FOR decades, the Armed Forces of the Philippines (AFP) survived on a year-to-year allowance while potential adversaries planned in decades. Fighter jets were debated, not bought. Submarines were studied, not launched. Missiles were admired in brochures while foreign vessels prowled our waters. The hard truth is this: Sovereignty cannot be defended on a cash-on-hand basis.
Modernizing a military is astronomically expensive. A squadron of multi-role fighters can cost more than the annual budgets of several civilian agencies. Submarines take seven to eight years to build. Integrated radar systems, missile batteries, cyber defenses, and hardened infrastructure require long-term commitments, not short-term improvisation.
Congress recognized this reality years ago. Through the first and second AFP Modernization Acts (RA 7898 and RA 10349), lawmakers extended the modernization program and created a trust fund that could draw from sources beyond the annual General Appropriations Act (GAA). Proceeds from the sale or lease of military lands, interest income, and other nontraditional streams were authorized to supplement tax revenues.
Multi-Year Contracting Authority (MYCA) allowed the Department of National Defense (DND) to enter into contracts spanning five to 10 years, assuring suppliers that the Philippine government’s obligations would survive annual budget cycles. RA 10349 also permitted the use of Official Development Assistance (ODA) and export credit financing — low-interest loans from partner countries tied to defense purchases.
These reforms ended the old “hand-to-mouth” cycle. They enabled bulk purchases, continuity across administrations, and access to “big ticket” assets that could never be paid for in a single fiscal year. Yet even these mechanisms depended on congressional triggers and unprogrammed appropriations. When fiscal space tightened, modernization slowed.
That strain became stark during last year’s budget hearings. Of roughly P40 billion allocated for modernization in 2026, around P30 billion was already committed to prior multi-year contracts. Only a small fraction remained for new acquisitions. Re-Horizon 3 — the most ambitious phase of modernization — risked stalling before it could fully begin.
Defense Secretary Gilberto Teodoro Jr. responded with an argument grounded in arithmetic, not ideology: The Philippines cannot wait for annual tax collections to catch up with urgent security threats in the West Philippine Sea. If the country delays commitments today, the equipment it needs will not arrive until it may be too late.
Congress consequently authorized new financing modalities.
First, sovereign guarantees were extended to private-sector loans. Instead of relying solely on government-to-government debt, the DND can now tap banks and capital markets, using the state’s creditworthiness to secure larger, longer-term financing and front-load acquisitions.
Second, the revitalized Self-Reliant Defense Posture (SRDP) framework opened the door to in-country production and deeper public-private partnerships, allowing the government to provide incentives and financial support to domestic defense manufacturers.
Third, a risk-sharing approach with private lenders spreads exposure and extends loan tenors, making annual amortizations more manageable for the national budget.
This shift is philosophical as well as financial. Defense spending is no longer treated purely as a sunk cost. It is increasingly viewed as strategic investment — one that builds deterrence, supports local industry, strengthens supply chains, and stabilizes the broader economy.
At the center of this effort is Re-Horizon 3 (2024-2030), aligned with the Comprehensive Archipelagic Defense Concept (CADC). With a projected outlay of roughly P2.1 trillion over a decade, it aims to transform the AFP into a multi-domain force capable of credible area denial.
In the naval domain, the acquisition of two to three diesel-electric submarines would mark a historic first.
– Submarines are asymmetric equalizers; their mere presence forces larger navies to devote disproportionate resources to anti-submarine warfare.
– Guided-missile frigates equipped with vertical launch systems, additional corvettes, and offshore patrol vessels will sustain presence in the exclusive economic zone.
– Fast attack interdiction craft armed with precision missiles defend chokepoints across the archipelago.
On land, the BrahMos supersonic cruise missile provides a shore-based anti-ship deterrent with a range approaching 300 kilometers.
Expanded ground-based air defense systems shield airbases and critical infrastructure from cruise missiles and drones.
The Army and Marines are transitioning from traditional jungle warfare to coastal defense and anti-access roles.
In the air domain, the Philippine Air Force is pursuing multi-role fighters capable of air superiority and maritime strike missions, along with additional FA-50 light fighters, long-range patrol aircraft, heavy-lift helicopters, and attack helicopters. Air cover is indispensable for fleet protection and rapid response across dispersed islands.
Yet today’s contest is not confined to conventional platforms. “Gray zone” tactics—maritime militias, cyber intrusions, and swarming operations — demand layered resilience. A major cyber defense program seeks to harden government and military networks against state-backed attacks. Expanded Maritime Domain Awareness, through advanced radars and unmanned aerial systems, ensures persistent surveillance. You cannot defend what you cannot see.
Unmanned systems are central to solving the archipelago’s math problem. With vast waters and limited hulls, the AFP is adopting a “manned-unmanned teaming” strategy. Drones provide 24/7 intelligence, surveillance, and reconnaissance. Unmanned surface vessels and loitering munitions add asymmetric strike options at lower cost. Instead of dispatching high-value ships to every incident, drone swarms can maintain constant watch while preserving heavier assets for decisive moments.
Behind all this lies C4ISTAR — the connective tissue of command, control, communications, computers, intelligence, surveillance, targeting, acquisition and reconnaissance. Broadband, satellite links and coastal radar networks knit together sensors and shooters so that a detection in Palawan can cue a missile battery or aircraft within seconds. Without this digital backbone, hardware is reduced to isolated pieces.
Time, however, remains the most unforgiving variable. Submarines require years to construct. Fighters take several years to deliver. If contracts are not secured and production lines reserved soon, capability gaps may persist into a period many analysts view as strategically volatile.
Private financing, therefore, is not fiscal adventurism. It is strategic acceleration. By front-loading commitments, the Philippines ensures that steel is cut, training begins, and deterrence matures before potential flashpoints intensify.
This is not a quest for confrontation. It is a commitment to prevention. A credible defense posture raises the cost of aggression and lowers the temptation to test our resolve. It protects not only territory but trade routes, energy supplies, and the daily livelihoods of millions.
For too long, we attempted to defend sovereignty on installment — hoping that next year’s budget would align with this year’s dangers. That era must end. Financing freedom is not about militarizing policy; it is about ensuring that freedom itself is never held hostage to accounting cycles.
If liberty demands investment, wisdom dictates we make it deliberately and in time. The price of preparedness is measurable. The cost of unpreparedness is not.
Rafael M. Alunan III is a member of the board of governors of the Management Association of the Philippines.