Taiwan’s asymmetric defense opportunity

Many in the English-speaking world perceive Taiwan’s defense spending as “measly.” But Taiwan’s president, Lai Ching-te, has taken a major step forward by committing to raise Taiwan’s defense spending from 2.45 percent to 3 percent of GDP in 2025 through a special budget.

Lai has clearly gotten the message that he must increase defense spending in a world where the U.S. appears increasingly likely to leave small powers to fend for themselves. However, the current Kuomintang-led majority coalition in Taiwan’s legislature is often portrayed as intent on diminishing Taiwan’s self-defense capabilities because it is pro-Chinese Communist Party, but there is more to this story.

Critics parsing through Taiwan’s 2025 general budget, passed by its legislature in late January, have highlighted perceived decreases in defense spending.

The Kuomintang and Taiwan People’s Party coalition indeed took a sledgehammer to the funding of various domestic government departments for partisan reasons. Prominent cuts to the military budget include 3 percent of the funds for military equipment and facilities expenses and 60 percent of the Ministry of National Defense’s publicity budget.

Small cuts to equipment procurement proposals in the draft budget are routine and this trim represents a small fraction of overall defense spending, which will still increase. Lastly, cutting the publicity budget hardly reduces real combat effectiveness.

Although the opposition’s characterizations of Lai’s administration as unscrupulous and wasteful are almost certainly exaggerated for partisan effect, Taiwan’s constitution gives the legislative branch limited powers to revise spending proposed by the executive branch, and thus it tends to rely on cuts and freezes to get its point across.

The Kuomintang and Taiwan People’s Party opposition parties have broadly justified the use of freezes as necessary to ensure rigorous scrutiny of the spending practices of the Democratic Progressive Party-led administration. Freezes are typically removed after relevant executive department heads submit reports to the legislature and face questioning.

Budgetary freezes will affect Taiwan’s armed forces more than cuts, but these are reversible and far from unreasonable. Some of the most controversial include a 50 percent freeze of the budget for Taiwan’s indigenous submarine program until the prototype vessel passes sea trials, a freeze of one-third of the budget for a drone industrial park in Chiayi and a 30 percent freeze of the military’s operational expenses budget.

Closely inspecting the tactical and strategic merits of Taiwan’s years-long $8.8 billion submarine procurement program, as several American experts have done, is wise given the near-term threat from China’s People’s Liberation Army and the clear need for less-costly asymmetric platforms.

Cultivating a drone industry from scratch is also a daunting task. After debating last year whether Taiwan’s state arms manufacturer or the Ministry of Economic Affairs would be better suited to developing a drone business park and how private investments will fit into the picture, Taiwan’s legislators settled on a 30 percent freeze until the state arsenal, the National Chung-Shan Institute of Science and Technology, submits a comprehensive business plan.

In response to Lai’s recent pledge to increase spending, opposition coalition legislators have urged that additional spending be allocated wisely, the executive branch should not avoid close oversight by the legislative branch, and spending should not overlook soldier salaries and training expenses. Without proper compensation and revitalized training, Taiwan’s increasing reliance on conscription might not succeed in increasing national morale and combat effectiveness.

Nonetheless, Taiwan’s national security could still be impacted if legislators are too slow to complete their reviews and procedural votes. One Taiwanese researcher estimated that Taiwan’s military could face a nine- to 30-day window without operational funding where it will have to rely on reserves of food, fuel and ammunition, possibly leading to unexpected shortages. The difficulty of unfreezing funding may also affect the Coast Guard’s ship procurement.

In addition to addressing these questions, Taiwan’s government should take the opportunity to reconsider its broader procurement strategy. Delays in the delivery of prior large purchases of exquisite arms from the U.S. have led to a well-known backlog worth upwards of $20 billion.

The credibility of U.S. arms manufacturers has also recently suffered in Taiwan due to price gouging by Raytheon, further raising questions about Taiwan’s strategic reliance on the U.S. for procurement, which has been a fact of life during previous decades of Kuomintang governance as well.

Taiwan’s failure to swiftly adapt its defense strategy away from purchasing expensive conventional weapons systems has long been attributed to the conservative defense establishment which has deep historical ties to the Kuomintang. Now that the Democratic Progressive Party’s support for expensive conventional platforms like submarines has driven Kuomintang legislators to favor more cost-effective systems, the time is ripe for a sea change in both the quantity and quality of Taiwan’s defense spending.

Reports suggest that the Taiwanese government already intends to focus the forthcoming special budget on precision ammunition, air defense, command and control, reserve force equipment and anti-drone technology. Such a budget could support relevant purchases from the U.S. such as additional guided missiles, specialized domain awareness, and equipment for command and control, intelligence, surveillance and reconnaissance, but the real opportunity likely lies within Taiwan itself.

Taiwan’s strong manufacturing base and mature commercial electronics industry have enormous potential to contribute to the national defense, as evidenced by the rapid expansion of domestic precision missile production after a special budget passed in 2021. Domestic spending could also help bolster local economies, creating jobs and business opportunities.

Future spending could continue investments into the missile supply chain, rapidly scale up aerial and maritime drone production, harden critical infrastructure and military facilities and address deficiencies in emergency food and energy stockpiles.

The Lai administration should vigorously facilitate close coordination between its policy staff, military planners and political opposition in the legislature to ensure that increased defense spending represents the will of Taiwan’s elected representatives and thus maximizes the odds that the legislative branch passes a special budget for defense. Such cross-partisan cooperation can provide a foundation of trust upon which more durable increases in defense spending can be achieved in future annual general budgets.

Although there is a strong desire in some quarters to accuse Lai of trying to distract from President Trump’s trade demands and the ongoing recall crisis, all sides should realize that they fundamentally agree on the necessity of increased defense spending, and spending three percent of GDP on defense would be good for the whole country.

Francis de Beixedon is an Asia researcher at a Washington think tank.

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