justice and Home Affairs deals primarily with the following:

• Intensified efforts by the countries of the region undertaken within the framework of the Anti Corruption Initiative (SPAI) and the Stability Pact Fight against Organised Crime Initiative (SPOC). Particular attention is given to the issue of trafficking in human beings through the three-year action plan of the Task Force against Trafficking in Human Beings.
• · In the wider context of internal security sector reform, the importance of police training and regional co-operation of police and border police forces has received wide acknowledgement by Stability Pact partners. Two initial Stability Pact regional police training courses were held in the second half of 2001. Funding for the first two modules in 2002 (management training and the fight against trafficking of drugs) has been secured.
  

The first Regional Funding Conference took place on 29 and 30 March 2000 in Brussels. The Special Co-ordinator presented a "Quick Start Package" to the donor community. The Package consisted of 244 projects, from all three Working Tables, with a value of 1.8 billion Euro. Most of the projects in the Package were proposed by the South Eastern European countries and in most cases involved more than one country. The implementation of the projects was to start within 12 months.

At the financing conference, the donor community undertook to provide approximately 2.4 billion Euro to finance the Quick Start projects. The sum pledged exceeded all expectations. One year later, the implementation of the Quick Start Package (QSP) showed encouraging results. Out of 244 projects of all three Working Tables, 201 (82 %) had effectively started. The QSP has proved to be a very important instrument to generate momentum for the Stability Pact and to mobilise additional funds for the region.

The second Regional Conference was held on 25-26 October 2001 in Bucharest. Key infrastructure sectors - transport, air traffic, energy and water, and the new set of 27 infrastructure projects received donor financing of 2.4 billion Euro. More than 500 million Euro were pledged for refugee matters.

All in all, donor funding for the region has been substantial since the creation of the Stability Pact. The overall bilateral and multilateral assistance to South Eastern Europe (macro financial assistance and budget support, reconstruction and economic development aid, humanitarian assistance) amounted to approximately 6 billion Euro in 1999. It exceeded 6,6 billion Euro both in 2000 and in 2001

One year after the First Regional Funding Conference took place, the implementation of the Quick Start Package (QSP) is showing encouraging results. Out of 244 projects of all three Working Tables, 201 (82 %) have effectively started. The QSP had been presented by the Special Coordinator of the Stability Pact to the Regional Funding Conference held in Brussels on 29-30 March 2000. At this conference donors pledged over EURO 2.4 billion.

The overall disbursement rate is satisfactory. About half of the aid committed for Working Table I has been expended, including refugee return programs with a disbursement rate about 70%. At Working Table III, 55% of the money pledged has by now reached its recipients. In the infrastructure sector, 15 out of 25 projects have started. These represent 75% of the total commitment for this sector. From these, 9 projects are already under construction, such as the road between Durres and Kukes in Northern Albania. As for some disbursement delays, both recipients and donors share responsibility. For instance, delays have been caused by long procedures on the donors side, or the lack of legal conditions in the target countries, e.g., in the field of land expropriation. All in all, the QSP has proved to be a very important instrument to generate momentum for the Stability Pact and to mobilise additional funds for the region.

The QSP increased the momentum for substantial internal reforms aimed at drawing the countries of the region closer to the EU. For instance, considerable progress has been achieved in the fight against corruption, which resulted in a detailed reform package for each of the countries concerned. Similarly, the Investment Compact spelled out reform requirements with a view to remove obstacles to private investment.

Regional cooperation has considerably improved since the Pact was launched. In many sectors QSP projects have brought about the beginning of a genuine political regional dialogue. For instance, trade ministers of Albania, BiH, Bulgaria, Croatia, Romania, the FYR of Macedonia and the FRY have agreed in January 2001 to prepare a Memorandum of Understanding between them that should be signed in June at Ministerial level. This MoU will initiate concrete steps with regard to intra-regional trade liberalization, which will stimulate growth, contribute to foreign investments, and accelerate EU approximation.
Through the QSP, the Stability Pact Partners enabled the principles of the Pact to take root. This has contributed to the promotion of peace and democracy across the region as a whole, for instance in the following way:

• The QSP has helped to promote democratisation. The Szeged Process successfully worked on bringing about democratic change in Serbia. The main target groups were representatives of the then opposition-governed municipalities and the independent media. Partners supported practical assistance measures with roughly EURO 15 million Euro. Further, it has supported efforts to reintegrate refugees and displaced persons through the Refugee Return Initiative with its 18 projects that received EURO 303 million pledges.
  
• The Private Sector Development programme has, in the economic field, achieved visible results. Pledges of EURO 356 million helped to promote cross Border Trade, Investment and SME support. Micro-enterprise Banks are now established in Bosnia Herzegovina, Kosovo, Albania and FRY, and are under preparation in FYR Macedonia and Romania.
  
• In the security sector, projects have helped inter alia in assisting the demobilization and reintegration of combatants into civil life. A joint World Bank/NATO project, which received EURO 32,6 million, provides training opportunities for several thousand former military personnel. The Regional Arms Control Verification and Implementation Assistance Center (RACVIAC) opened in Zagreb in October 2000, assists the countries of the region in the implementation of arms control agreements and confidence building measures.
  

Recent events show that nearly two years after the creation of the Stability Pact, the general objectives of peace, democracy, security and prosperity continue to be of full relevance in SEE. Efforts aimed at conflict prevention and peace building are still required.

The Special Coordinator, in close consultation with the EU and other partners, therefore suggests to streamline Stability Pact activities and to identify priority sectors and strategies, which set concrete, annual goals. Priorities for the near future should include, inter alia, refugee issues and inter-ethnic relations, private investment and regional trade, fighting organised crime and corruption, as well as disaster preparedness and prevention.

Transparency and efficiency of defence budgeting is a fundamental part of the systems of democratic control over the Armed Forces, established in most of the countries in Central and Eastern Europe over the last decade. As an effort to promote regional cooperation in this area, at the meeting of the Stability Pact Working Table III (Security Issues), held on 15-16 February 2000 in close cooperation with the United Kingdom, agreed to take on the leadership of a Task Force to initiate a comparative study of military budgeting in SEE. The Bulgarian Ministry of Defence has proposed its partnership to the states and organizations interested in this area to use the already existing experience and expertise in our defence system and to share those practices within Southeast Europe.

An initial seminar on "Promotion of Transparency and Democratic Decision Making in the Formation of SEE States Military Budgets" was held in Sofia on 6-7 June 2000, in cooperation with the United Kingdom and a broad participation of the South-East European states. This seminar sought to raise awareness among SEE countries of the need for and benefits from transparency of military budgets and to explore the scope of transparency.

On the basis of a "non-paper" adopted during the seminar this initiative was further developed into a project on "Transparency of Defence Budgeting", aimed at providing means for the efficient management of the defence resources, increasing the effectiveness of the civilian control over the armed forces, improving the regional stability and contributing to confidence building among the SEE states.
Under the auspices of Stability Pact Working Table III, the first joint meeting of the Multinational Steering Group (MSG) and the Academic Working Group (AWG) of the project for Transparency of Defence Budgeting was held on 15-16 March 2001 in Vienna. The meeting was organized and hosted by the Permanent missions of the UK and Bulgaria to the OSCE. Delegations participated from Albania, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, Greece, Romania, Turkey, the Federal Republic of Yugoslavia as well as Canada, Denmark, Germany, Hungary, France, Italy, Sweden/EU Presidency, United Kingdom, Switzerland, and the USA.
During the discussion a common understanding on the definition of transparency of military budgeting was agreed upon. The participants discussed and adopted the final text of a Project Paper, describing the aims of the Initiative. A Multinational Steering Group of the Initiative was constituted, including all countries and organizations represented at the meeting. It was agreed that the next meeting of Multinational Steering Group would be held in October 2001. This meeting will assess the progress achieved in the implementation of the Initiative.

At the Vienna meeting Terms of Reference of the Academic Working Group were discussed and adopted by the participants. An appeal was made to participating countries to nominate their representatives to the Academic Working Group. It was agreed that the next meeting of the AWG would be held in Sofia, Bulgaria in May 2001. At the joint meeting it was also agreed to establish a Group of Experts (GOE) of the Initiative that would be located at the Defence Staff College in Sofia, Bulgaria. The GOE will be accountable to the MSG.

As agreed at the meeting in Vienna, on 21-22 May 2001 the centre was officially opened by Bulgarian Deputy Minister of Defence V. Shalamanov. Military attachés in Sofia, foreign consultants, representatives of the media and other guests attended the opening ceremony. After the opening a meeting of the Academic Working Group was held.

The participants in the meeting discussed the final structuring of the Academic Working Group, the issue of accepting new members in AWG, the basic rights and responsibilities of AWG, the structure of the data and analytical conclusions that should be submitted by the participating states, the terms and methods for exchange of data, the support of the AWG for the structuring of the Group of Experts (GOE) and the creation of working conditions for the experts, as well as issues of planning and organisation.

A paper for academic focus and a work programme were adopted. According to the decision, the Group of Experts, in cooperation with the AWG, will provide by 1 October 2001 and in the spring of 2002 two papers:

• A Compendium of South East European Defence Expenditures for the Years 1999 and 2000 and Budgets for the Years 2001-2005;
  
• A Comparative Study of National Practices in Southeast Europe in Programming, Budgeting, and Budget Execution in the context of defence planning, including parliamentary control, legislative processes and administrative processes.

(Paper endorsed by the Multinational Steering Group, 15/16 March 2001, Vienna)

PREAMBLE
Democratic changes in countries in Central and Eastern Europe over the last 12 years have led to fundamental restructuring in their armed forces and have laid the basis for their integration into the Euro-Atlantic structures. Most of the former socialist states are in the process of radical defence reforms, aimed to change the role of the military in the national political system as well as to develop a new type of armed forces.
In the majority of these states systems of democratic control over the Armed Forces have been established, based on clear organizational and functional structures and clear identification of responsibility and accountability. An important step to launch that process was the introduction in those states of similar Planning, Programming and Budgeting Systems that provided a methodology to align policy and plans with the available resources. But more importantly, those new defence management systems provided an opportunity to address issues like: public accountability; visibility of results (actual capabilities); integrity and continuity; interoperability with NATO and other partners.
The nature and pace of transition is characterized by the quality and content of public debate and by the creation of mechanisms for making the executive authority accountable to the public through its elected representatives. In the transition process, transparency of national security decision-making processes is important in order to ensure that the organizing principles of democratic public policy are applied in the case of the national armed forces.
On 10th June 1999 the Stability Pact (SP) for South-Eastern Europe (SEE) was launched. At the Sarajevo meeting (15-16 February 2000) of SP Working Table III /Security Issues/, Bulgaria, in close cooperation with the United Kingdom, took on the leadership of a Task Force to initiate a comparative study of military budgeting. An initial seminar, "Promotion of Transparency and Democratic Decision Making in the Formation of SEE States Military Budgets" was held in Sofia over 6-7 June 2000, in cooperation with the United Kingdom. This seminar sought to raise awareness among SEE countries of the need for and the benefits from transparency of military budgets as well as to explore the scope of such transparency. At this seminar and in the course of discussion a "non-paper" was considered that outlined the proposal for establishing a Task Force on transparency of defence budgeting. The substance of this non-paper was subsequently presented formally to and endorsed by the Sofia meeting of Working Table III (4-5 October 2000).

I. MISSION OF THE PROJECT

The mission of the project "Transparency of Defence Budgeting" is twofold:

• to promote domestic and international transparency of defence budgets and the defence budgeting process, throughout South Eastern Europe and,
  
• to encourage good practice in defence decision making (policy making, planning, programming and budgeting), with particular reference to accountability.
  

The successful achievement of this mission should encourage the efficient management of the defence resources and increase the effectiveness of the civilian control over the armed forces thereby contributing to the improvement of regional stability and confidence building among the South-East European states.

II. GOALS OF THE PROJECT

1. Providing transparency in the process of defence budget formulation.
   
2. To promote and suggest proper mechanisms allowing countries to identify adequate Armed Forces according to need and affordability.
   
3. Preparation of the countries of the region for accession to the European and Euro-Atlantic security structures.
   
4. Promoting best practices in the defence budgeting processes and the management of defence resources.
   
5. Acting as a catalyst for continuous improvement of the civilian control over defence budgeting.
   
6. Supporting the initiatives within the OSCE.

III. TASKS TO BE SOLVED BY THE PROJECT

1. Creating of a methodology for comparative study of defence budgeting.
   
2. Creating of a mechanism for exchange of information for SEE states' defence expenditures.
   
3. Organizing exchange of the best practice in the area of defence planning, programming, and budgeting and harmonizing the initiatives in the planning and budgeting system.
   
4. Identifying common trends in the evolution of requirements towards national defence and defining the defence policy goals.
   
5. Developing and maintaining the defence budgeting' information system.
   
6. Supporting implementation of the fundamental concepts for management of defence resources. Developing, assessing, and introducing methods for system analysis and modelling for supporting the process of decision making on defence resources' allocation.
   
7. Adopting common terminology and standards for defence expenditures' allocation and proposing a common system for budget classification.
   
8. Defining the organizational structures for implementation of the tasks, and a mechanism for decision-making.
   
9. Training experts in the field of budgeting systems within the Stability Pact framework.
   
10. Developing common cost factors for arms and equipment and for the defence infrastructure on the Balkans.
    

IV. STRATEGY

For successful implementation of the project it is necessary:

1. The project be developed within the Stability Pact framework.
   
2. Strong political support be ensured for the implementation of the project in the frame of bilateral cooperation and cooperation within the Stability Pact, NATO, and the OSCE.
   
3. Precise mechanisms providing for smooth functioning of the Project's executive bodies should be developed.
   
4. Financing the activities of the Project should be guaranteed on multilateral and bilateral basis in the Stability Pact framework.
   
5. A mechanism for consensus-based decision making within the framework of the Project should be created.
   
6. A system for reporting and evaluation of results has to be put in place.
   

V. STRUCTURES INVOLVED IN IMPLEMENTATION OF THE PROJECT

1. External structures:
   
• Organization for Security and Cooperation in Europe;
  
• SEE Security Cooperation Steering Group supported by NATO;
  
• Stability Pact, Working Table III "Security Issues".
  
2. Internal structures:
   
• Multinational Steering Group (MSG);
  
• Academic Working Group (AWG);
  
• Group of Experts (GOE).
  
3. Sources of Expertise:
   
• Geneva Centre for the Democratic Control of Armed Forces, Switzerland;


• Institute for Defence Analysis, USA;


• University of National and World Economy, Bulgaria;


• Centre for European Security Studies;


• Ressource Management Centre, Brasov, Romania.

Additionally Bulgaria will contribute to implementation of the project through structures within the MOD and within the Defence Staff College "G. S. Rakovski".

VI. PLAN FOR IMPLEMENTATION OF THE PROJECT

1. Formation of secretariat of MSG, including representatives from the Bulgarian MOD and MFA - 31.01.2001
   
2. Presentation of the Project to representatives of the Geneva Centre for the Democratic Control of Armed Forces.
   
3. Joint meeting of the MSG and AWG in Vienna - 15-16.03.2001.
   
4. Ensuring the involvement of international organizations as an element of the Project - spring 2001.
   
5. Start of the functioning of the GOE in Sofia - May 2001.
   

VII. FINANCING OF THE PROJECT

1. Financing of the international structures:
   
• Multinational Steering Group
  
• Academic Working Group
  
• Group of Experts
  

Financing the international structures directly involved in the implementation of the Project will be done through donor contributions in the framework of the Stability Pact. Start up funding, $ 41 000, will be provided by the UK. For year 2001 Bulgaria will contribute 15 000 BGN/DM for the implementation of the Project. In order to reduce the overall cost to the donors, the basic salary of individuals working within the Group of Experts organization may be paid by the countries lending them.


2. Financing of the structures within the Bulgaria's MOD and the participation of MOD's representatives in the international structures
   Financing the structures within the MOD will be a part of the defence budget. Bulgaria may provide offices for the Group of Experts. Participation of Bulgaria's representatives in the International Steering Group and in the Academic Working group will be paid by the donor.
   

I. MULTINATIONAL STEERING GROUP

1. Includes 20-22 representatives of the countries from the SEE region, representatives of NATO member states and EAPC/PfP Partner countries with special interests in the region, and interested international organizations. The group is chaired by two chairmen, one from Bulgaria, and the other from the UK.
   
2. Supports sharing of information related to the defence budgets, and develops mechanisms for co-operation.
   
3. Encourages achievements in the area of planning, programming, and budgeting.
   
4. Provides for framework for information exchange.
   
5. Approves standards and a system of indicators for defence budgeting information exchange.
   
6. Coordinates the Project's working programs in the framework of available resources.
   
7. Develops a mechanism for reporting the Project's accomplishments.
   
8. Implements surveys and coordinates the Project's activities.
   
9. Assesses the correspondence between the results achieved and mission of the Project.
   
10. On the basis of the results observed, it changes the Project's functioning.
    

II. ACADEMIC WORKING GROUP

1. Includes 12 representatives from the academic community of the region, and arrangements for the University of Groningen in the Netherlands, the Geneva Centre for the Democratic Control of Armed Forces, G. Marshall Centre, and Institute for Defence Analysis (USA) to make a contribution that complements the regional input.
   
2. Supports the Multinational Steering Group, acting as a catalyst for change, defines the best practice in the area of defence budgeting and transparency.
   
3. Develops standards and a system of indicators for exchange of information on defence budgeting, and proposes them for approval to the Multinational Steering Group.
   
4. Participates in seminars and conferences in the Project's framework.
   
5. Recommends to the Multinational Steering Group solutions to problems related to the transparency of defence budgeting.
   

III. GROUP OF EXPERTS

Multinational group that includes 6 persons, 1-2 of them from Bulgaria. Bulgaria will provide several offices, office equipment, Internet access. Location - in the Defence Staff College "G. S. Rakovski". The Group works permanently in Sofia.

©Budget Transparency Initiative, 2002
Center of Excellence-Sofia, BULGARIA
Members of the Research Staff
Maia Jeliazkova
Dimitar Tsotsomanski
Stephan Stephanov

We gratefully acknowledge the assistance of:

Members of the Academic Working Group

Prof. Tilcho Ivanov, University for National and World Economy-Sofia, Bulgaria
Prof. David Greenwood, Centre for European Security Studies-Groningen, the Netherlands
Prof. Philipp Fluri, Geneva Centre for the DCAF, Switzerland
Prof. Tibor Vorosh, Budapest University of Economic Sciences and Public Administration, Hungary
Prof. Jan Gavrila, Regional Center of Defence Resources Management-Brasov, Romania
Major Ojdana Zuzul, Ministry of Defence, Croatia
Capt.(N) Isidoro Fusco, Italian Defence General Staff

Members of the Secretariat of the Multinational Steering Group

Mr. Mervyn Harvey, UK Advisor to the Ministry of Defence of the Republic of Bulgaria
Capt. Ivo Radulov, Ministry of Defence of the Republic of Bulgaria

and LTC Pavlin Roussanov, Ministry of Defence of the Republic of Bulgaria