22. Military conversion can be divided into five areas, namely: (a) military industry; (b) military sites; (c) research and development; (d) demobilization; and (e) surplus weapons. They offer different challenges and opportunities and vary in their application to the industrialized countries, the economies in transition, and the developing countries. Like technological adaptation in the civilian sector, conversions provide tremendous opportunities for private sector development. In fact, conversion may be part of the broader transformation of societies, as in the case of Angola, Bosnia and Herzegovina, Cambodia, Egypt, Ethiopia, Guatemala, Panama, South Africa, Viet Nam and Zaire. Thus, the process of military-to-civilian structural adjustment is complex and dynamic.
23. As with all privatization, conversion initiatives can only be sustainable in favourable political, legal, economic and social frameworks. In many instances, there is a geographical concentration of military sites and industries. This aggravates the impacts of conversion on the stakeholders in such sites and industries, particularly the local stakeholders and their families, namely the men and women in uniform, the workers, managers, local private enterprise suppliers, local governments, etc. Sustainable conversion can only benefit from the active engagement of the local stakeholders in setting up priorities for future public-private initiatives in manufacturing, services, research, education, training, etc. as illustrated by the cases of Subic Bay in the Philippines, and sites in Europe and the United States, where all stakeholders, at different levels, have been organized to join partnerships in order to respond to the problems of the redevelopment of the closed bases and restructuring of defence industries. Generally speaking, conversion processes stand a better chance of success when they are integrated into the development of a country or region.
24. Since the ultimate resource in conversion is human capital, the engagement of workers and managers of military sites and industries in conversion planning and implementation can be more important than the reallocation of physical assets. Usually, the military industries and sites attract some of the best technical talents in a country. This human capital is an important component in viable conversion to knowledge-based sustainable activity, and constitutes a pool from which private sector managers and entrepreneurs can evolve.
25. The setting up of public-private partnerships can be facilitated by promoting stakeholders' dialogue and consensus, as this empowers the constituencies closest to the issues of conversion and helps build up solidarity among them. Conversion can be greatly stimulated by the expansion of existing networks to the developing countries and the economies in transition, thus truly globalizing them. Dialogue also contributes to curbing corruption and other illicit practices by the exposure and sharing of information, keeping the process transparent to all concerned, and promotes market forces as it spreads information throughout the immediate markets affected. Dialogue would also help improve coordination at all levels of government for mutually reinforcing actions.
26. In the former centrally planned economies there is a natural reluctance to create redundancies, particularly in areas of large concentration of military sites and industries which have few immediate employment alternatives. For these countries, and in developing nations also, social safety nets have been designed for displaced workers, together with training programmes to develop new skills required by private firms in new markets. The set of skills required of a converted enterprise - site or industry - is often radically different from that necessary to the original company. Thus, conversion needs a radical change in attitudes of the workers and managers involved. Countries such as the Russian Federation, China, Belarus, Ukraine, Poland, Cambodia, Viet Nam, Argentina and Egypt in the last several years have either initiated various training programmes or established institutions as clearing houses, training centres and business promotion intermediaries.
27. As the political, economic and military reorganization of the world takes shape, the resources spared by the overall decline in military budgets - the peace dividend - could, in principle, help finance sustainable development initiatives. But there is so much competition for these same resources that the peace dividend cannot be taken for granted. Thus, the implementation of initiatives for military conversion must find resources from a diversified portfolio of sources, some conventional, others non-conventional, as exemplified by debt swaps, buy-operate-transfer (BOT) finance, offsetting of government civilian procurement, etc. One such source, often overlooked, is the hidden resources represented by waste in existing military activities, which could lower the capital requirements for new, converted sites and industries. In St. Louis, Missouri, United States, several projects have been launched to identify the hidden resources - equipment, technology and skills - to be used for community development and new business start-ups.
28. Public-private partnerships, whether entirely domestic or involving foreign partners, are worth promoting as a means of realizing and expediting conversion. Small and medium-sized enterprises which have a high collective employment potential could especially be promoted, such as service businesses, originating from military research and development, manufacturing or military sites, which require much less capital per worker, e.g. health services, warehousing, port and airport services, maintenance and repair services, tourism, education, training, consulting, information services.