US military bases – the economic impact

Intel Dump has a post about US basing strategy which, as part of its argument repeats a claim that the US base in Manas, Kyrgyzstan, contributes so heavily to the local economy that it is worth around 5% of Kyrgyzstan’s GDP – a number that seems suspiciously high to me.

The original article – US Bases Overseas Show New Strategy by Michael Mainville – explains the US base’s impact as follows:

In poverty-stricken Kyrgyzstan, the presence of even a relatively small number of American troops can have an enormous impact. The base employs more than 500 locals, paying them up to 10 times the average monthly wage of about $100. The base is pumping about $156,000 a day into the local economy and last year accounted for 5 percent of Kyrgyzstan’s entire gross domestic product.

"The general attitude among people here is that they’ll take it for what it’s worth" the Western official said. "The advent of the American base has actually helped to create something of a middle class in Bishkek."

Now, of course, if the base really is worth 5% to the Kyrgyz economy – or even a figure even remotely approaching that – you can see why the government and the people living in the region of the base would be extremely keen to ensure that the base remains.  $156,000 multiplied by 365 does indeed come to a figure that roughly matches 5% of the Kyrgyz GDP but, looking at the figures that Mainville has given, I can’t help but wonder how he comes up with the figure of $156,000 per day in the first place.

My first question is how much does the US really pay local contractors – I don’t know anything about how the US military deals with these kinds of issues, but I do find it hard to imagine that they pay 10 times the local wage.

Anyway, assuming that the US pays an average of $1,000 per month to the 500 local contractors Mainville mentions (and, as he notes that would be a ten times the average wage in the region) the US would pump $500,000 a month into the local economy – or $16,438 per day.  That’s less that one tenth of the total figure Mainville gives. 

If – and this is far more likely, I think, but I’m happy to be corrected –  the US pays wages at closer to the local market rate ($100 per month), that figure drops to $1,644 per day.

So, what gives?  Depending on the figures above we can account for either $16,438 per day being pumped into the economy, or $1,644 per day, but certainly not $156,000 per day.  At most, I can account for a little over 10% of the figure Mainville is claiming.   Where does the rest of the money come from?  Anybody have any better ideas than me?

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4 Responses

  1. Nathan says:

    As far as wages go, I do find it quite plausible that the US military pays up to 10 times the local average. Judging from Uzbeks I know who have worked for the US government, I’d say that most get something like 3-5 times more than the average wage. I could be totally wrong though.

    As far as the rest of the money goes, I’m not sure, but I’m sure there are all kinds of ridiculously expensive fees, rents, and whatnot that must be paid. And I’m sure local companies and businessmen are making a pretty penny for all manner of provisions and services.

    $156,000 per day sounds like the US government working on the cheap to me!

  2. Brendon Carr says:

    What about the money spent on the economy by the US personnel, civilian and military? Rent, booze, companionship, and tattoos — all the essentials.

  3. michael says:

    I worked with US embassy local staff in Bishkek just before the base opened at Manas. Security guards were making btwn 500-800 USD per month. Drivers were making less. Technical staff(plumbers, electricians) about the same as the guards. Most of the guards were highly educated, better than I was in a lot of cases with graduate degrees. There were also elite former “sportsmen” a former soviet wrestling champion among others.

    The jobs were highly coveted and the embassy could have their pick of overqualified applicants because there are so few other opportunities of any kind in Kyrgyzstan.

    Another way the US pumps money into the KG economy is through rental accomodation. Embassy expat staff are housed in relative opulence compared to locals or even to what a federal bureaucrat could expect to find in the US and the embassy pays above market rates for most places.

    With the base at Manas a lot of the money was going straight into Akaev family coffers since Akaev’s son in law own(ed) the company that provided airport services and fuel.

  1. July 15, 2005

    Speaking of Military Matters

    While we’re on the topic of military relations, Andy has an interesting post on the economic impact of the US base in Kyrgyzstan.

    Now, of course, if the base really is worth 5% to the Kyrgyz economy – or even a figure even remotely approaching that …