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Photo of Secretary of Defence, Graham Fortune.

Photo of the Secretary of Defence, Graham Fortune.

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Annual Report for the year ended 30 June 2003

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Part 1: Overview

Secretary of Defence's overview

Introduction

The roles of the Ministry of Defence, which are founded on section 24 of the Defence Act 1990, are to:

The Ministry's Statement of Intent reflects these roles. The high-level outcome is: a secure New Zealand that contributes to international security.

This high-level outcome, which is shared with other key government agencies, is based on a simple aphorism: security underpins all the Government's social and economic goals. New Zealand's present and future prosperity is predicated on a peaceful and stable international and regional environment. Without international and regional peace and stability, New Zealand cannot derive maximum benefit from relations with other countries.

The Ministry's performance in progressing the high-level outcome is measured against an intermediate outcome: Ministry of Defence advice and action are credible and respected, and the Government's defence policy objectives are achieved.

The Ministry contributes to this outcome in a number of ways. In concert with the New Zealand Defence Force and other key government agencies, the Ministry actively contributes to and promotes New Zealand's security and defence interests. We participate in global and regional efforts to reduce security risks and confront challenges to peace and stability.

Participating in this process is not enough. The Ministry's key objective is to advance the specific outcomes sought by the Government, currently expressed in the defence policy objectives.

The Government's defence policy objectives are set out in The Government's Defence Policy Framework (June 2000) and the Government Defence Statement - A Modern, Sustainable Defence Force Matched to New Zealand's Needs (8 May 2001). The objectives also formed the basis for the 2002 Defence Long-term Development Plan (LTDP) that was updated in June 2003. This is a planning tool to enable decisions on defence capability acquisitions to be taken over the next ten years.

The Ministry is an integral part of New Zealand's national security architecture. Defence policy has a solid empirical basis. As defence policy-makers we seek to comprehend the risks and challenges in our strategic environment and how they affect New Zealand's defence and security interests. The unpredictable world in which New Zealand pursues its interests complicates this responsibility.

While New Zealand may not face a direct military threat from another country in the foreseeable future, our interests continue to face a wide range of security challenges. Not all of these challenges are of a military nature. The terrorist attacks on 11 September 2001, the Bali bombings on 12 October 2002, and the outbreak of Severe Acute Respiratory Syndrome (SARS) earlier this year confirm this constant judgment. Such unexpected events serve to remind us that geographical distance does not by itself offer absolute protection; does not absolve us from maintaining defence forces that are fully trained for all contingencies, including combat; and does require us to be actively engaged in shaping and influencing attitudes and policies in our region and elsewhere.

The deployment of competent New Zealand Defence Force personnel to various trouble spots around the world is the most tangible sign of New Zealand's commitment to international peace and security. In the past year, New Zealand Defence Force elements have been deployed to Afghanistan, the Arabian Sea, and the Gulf of Oman in the fight against terrorism. The proposed New Zealand Defence Force deployment to Iraq will assist post-war reconstruction and rehabilitation efforts. More than 100 New Zealand Defence Force personnel will take part in the Regional Assistance Mission in Solomon Islands. The longer-term policy challenge for the Ministry is to maintain our focus on existing and emerging security threats including terrorism, transnational crime, illegal movement of people and goods, and civil instability; identifying New Zealand interests; and formulating appropriate and realistic response options.

The Ministry's ability to respond effectively to meet these new challenges depends on two principal factors: our proficiency at working more closely with other New Zealand agencies and with governments in the region; and the New Zealand Defence Force's capacity to undertake a variety of operations. The Ministry attaches great importance to building greater inter-agency coordination in New Zealand on defence and wider security issues; to supporting a whole-of-government approach to security issues; and to ensuring effective engagement with our neighbours in the Asia-Pacific region. A key aim is to enhance the capabilities of the New Zealand Defence Force across all three services to undertake a range of combat and peace support operations, through the implementation of the Long-term Development Plan. This will improve the ability of the New Zealand Defence Force both to defend New Zealand's interests and to contribute effectively to international and regional peace and security.

Policy and Planning

The Secretary of Defence is the principal civilian advisor on defence matters to the Minister of Defence and to the Government. The Chief of Defence Force, who commands the New Zealand Defence Force, is the principal military advisor. The two advisory roles are complementary. There is considerable overlap on defence, security and New Zealand Defence Force capability issues and this requires close cooperation and consultation between the Ministry and the New Zealand Defence Force. This coordination takes place on a regular basis through the Office of Chief Executives, which brings the Secretary of Defence and the Chief of Defence Force together to discuss policy issues of mutual interest, and on the Executive Governance Boards, which oversee major capital acquisition projects.

Another important point of consultation and on-going cooperation between the two defence organisations is the Defence Policy and Planning Unit. The Unit is a seamless Ministry and New Zealand Defence Force policy unit. Its principal role is to provide a single stream of information and policy advice to the Chief of Defence Force and to the Secretary of Defence, and through them to the Minister of Defence and the Government. The Defence Policy and Planning Unit consists of the International Defence Relations Branch and the Strategic Policy Branch and is staffed by personnel from both organisations.

Implementing the Government's defence policy

In the past year, a major focus of the Defence Policy and Planning Unit's work programme, particularly for the Strategic Policy Branch, has been the implementation of the Government Defence Statement. The Statement sets out the Government's priorities for rebuilding the New Zealand Defence Force as being:

The implementation of the Statement has involved a number of reviews - both policy and capability - and updating the Long-term Development Plan in June 2003.

Capability development

In the last twelve months, the Defence Policy and Planning Unit has concentrated on a range of capability development work including:

Fixed Wing Transport Review

In November 2002 the Ministry and the New Zealand Defence Force completed the Fixed Wing Transport Review. Prepared in consultation with relevant government agencies, this review considered the policy and capability requirements for the Royal New Zealand Air Force's fixed wing transport fleet (i.e. the C-130 Hercules aircraft and the Boeing 727 transport aircraft). Following the completion of the review, in December 2002 the Government agreed to the life extension of the C-130 Hercules aircraft and the acquisition of two second-hand Boeing 757-200 aircraft to replace the Boeing 727 aircraft.

P-3 Orion Upgrade

The Ministry and the New Zealand Defence Force, in consultation with other government agencies, completed in November 2002 a significant investigation into the P-3 Orion aerial patrol capabilities to meet both civilian and military needs. As a result, the Government agreed in December 2002 that the P-3 Orion mission systems and communication and navigation systems should be upgraded.

Special Operations Capability Review

A review has developed the policy requirements for Special Operations against the Government's defence and security policies and, from this analysis, derived the required military capabilities to undertake such operations. The Government is considering the review's key findings.

Hydrography Review

A review of the hydrographic survey capability was one of the initiatives announced in the Government Defence Statement. An independent consultant, Mr Ross Tanner, was commissioned to undertake the review and government and non-government agencies were consulted as part of the review process. The purpose of the review was to provide advice on the need for the Government to retain ownership of such a capability and, if so, whether Navy was the most appropriate provider. The review examined the present funding-provider arrangement between the New Zealand Defence Force and Land Information New Zealand. The Government is considering the review's recommendations.

The Capability Management Framework

A key development in the past year has been the formulation of a Capability Management Framework, a joint project of the Ministry and the New Zealand Defence Force. The Capability Management Framework is a process of management and governance for defence capability work that will replace the inadequate existing Defence Planning System. When completed, the Framework will incorporate management systems for both operational and financial risks, to ensure that long-term investments in defence capabilities provide the best value for money and are matched to New Zealand's defence needs. In adopting the Framework, the Ministry and the New Zealand Defence Force are demonstrating a serious commitment to a transparent and accountable process for defence acquisitions. The Capability Management Framework will help ensure that the capabilities acquired by the New Zealand Defence Force are consistent with the Government's defence policy as well as being affordable and sustainable.

Long-term Development Plan update June 2003

First released on 11 June 2002, the Long-term Development Plan is a planning tool to enable decisions on defence acquisitions to be assessed, prioritised and measured in the context of current defence policy and affordability. The Plan links defence policy objectives with capability requirements in the Government Defence Statement and contains a comprehensive list of major projects (projects over $7 million), with preliminary costings, timings, and priorities.

In June 2003 the Long-term Development Plan was reviewed and updated to reflect progress made over the last twelve months implementing the defence acquisitions programme. The Government has endorsed action on a number of projects including:

The projects to reconstruct Whenuapai's runway surface and hard standing area have been removed from the Long-term Development Plan in accordance with the Government's decision to consolidate Royal New Zealand Air Force operations at Ohakea. The Ohakea runway project has now been completed. While no projects have been reprioritised, there have been some changes to the range of project costs in the Long-term Development Plan update.

The Government has directed that the Long-term Development Plan be managed within three financial parameters, which are:

The Government has also decided that one Long-term Development Plan funding parameter agreed in 2002, that "current operating baselines set to 2005/06 with adjustments for unfunded depreciation thereafter", should no longer apply. Consequently, this funding parameter has been removed in the Long-term Development Plan update.

The funding in the Long-term Development Plan incorporates Government commitments including new capital injections. It is over and above the money already spent (nearly $1 billion) on re-equipping the New Zealand Defence Force through the acquisition of the light armoured vehicles, Seasprite helicopters, and new Army radios.

The Long-term Development Plan does not give Defence authority to proceed with any of the projects set out in the Plan. Every project will be brought forward for approval and will be judged in the context of the Government's defence policy, the priority of that project in terms of the Long-term Development Plan, and the affordability of that project within the overall context of the Long-term Development Plan.

Developing appropriate business plans and implementation of the Long-term Development Plan will continue to comprise an important part of the Defence Policy and Planning Unit's work in the coming year. This will include work on projects such as the New Zealand Defence Force helicopter capability and Special Operations capability.

The Long-term Development Plan will be reviewed and updated on a regular basis. This will particularly be the case with the availability of new and more accurate information and whenever there is a significant change in the Government's financial circumstances, a change in policy, or a revaluation of the New Zealand Defence Force's assets.

Policy development

Pacific Review

In response to a wider review of New Zealand's relations with the Pacific region, the Defence Policy and Planning Unit has updated a whole-of-government review of Defence engagement in the Pacific. The review, entitled New Zealand and the Pacific Islands: Security Through Partnership, examined the four main aspects of New Zealand's defence and security engagement with the Pacific: strategic policy; New Zealand Defence Force capabilities; New Zealand's engagement with regional disciplined forces; and maritime patrol. The review found that New Zealand's current engagement with the Pacific on defence and security issues is aligned with Government defence policy and the strategic elements of the Ministry of Foreign Affairs and Trade's Pacific Policy Review 2001. The review recommends that New Zealand should enhance its defence and security engagement in partnership with Pacific Island governments in a number of areas, particularly in terms of interdepartmental coordination and the establishment of a targeted regional law and order enforcement programme.

Arms control and disarmament, Antarctica and oceans policy

The Unit has also been involved in policy development on a range of issues with other agencies. Arms control and disarmament continues to be of interest to Defence and the Defence Policy and Planning Unit worked with Ministry of Foreign Affairs and Trade on the issues of small arms and the Certain Conventional Weapons Convention. The Defence Policy and Planning Unit participated in Officials' Antarctic Committee meetings, hosted by Ministry of Foreign Affairs and Trade, and contributed to the development of the new strategic interests statement and fishing policy for the Southern Ocean and Ross Sea. The Ministry has also been involved in the inter-agency Oceans Policy process.

International Defence Relations

A stable and peaceful Asia-Pacific region is central to New Zealand's interests. Since 11 September 2001 and the Bali bombings in October 2002, terrorism has emerged as a major security problem in the region. The Bali bombings sharpened awareness both in New Zealand and in the Pacific region that our interests and citizens may not be immune from such attacks. Terrorist networks thrive in communities under stress from civil instability and divided by religious, ethnic and political differences. In cooperation with our security partners, the difficult challenge for New Zealand defence policy and the New Zealand Defence Force is to help prevent those conditions that allow terrorist networks to prosper.

In our Pacific neighbourhood, a recurring pattern of social, economic and political disorder has continued, particularly in Melanesia. The political and security crises in Fiji and Solomon Islands in 2000 obliged countries in the region to re-evaluate existing policy settings and engagement strategies. The breakdown of law and order in Solomon Islands over the past five years undermined its viability as a functioning nation-state. Development prospects in some Pacific Island countries, particularly Papua New Guinea and Vanuatu, continue to be hindered by ethnic tensions, widening socio-economic disparities, pervasive corruption, problems of governance, susceptibility to transnational crime, tribal differences based on land grievances and urban drift, and under performing economies.

New Zealand is a strong supporter of regional efforts to enhance stability and security in Southeast Asia. The Association of Southeast Asian Nations (ASEAN) Regional Forum, with its broad membership, provides opportunities for New Zealand to work with other Asia-Pacific countries in promoting regional security. New Zealand is committed to the Five Power Defence Arrangements. This provides a major point of defence contact with Singapore and Malaysia, and underlines New Zealand's contribution to confidence building and diplomacy in the region. The United Nations Mission of Support in East Timor (now known as Timor-Leste), and its predecessor missions, to which New Zealand made a meaningful and long-standing troop contribution, is one of the most successful operations of its type.

New Zealand is committed to playing an active role in the maintenance of international peace and stability. The deployment of New Zealand Defence Force personnel in support of multilateral peacekeeping and peace support missions reinforces New Zealand's wider commitment to collective security and our credentials as a good international citizen. Participation in such missions complements and strengthens New Zealand's profile in areas of considerable international tension. It also strengthens our voice in calling for widespread participation in missions of importance to us in the Asia-Pacific region. Our contributions in support of the fight against terrorism demonstrate New Zealand's preparedness to uphold the principles of international law and collective responsibility.

For a defence force of our size, New Zealand has maintained a high level of commitment to the campaign against terrorism, through the deployment of ground, naval and air assets in Afghanistan and the Gulf of Oman. The deployment of a P-3 Orion maritime surveillance aircraft to the Gulf of Oman has been a significant deployment over a sustained period of time. Following the direct employment of combat assets in 2002, we are currently preparing for further contributions to Afghanistan, including leading a Provincial Reconstruction Team and training the Afghan National Army.

New Zealand has been closely monitoring developments in the Middle East. New Zealand has significant interests in the stability of this region. We are heavily dependent on the Middle East for oil supplies and the region contains some valuable markets for New Zealand producers. New Zealand provides considerable support to peace and security in the region contributing more than thirty New Zealand Defence Force personnel to United Nations peace support missions in Egypt, Israel, Jordan and Syria. We will be involved in the post-conflict rebuilding of Iraq. New Zealand has also welcomed renewed efforts to resolve the Israeli-Palestinian conflict with the release of the United States, Europe, United Nations and Russian "road map" to peace by 2005. It remains to be seen, however, whether or not the roadblocks to a final Israeli-Palestinian settlement can be overcome. The May terrorist attacks on western compounds in Saudi Arabia are a salient reminder that the Middle East will remain a fractured region for some time to come.

Closer defence relations with Australia

Australia is New Zealand's closest defence partner. This partnership is based on mutual interests and a long association of defence cooperation dating back to the Boer War and to the Gallipoli landings. A close defence relationship with Australia in support of common interests for a secure and peaceful region is a key policy objective in The Government's Defence Policy Framework. Both countries share a strong commitment to the security and stability of the Asia-Pacific region as reflected in our combined efforts in Bougainville, and East Timor.

Regular meetings take place at several levels, the most important being the annual meeting of Defence Ministers and the concurrent meeting of Secretaries of Defence and Chiefs of Defence Force. At this year's meeting in Canberra, coinciding with the 20th Anniversary of Closer Economic Relations, Defence Ministers adopted a revised Closer Defence Relations Statement. This update involved the simplification and reduction of the eleven Closer Defence Relations Outcomes to five. The revised statement recalls the historic, longstanding and close links between our people and Defence Forces, and points to the future by:

Ministers also noted good progress in other areas of collaboration including: training opportunities and exchanges; enhancement of command and control of joint and combined operations between the Australian and New Zealand Defence Forces; complementary patrol capabilities; intelligence, surveillance and reconnaissance in the Pacific; complementarity of Army equipment; learning from each other on capability issues such as Australia's P-3 Orion systems upgrade and New Zealand's C-130 Hercules life of type study; and sharing information on rotary wing requirements.

Pacific

New Zealand has very close links with the Pacific, especially Polynesia. The Pacific region is a part of our heritage. The combination of history, geographic proximity, community links, commercial interests, and humanitarian concern means that the region will remain a central part of our security and defence policy. New Zealand shares many security interests with the Pacific Islands. They comprise a wide range of responsibilities and, more recently, the need to address an emergent range of risks such as illegal movement of people and goods, international terrorism and other transnational security threats.

One of New Zealand's primary mechanisms for defence engagement with the Pacific is the Mutual Assistance Programme. The main objective of the Mutual Assistance Programme is to assist Pacific disciplined forces with law and order issues and emerging security challenges - "security through partnership". The New Zealand Defence Force has Mutual Assistance Programme activities with Papua New Guinea, Vanuatu, Solomon Islands, Tonga, Samoa, and Cook Islands. Some of the major developments over the last twelve months in terms of New Zealand's defence relations with the Pacific include the following:

Papua New Guinea

New Zealand's defence assistance to Papua New Guinea has been limited while the Papua New Guinea Defence Force works through issues relating to retrenchment and reform processes and funding. This aside, there has been a reinvigoration of the bilateral defence relationship. New Zealand Defence Force Mutual Assistance Programme talks with the Papua New Guinea Defence Force were held in Port Moresby in April 2003, the first such talks for more than three years. A New Zealand Defence Force officer participated in a peacekeeping seminar hosted by the Papua New Guinea Defence Force in Port Moresby in March 2003. This might be an area in which the New Zealand Defence Force could provide future assistance. A New Zealand Defence Force officer, who had been seconded to the Papua New Guinea Defence Force for the last four years to assist them in the area of commercialism, completed his posting. The New Zealand Defence Force is looking at other ways to support the Papua New Guinea Defence Force in this area.

The New Zealand Defence Force's direct participation in the efforts to bring peace to Bougainville ended officially with the withdrawal of the Peace Monitoring Group on 30 June 2003. New Zealand's involvement in the peace process dates back to peace talks on HMNZS Endeavour in 1990. The establishment of the Bougainville Transition Team, a civilian team made up of personnel from the Peace Monitoring Group contributing countries, is intended to assist the people of Bougainville so they can assume greater control of the peace process and the transition to autonomous government.

Solomon Islands

A continued decline in respect for the rule of law in Solomon Islands and the inability of the Royal Solomon Islands Police to reform itself into an effective and trusted force have been a source of growing concern over the last twelve months. New Zealand and Australia have consulted closely about responses and the New Zealand Defence Force will deploy 105 personnel, including a detachment of four Iroquois helicopters, to Solomon Islands as part of the Regional Assistance Mission. Army engineers successfully completed Exercise Tropic Twilight in Western Province, which involved the conduct of civil aid tasks in support of NZAID objectives. New Zealand Defence Force personnel also participated in Operation Tardis, an NZAID-Mutual Assistance Programme jointly funded mission involving the construction of community police posts in Honiara.

Fiji

Although the sanctions imposed by New Zealand against Fiji following the events of May 2000 have been lifted, bilateral defence cooperation has not resumed. The New Zealand Defence Force continued to provide a limited amount of funding and training support for Republic of Fiji Military Forces and ni-Vanuatu personnel who were deployed to Bougainville as part of the Peace Monitoring Group. A Republic of Fiji Military Forces company also served with our battalion in East Timor.

Southeast Asia

The campaign against terrorism in Southeast Asian countries assumed new urgency in the aftermath of the Bali bombings. Indonesia, Malaysia, Singapore and the Philippines have taken a number of steps to reduce the scope and capability of militant groups willing to undertake large-scale terrorist attacks on targets associated with the West. It would be a mistake to assume, however, that our Southeast Asian neighbours have the capacity or the resources to eliminate totally such terrorist networks. Regional cooperation on counter-terrorism is, therefore, crucial in the fight against regional militant groups. The region's economic well being depends on combating this threat and dealing with other risks to development arising from such issues as Severe Acute Respiratory Syndrome (SARS), ethnic and religious intolerance, corruption, and transnational crime.

With this in mind, New Zealand maintains important bilateral and multilateral defence and security relationships in Southeast Asia.

Five Power Defence Arrangements

The Five Power Defence Arrangements continue to make an important contribution to regional security by enhancing defence cooperation among its members: Singapore, Malaysia, Australia, New Zealand and the United Kingdom. New Zealand is involved in Five Power Defence Arrangements activities, especially through the New Zealand Defence Force's regular participation in Five Power Defence Arrangements exercises. In June, the Minister of Defence, Hon Mark Burton, attended the Formal Ministers' Meeting in Malaysia. New Zealand supported organisational changes to the Five Power Defence Arrangements such as the establishment of the joint headquarters, mechanisms for policy development, and arrangements for more effective integration of activities. We also support the continued evolution of the Five Power Defence Arrangements including the June 2003 agreement between the Five Power Defence Arrangements Defence Ministers that consideration should be given to future Five Power Defence Arrangements activities incorporating non-conventional threats such as terrorism and piracy.

ASEAN Regional Forum

New Zealand is committed to the Association of Southeast Asian Nations (ASEAN) Regional Forum process. The ASEAN Regional Forum is the only pan-regional forum devoted to discussing security issues. Contrary to some predictions, the ASEAN Regional Forum has developed into a valuable forum and it is looking to enhance its role in regional security dialogue. New Zealand supports this initiative and the role of the ASEAN Regional Forum in regional counter-terrorism efforts. New Zealand led the development of the electronic register for ASEAN Regional Forum confidence building measures, which is now operational. New Zealand also supported efforts to enhance defence participation in the ASEAN Regional Forum process, which is now gathering momentum. With Laos, New Zealand co-hosted the two most recent Inter-Sessional Group meetings on confidence building measures in Wellington in November 2002 and Vientiane in March 2003. New Zealand defence officials participated in these meetings as well as the Senior Officials' Meeting in Cambodia in April 2003 and the ASEAN Regional Forum Ministerial Meeting held in Cambodia in June 2003.

Singapore

New Zealand has an active and close defence partnership with Singapore. The Minister of Defence, Hon Mark Burton, met his Singaporean counterpart, Dr Tan, in June 2003 at the 2nd International Institute of International Affairs Asia Security Conference in Singapore and then at the Five Power Defence Arrangements Formal Defence Ministers' Meeting in Penang, Malaysia. He also met Singapore's incoming Minister for Defence, Rear Admiral Teo. Senior meetings reinforce the extensive range of defence cooperation both bilaterally, through regular exercises, training, and exchanges, and multilaterally, through groups such as the Five Power Defence Arrangements and ASEAN Regional Forum.

Malaysia

New Zealand values its close bilateral defence relationship with Malaysia. As with Singapore, we welcome opportunities to cooperate bilaterally through meetings, exercises, and exchanges, and in multilateral cooperation through the Five Power Defence Arrangements and ASEAN Regional Forum. The Minister of Defence, Hon Mark Burton, met his Malaysian counterpart, Minister Najib, in June 2003 at the 2nd International Institute of International Affairs Asia Security Conference in Singapore, and then at the Five Power Defence Arrangements Formal Defence Ministers' meeting in Penang.

Thailand

New Zealand has good defence relations with Thailand. In East Timor both countries worked closely together. Thailand assumed responsibility for our area of operations in East Timor when the New Zealand contingent withdrew in November 2002. In addition to peacekeeping, we have an active bilateral training programme facilitated by the New Zealand Defence Force's Mutual Assistance Programme. The Minister of Defence, Hon Mark Burton, made his first bilateral visit to Thailand in June this year, where he received a very warm welcome from his Thai counterpart, General Thammarat. As a result of this visit, consideration is being given to closer cooperation in areas such as preparation for participation in, and lessons learned from, peace support operations.

East Timor

Despite the withdrawal of the New Zealand battalion group and Iroquois helicopters in November 2002, New Zealand continues to make an important military contribution to the newly independent nation of East Timor. At present, the New Zealand Defence Force contributes approximately 26 personnel to East Timor. Most of these personnel are involved in providing training and advisory support to the nascent East Timor Defence Force. This assistance will be the focus of any ongoing military commitment New Zealand makes to East Timor. A small number of staff officers and military observers are also attached to the peacekeeping force. This contingent is scheduled to be withdrawn by June 2004.

Other Southeast Asian Nations

New Zealand maintains limited, but positive defence relations with Brunei and the Philippines. The basis of this defence cooperation is the New Zealand Defence Force's Mutual Assistance Programme. New Zealand remains committed to the demining process in Cambodia, where New Zealand Defence Force Technical Advisors are deployed. The New Zealand Defence Force's commitment to the demining programme in Laos ended in June 2003. New Zealand's most recent defence relationship in the region is with Vietnam. The New Zealand Defence Attaché based in Bangkok was cross-accredited to Hanoi in 2001. This cross-accreditation has enabled New Zealand to establish good contacts with the Vietnamese defence authorities.

North Asia

The key development in the strategic environment in North Asia over the last twelve months has been heightened tensions on the Korean Peninsula. The situation on the Peninsula has brought together many aspects of the complex North Asia security environment. These include North Korea's claim in October 2002 that it has reactivated its nuclear programme, the United States military presence in Asia, an evolving Sino-American relationship, and Japan's increasing regional security engagement. New Zealand has a role in supporting diplomatic efforts towards resolution of current security problems on the Peninsula, and through supporting United Nations Command activities.

While China opposed the United States-led invasion of Iraq, this issue has not upset the evident warming of Sino-American relations since 11 September 2001. China has supported the United States in its anti-terrorist campaign, sharing intelligence information on potential militant groups and giving tacit acquiescence to the basing of United States military forces in Central Asian countries close to Chinese borders. Symbolising the positive shift in Sino-American relations has been the growing personal linkages at the highest political level. In October 2002, then President Jiang Zemin visited President George W. Bush, the third such summit inside twelve months.

On the economic side, the Severe Acute Respiratory Syndrome (SARS) outbreak spiked North Asia's recovery from the economic crisis of 1997. A number of countries were directly affected, while the economic consequences spread rapidly through the region. Combined with the effects of 11 September 2001 and the conflict in Iraq, SARS affected tourist numbers and delayed foreign direct investment in the region. There are now signs of recovery in most countries in the region, particularly in China.

North Asia will continue to be an important region of security and defence engagement for New Zealand. North Asia is a primary destination for New Zealand products and is worth over $7.6 billion for New Zealand exporters (Source:Statistics New Zealand). Japan, China, the Republic of Korea, and Taiwan are all ranked in New Zealand's top 10 bilateral trading partners. North Asia is, therefore, a region where strategic realities, uncertainties and market opportunities combine to compel a strategy of greater engagement.

China

Relations between New Zealand and China have never been closer. This is reflected in the degree of trust and familiarity that is now developing between the defence forces of New Zealand and China. Last year the frigate HMNZS Te Kaha visited Shanghai. The Chief of Defence Force plans to visit China later this year. General Guo Boxiong, Vice Chairman of the Central Military Commission, and Vice President of the Academy of Military Science, Lieutenant General Xu Genchu, plan to make separate visits to New Zealand shortly. Two People's Liberation Army officers are currently studying at different military educational institutions in New Zealand. New Zealand Defence Force officers continue to gain great benefit from attendance at the excellent international security seminars hosted by the People's Liberation Army National Defence University. The New Zealand Defence Force Command and Staff College senior course visited China last year. In a new development, in July 2002 the Ministry hosted a council member of the Red Cross Society of China and two People's Liberation Army officers to exchange information on the dissemination of the Law of Armed Conflict information. New Zealand also hopes to cooperate more in other areas such as logistics management, peacekeeping operations techniques and demining.

Republic of Korea

New Zealand and the Republic of Korea share a mutual commitment to regional security. Our armed forces gain professional benefit from deepening defence and security links. This interaction is important and complements the growth in other areas of a bilateral relationship that is of growing importance to New Zealand. The frigate HMNZS Te Kaha completed a very successful visit to Chinhae last October. In November 2002 the Commander of the Republic of Korea's Special Warfare Command, Lt Gen Kim Yun Suk, visited New Zealand.

New Zealand made a second contribution of an eleven strong contingent to the United Nations Command Honour Guard in Seoul for six months in March this year. This reaffirmed the value that New Zealand places on its broader relationship with the Republic of Korea. It also underlines our support for the role of the United Nations as expressed in the armistice agreement, while also demonstrating New Zealand's ongoing commitment to peace and stability on the Korean Peninsula and in the wider Asian region.

Given the importance of New Zealand's overall relationship with the Republic of Korea, the Prime Minister, Rt Hon Helen Clark, accompanied by the Chief of Navy, visited Seoul in July 2003 to attend the commemorations on the 50th Anniversary of the Signing of Korean War Armistice. Following the very successful political-military talks held in Seoul in November 2002, the Ministry plans to host the fifth round of consultations in Wellington later this year. Defence academic links are also growing. In a new development, the New Zealand Defence Force is participating in the Korea National Defence University 'Visiting Professor Programme' this year. The New Zealand Defence Force Staff College senior course will visit Korea in September.

Japan

Japan and New Zealand continue to develop closer defence relations. Both countries share a deep commitment to regional stability and security. This was highlighted by Japan's provision of refuelling assistance to the Royal New Zealand Navy frigates operating in support of maritime interdiction operations in the Arabian Sea and the Gulf of Oman.

Personal linkages between the two defence communities have grown stronger. The Secretary of Defence made his first official visit to Japan in May 2003. The Minister of Defence, Hon Mark Burton, will make his second visit to Japan in August. A second round of bilateral security talks between New Zealand and Japan were held in Tokyo last December. Former Minister of State for Defence and Director General of the Defence Agency, Mr Tsutomu Kawara, met the Minister, Secretary of Defence and the Chief of Defence Force in Wellington in April 2003.

The Chief of Navy visited Tokyo for the 8th Western Pacific Naval Symposium and the Japan Maritime Self Defence Forces 50th Anniversary International Fleet Review in October 2002. The frigate HMNZS Te Kaha had a very successful tour of Japan (5-21 October 2002) visiting Fukuoka, Tokyo and Okinawa. The Royal New Zealand Navy appreciated the opportunity to provide reciprocal hospitality in June 2003 for three training ships of the Japan Training Squadron.

The United Kingdom and North America

United Kingdom

The defence relationship with the United Kingdom is close and long-standing. Cooperation with the British Armed Forces extends across a wide range of activities, including joint and multinational exercises, individual and unit exchanges, specialist training, and defence agreements. Our contributions with the British to peace support operations in Bosnia, Sierra Leone and Afghanistan and also our commitment later this year of a light engineering group to the reconstruction effort in Iraq have further advanced the defence relationship. The Minister of Defence, Rt Hon Geoffrey Hoon, visited New Zealand in June 2003.

United States

Having established common cause with the United States on counter-terrorism, a key component of the bilateral defence dialogue is related to counter-terrorism. New Zealand is one of a handful of countries committed to stabilisation efforts in Afghanistan, a fact that is recognised and appreciated by the United States as is our continuing role in Operation Enduring Freedom. The United States has also welcomed New Zealand's offer to assist the Iraqi people with post-war reconstruction and rehabilitation efforts, and has recognised our contributions in the Pacific region.

Canada

New Zealand has a close defence relationship with Canada. It centres on cooperation in peacekeeping, participation in multilateral exercises, and an annual three-month exchange of around 20 personnel from each country. The defence relationship has been further strengthened by our contributions to maritime interdiction operations in the Gulf of Oman as part of the Canadian-led Coalition Task Group.

New Zealand is purchasing 105 light armoured vehicles from General Dynamics Land Systems in Canada to replace the Army's obsolete M113 Armoured Personnel Carriers. The first tranche of light armoured vehicles will arrive in New Zealand in August. The light armoured vehicles has a high degree of commonality with the Canadian Army vehicle, and the purchase has brought increased contacts and interoperability between the two armed forces, adding a further dimension to the overall defence relationship.

Afghanistan and Iraq

Afghanistan

As a direct consequence of the terrorist attacks of 11 September 2001, New Zealand has been a strong supporter of international efforts to help Afghanistan eliminate terrorist groups through the deployment of our Special Air Services, contributions to the International Security Assistance Force, and the deployment of a C-130 Hercules for transport duties. Other contributions to Operation Enduring Freedom, aimed at countering terrorism, mentioned elsewhere in this report, also directly contribute to peace and security efforts in the region. New Zealand is now looking to contribute further to the stabilisation efforts in Afghanistan, offering to lead a Provincial Reconstruction Team to enhance the security environment and provide humanitarian support for the Afghan people.

Iraq

The major political and military issue that has dominated the international agenda over the past twelve months has been Iraq. As a strong supporter of international efforts to eliminate weapons of mass destruction, New Zealand supported the efforts of the United Nations to disarm Iraq in accordance with United Nations Security Council Resolution 1441 and previous United Nations resolutions going back to 1991. We demonstrated our commitment to the disarmament process with the contribution of thirteen New Zealand Defence Force personnel to the United Nations weapons inspection teams in Iraq.

While New Zealand, like many countries, opposed direct military action in Iraq without a United Nations mandate, we have responded quickly to the humanitarian needs of the Iraqi people in the post-war period. Two New Zealand Defence Force personnel have been deployed to Iraq as part of the United Nations Mine Action Service operations. Under United Nations Security Council Resolution 1483 passed on 22 May 2003 New Zealand will help rebuild civil society with the deployment of 61 New Zealand Defence Force engineers and support staff to work with British forces in southern Iraq.

Peacekeeping

New Zealand has been committed to peacekeeping missions since the 1950s and taken part in over thirty-five different missions in the last fifteen years. Recently, there has been a greater concentration of resources in the Asia-Pacific region through large deployments to East Timor and Bougainville. The Asia-Pacific region will remain New Zealand's first priority, although our commitment to collective security and the rule of law will require ongoing contributions beyond the region. Reflecting the shift towards regional responses, only a small proportion of New Zealand Defence Force personnel are currently deployed on United Nations-led missions. At present, New Zealand has military commitments to twelve international peace support operations carrying out peacekeeping or mine action activities in the Pacific, Middle East, Asia, Europe, and Africa as well as the various contributions to Operation Enduring Freedom. In total, about 380 New Zealand Defence Force personnel are deployed on these missions.

Acquisition

The Ministry, through the Acquisition Division, is responsible for procuring all major items of capital equipment for the New Zealand Defence Force. The procurement process is often lengthy. It commences with the Government giving approval in principle to the acquisition process on the basis of concepts of operations and functional performance specifications. The Acquisition Division takes the functional performance specifications and develops the necessary documentation for tender purposes. The Division undertakes risk assessments, invites tenders, evaluates tender responses and identifies preferred bidders. Once Government approval is given, the Division negotiates and manages the contract arrangements through to the delivery of the equipment to the New Zealand Defence Force.

Major projects for the Acquisition Division currently include the light armoured vehicles, the light operational vehicles, new naval vessels, maritime helicopters, tactical communications equipment, C-130 Hercules aircraft life of type extension, P-3 Orion maritime patrol aircraft mission system, C-130 Hercules and P-3 Orion communication and navigation system upgrades, joint command and control system project definition study and three weapons systems for the Army.

Upgrading the army

Vehicles

Light armoured vehicles - All pre-production activities are complete and the vehicle production is well advanced with seven vehicles prepared and positioned in Canada for shipping to New Zealand. Approximately twenty five percent of the vehicles are complete and at various stages of being made ready for shipping. Training of Army teams has commenced in Canada with driver and crew training being carried out on completed New Zealand vehicles. Maintenance and support facilities at various Army bases are close to completion ready for the delivery of the first vehicles. The first batch of vehicles is due for acceptance by the Ministry in October 2003 with the last batch due in November 2004.

Light operational vehicles - Tenders have been received and consideration is being given to the selection of a preferred supplier.

Tactical communications

This project covers tactical communications for the Army and supporting RNZAF units. The project has progressed as planned with deliveries of significant elements of the project being undertaken in the past twelve months allowing the fielding of the equipment by the New Zealand Defence Force. The need for additional radios was identified which could be purchased within the approved budget due to savings generated during the life of the project. The Government approved the purchase of this additional equipment.

Weapons

Requests for proposal have been placed with selected suppliers for the direct fire support weapon (area) and radar system for the very low-level air defence system purchased in 1996. A request had been made through the United States of America foreign military sales programme for the supply of the medium range anti-armour weapons.

New naval vessels

Following the Government's endorsement of the Maritime Forces Review, Project Protector was initiated to purchase new vessels for the Royal New Zealand Navy. Six companies selected from a registration of interest process have received the request for proposal in May 2003 and responses are required in October 2003.

Air transport capabilities

Fixed wing transport

Marshall of Cambridge Aerospace Limited of the United Kingdom completed a life of type study on the C-130 Hercules aircraft fleet. The study was used to determine the configuration and condition of the aircraft and identify the feasibility and costs of extending their life. The study allowed the Government to make informed decisions on the fixed wing transport fleet. In November 2002 the Government approved the commencement of a project to extend the life of the C-130 Hercules aircraft. As a result of a registration of interest process five companies were selected to tender for the life extension project and were provided with the tender documentation in July 2003. The request for tender closes in October 2003.

Concurrent with the Government approval to extend the life of the C-130 Hercules aircraft, the Government also approved a project to acquire two used Boeing 757-200 aircraft to replace the two RNZAF Boeing 727 aircraft. Two Boeing 757-200 aircraft were identified, purchased and introduced into service by the New Zealand Defence Force in mid June 2003 in a passenger configuration. Modifications to each aircraft (cargo door, strengthened floor, air stairs and long range fuel tanks), necessary to meet full capability requirements, are in the planning phase.

Maritime surveillance aircraft

P-3 Orion

In December 2003 the Government approved the initiation of a project to upgrade the mission systems and the communication and navigation systems on the P-3 Orion aircraft. A registration of interest process facilitated the selection of four companies with the required experience to undertake this project. The tender documentation was released to these companies in June 2003 and tenders close in September 2003.

Maritime helicopters

The fifth aircraft (NZ3605) was delivered to the New Zealand Defence Force in early 2003. This project is now complete with project closure activities underway.

A joint approach

Joint command and control system

The selection of a contractor to undertake the project definition study for this project was made in October 2002 and work is proceeding satisfactorily.

New Zealand industry involvement

Defence Technologies New Zealand Joint Action Group

The Ministry has continued to support local companies seeking to obtain defence work from major acquisition projects and through exports. The main conduit for this assistance had been through the group of local companies, Defence Technologies New Zealand Joint Action Group, which is now the New Zealand Defence Industries Association, who have a focus on defence work. The Ministry provided regular briefings at New Zealand Defence Industries Association meetings. Assistance is also provided to New Zealand Defence Industries Association as sponsors of the annual Defence Industry Seminar.

Defence Industry Committee of New Zealand

The Ministry provided support for the Defence Industry Committee of New Zealand. This ministerial appointed committee provides industry feedback into Defence and briefs the Minister on issues relating to industry. The Defence Industry Committee of New Zealand established the Defence Industry Committee Awards of Excellence. These are awarded annually to companies that have provided Defence with excellence in service or products. The awards are presented at the Defence Industry Seminar dinner.

There has been a restructuring of the awards to allow for the recognition of smaller organisations in the provision of excellent service to the New Zealand Defence Force as well as the larger procurement projects.

Defence industry policy

A review of the Defence policy with respect to support for New Zealand industry through the acquisition of equipment was undertaken. Ministers agreed that the Government policy on procurement published by the Ministry of Economic Development would be applied to Defence procurement. This policy requires that Defence give "full and fair" opportunity for local suppliers to participate in Defence projects. Under the trade relationships with Australia and Singapore, local industry is defined as industries from New Zealand as well as Australia and Singapore. To facilitate fair and full opportunity for local, and in particular New Zealand domestic industries, the Ministry has engaged with the Industrial Capability Network. This is to ensure that the Network can promote domestic industry capabilities to the major international companies being considered for the supply of equipment being purchased for the New Zealand Defence Force by the Acquisition Division.

Evaluation

Under section 24(2)(e) of the Defence Act 1990, the statutory role of the Evaluation Division is to carry out assessments and audits of any function, duty or project of the New Zealand Defence Force. The Division also conducts audits of the Ministry of Defence's activities relating to the procurement of major military capability.

These assessments and audits are undertaken when required by the Minister of Defence, or to a programme approved under authority delegated by the Minister to the Secretary of Defence and the Chief of Defence Force. Reports of completed audits are submitted to the Minister and chief executives. Reports are available in the Defence Library, the Parliamentary Library and the National Library.

The Secretary of Defence and Chief of Defence Force, together with an external member, met twice during the year as the Defence Evaluation Board, to approve the programme of work for the Evaluation Division, receive reports on audits completed, and to monitor follow up action on past audits. The Evaluation Division also undertakes internal audits of the Ministry for the Secretary of Defence.

During the year the Evaluation Division completed reports on:

In addition to undertaking audits to meet the Secretary of Defence's responsibilities under the Defence Act, the Evaluation Division undertakes audits under section 3(6) of the Hazardous Substances and New Organisms Act 1996. During the year the Division examined the New Zealand Defence Force's implementation of systems for controlling hazardous substances not contained in weapon systems. The report of this audit will be issued early in 2003/04.

Corporate

The Corporate Division provides support services and policy advice in the areas of human resources, information management and technology, communications, and legal. The Corporate Division is responsible for all aspects of Ministerial services and support including the handling of Ministerial correspondence, requests under the Official Information Act of 1982, and miscellaneous inquiries.

Over the last twelve months, the Corporate Division has introduced a series of improvements and enhancements to the Ministry's management systems. A new financial management system has been implemented to improve financial management and forecasting for acquisition projects.

The Corporate Division also played a leading role in developing the Ministry's first Statement of Intent, published in May 2003. As noted earlier, the Statement of Intent sets out the Ministry's strategic, outcome-focused approach to planning, management and reporting, and its accountability for the delivery of outputs.

Review of accountabilities and structural arrangements between the Ministry of Defence and the New Zealand Defence Force

In March 2003 the Government considered the review into the accountabilities and structural arrangements between the Ministry and the New Zealand Defence Force. The Government agreed that the objective is to achieve a greater degree of "jointness" within the New Zealand Defence Force and between the New Zealand Defence Force and the Ministry. At this stage, legislative amendments to the Defence Act 1990 have been ruled out. The Government has directed that greater "jointness" be achieved by reinforcing and cementing in place existing initiatives designed to support cooperation and collaboration between the two defence organisations. There is a requirement for further work and the Government will consider advice from the defence organisations in the coming year.

Conclusion

The last year has been a challenging one for the work of the Ministry. New Zealand's involvement in the international counter-terrorism campaign and efforts to improve international peace and stability has led to a significant number of New Zealand Defence Force deployments overseas. These commitments have had a major impact on the work of the Ministry and will require ongoing monitoring to ensure that they are meeting the Government's objectives.

The implementation of the Long-term Development Plan is progressing well. Following advice, including that from the Ministry, the Government has been able to make a number of decisions on upgrading existing equipment or purchasing new equipment for the New Zealand Defence Force's three services. The main challenge for the Ministry will be to ensure that capability development remains consistent with the Government's defence policy and plan for rebuilding the New Zealand Defence Force and within budget. A modern and sustainable New Zealand Defence Force will enable New Zealand to meet its own defence and security needs and contribute appropriately and effectively to regional stability and global security.

In the future, the implementation of the Hunn Review will present new opportunities for the Ministry and the New Zealand Defence Force. It will be important to achieve outcomes that optimise the delivery of high quality policy advice on defence issues and improves the effectiveness of the two organisations.

Graham Fortune
Secretary of Defence
25 September 2003

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