Taiwan’s Minister of National Defense Feng Shih-kuan confirmed plans that Taiwan planned to increase military spending by almost 50 percent to almost 3 percent of GDP in 2018, Bloomberg reported on 16 March 2017. The move follows calls from commentators for several years that Taiwan should increase its national defense budget to at least 3 percent of GDP.
US conservative news website, the Washington Free Beacon, reported the new Trump administration was preparing to provide “more and better defensive arms to Taiwan." The report, which quoted unnamed sources, added that the Obama administration had in December 2016 blocked a US$1 billion arms sale to Taiwan.
Total defense spending declined under the Ma Ying-jeou administration. China’s military continued its rapid expansion, and its announced military budget in 2015 of US$145 billion dwarfs the Taiwan equivalent of just US$10.1 billion.
William S. Murray noted in 2008 that "Taipei decreased its defense budgets in absolute and relative terms from 1993 until 2003, with only meager improvements thereafter. These diminished efforts hardly seem commensurate with the increased threat that Taiwan confronts. They suggest either a state of denial about the threat, a gridlocked political system, misplaced faith in current systems and geographic advantages, or perhaps most disturbingly, a belief that the United States is certain to provide timely military assistance."
Premier Lin Chuan said 21 June 2016 that the government's defense budget for 2017 was not likely to reach 3 percent of gross domestic product (GDP), given the country's tight financial situation. Responding to a legislator's question during an interpellation session at the Legislative Yuan, Lin said the defense budget would have to be approximately NT$500 billion (US$15.54 billion) before it could reach 3 percent of GDP, which he said is unfeasible at present. He said the government is hopeful that the defense budget can be increased slightly despite the difficult financial situation, but said that any significant growth was out of the question.
The core policy of Taiwan's National Military Strategy is to avoid war, and to assure the security and stability of the Taiwan Strait. Taiwan must maintain an appropriate defense capability to guarantee the survival of the island as well as the security and prosperity of the people. Taiwan's major equipment acquisition policies are as follows: 1. Under the strategic directive of effective deterrence, robust defense, acquisitions must meet the basic requirements of major weapons and equipment for Taiwan's defense operations. 2. Acquisitions must be consistent with complete life-cycle management and integrated logistic planning. 3. Acquisitions must comply with technology transfers, or training packages and other software so that weapons and equipment can be used to their full effect.
In order for Taiwan to reach their goal of effective defense, important elements of their buildup and development include early warning, information & electronic warfare superiority, counter blockade capability, long-range precision, and force integration. In addition, a C4ISR system has also become a strategic objective, as it would enhance the combat power of the combined joint operations of the Taiwan armed forces. Taiwan is expected to build its national defense capability to emphasize quality and power over quantity by fielding a C4ISR system and by acquiring defensive weapons. The key to success in defending Taiwan is information superiority over the PRC. Information superiority is essential, because the characteristics of the PLA threat include synchronized, multi-faceted, surprise, and quick attacks. Information warfare is expected to be a prelude to an attack against Taiwan, and in order to counter the threats of the PLA, the Taiwan Armed Forces need to immediately take synchronized, and rapid defensive combat actions. From a C4ISR system point of view, information superiority is crucial to achieving victory in combat. In order to enhance Taiwan's defensive capability, Taiwan's Armed Forces need a more sophisticated CS4ISR system that would provide the quick response, long range, high precision, and robustness demanded by future combat situations.
As the Legislative Yuan (LY) assumes more control of the MND budget, procurement plans require more staffing and approvals are slow. This adds to the frustrations felt by the Taiwan military, U.S. defense contractors and the U.S. Military Departments. Even with the difficulties encountered, the U.S. will continue to support the Taiwan military with defensive military equipment, technology, training and assistance in the years to come.
The defense budget for the ROC military was reduced annually during the 1990s and became more and more open to public scrutiny. The downward trend in ROC military expenditures was especially evident in fiscal 1994, when the budget shrank 4.65 percent. The defense budget is becoming increasingly public. In fiscal 1996, only 36 percent of the budget was considered confidential, in comparison to 51 percent in fiscal 1993 and 46 percent in 1994, respectively. The defense budget for fiscal 1996 occupied just under 23 percent of the total government budget, down from 24.5 percent of the previous year.
Taiwan's Ministry of National Defense (MND) had a budget of US $9.57 billion for Fiscal Year 1996, which began July 1, 1995, a 2 percent increase over the previous year's budget. The national defense budget accounted for 23 percent of the total budget of the central authorities, a slight reduction from its 24.5 percent share of the total FY 95 budget. US $3.4 billion or 35.5 percent, of that budget was reportedly spent on military investment. Defense spending' as a percentage of Taiwan's GDP has been steadily decreasing over the past several years. The national defense budget for FY 1996 represented 3.6 percent of Taiwan's overall GDP.
Taiwan's National Defense budget amounted to New Taiwan Dollars (NTD) 274.78 billion or approximately USD 9.46 billion, for fiscal year 1998. The National Defense Budget accounted for 22.43 percent of the total budget of the Central Authorities, a 0.08 percent reduction from its 22.51 percent share of the total FY 97 budget. Defense spending's share of Taiwan's GDP has been steadily decreasing over the past several years. The National Defense Budget for FY 1998 represented 3.26 percent of Taiwan's overall GDP.
The national defense budget for FY 1999 amounted to NTD 284.5 billion (approx. USD 8.89 billion), or 22.7 percent of the total budget of the Central Authorities. The National Defense Budget for FY 1999 is projected to account for 3.06 percent of Taiwan's overall GDP. The budget for weapons purchases reportedly is NTD 60 billion (about USD 1.88 billion).
It has been projected that Taiwan will spend in excess of NT$700 billion (US$20.68 billion) for 11 items as a part of its arms-procurement spending from 2003 through 2012. While the U.S. supplies the bulk of Taiwan arms purchases, and will continue to do so in the years to come, Taiwan's indigenous capabilities have gradually expanded, with a majority of the building taking place with the United States' assistance. To fulfill current customers' needs, total services and commercial logistic support to maintain or upgrade Taiwan's existing defense force are required. In the near future, the most urgent defense requirements are the integration tasks between current platforms and weapons within and among Taiwan's armed forces. However, the Taiwan defense industry's long-range plans include integrated battlefield management and C4ISR upgrades.
On the horizon, and as a matter of public record, are the intended purchases of four Kidd-class destroyers, 12 P-3C Orion submarine-hunting aircraft, nine CH-47SD Chinook transport helicopters, eight conventional submarines, a batch of new Tienkung-series air defense missiles, a dozen MH-53H mine sweeping helicopters, Paladin artillery system, AAV7A1 amphibious assault vehicles, 30 AH-64D Apache helicopters, Patriot anti-missile systems, additional missiles, torpedoes, aircraft survivability equipment, two long-range early warning radars, three air traffic control radar sets, and electronic warfare systems.
On 02 June 2004 the Executive Yuan approved the Defense Ministry's special budget allocations for major military procurement programs worth a total of NT$610.8 billion (about US$18.23 billion). The money to finance the special budget will come from NT$94 billion through the release of shares of state-owned enterprises, NT$100 billion from the selling of state-owned land, and the raising of the national debt of NT$420 billion. The proposed budget would cover six sets of Patriot Advanced Capability III anti-missile systems, eight conventional submarines and 12 P-3C anti-submarine aircraft.
Taiwan reversed the trend of the past several years of declining defense expenditures; it is also modernizing select capabilities and improving its overall contingency training. The balance of forces continues, however, to shift in the Mainland's favor. In proportion to its population, Taiwan still maintained a large military establishment.
President Ma Ying-jeou pledged during his presidential election campaign in 2008 that Taiwan would complete the implementation of an all-volunteer military by 2014 and that the military budget would be equal to at least 3 percent of gross domestic product (GDP).
As the economic downturn led to a tax shortage, health welfare spending has increased year by year, the defense budget naturally inevitably marginalized. Making the situation worse, Ma Ying-jeou came to power after the government launched a comprehensive system of recruiting technology (scheduled to be fully implemented by the end of 2014), resulting in military personnel costs surge; stagnant growth in the defense budget in the case, the implementation of all volunteer force meant the amount of investment has shrunk dramatically arms.
In 2008, Taiwan's total defense budget restated 334 billion Taiwan dollars (about 10.9 billion U.S. dollars) of the total budget of 20.07%, which accounted for 2.94% of GDP. A total of NT$315.2 billion (US$10.17 billion) was to be allocated as the defense budget for 2009, NT$10.4 billion lower than the 2008 level, according to a national defense budget plan published in August 2008. For 2009, the Legislative Yuan actually allocated NTD 395.3 billion (approximately U.S. $12.35 billion) for defense, which accounted for 3.05% of GDP. Of a five-year national defense buildup plan for 2009-2013, roughly NT$1.708 trillion was expected to be allocated by the central government as military expenditure, constituting 3 percent of the gross domestic product.
To 2010, the total defense budget went to 297.4 billion Taiwan dollars ($ 9.2 billion), the Legislative Yuan passed the actual NT $ 288.6 billion, equivalent to 16.64% of the total budget amount, including personnel costs up to NT $ 134.5 billion, accounting for the overall defense budget 45% (5% increase compared to 2009), the cost of maintaining and operating military investment and therefore reduced to only 700 billion Taiwan dollars.
The year 2011 defense budget was further down nearly five-year low of 297.2 billion Taiwan dollars (about 10.3 billion U.S. dollars), with some unrelated military spending in the past are not included in the defense budget accounts (such as military hospital fund). Defense Minister Kao Hua-chu said in March 2011 that the Defense Ministry had asked for a 2012 budget of NT$325 billion (US$11.02 billion) at a minimum. According to current plans, Wu added, the 2011 military budget stood at over NT$290 billion (US$9.83), including expenditures on military personnel, military investment, and the renovation of equipment and facilities. Military spending was less than 3 percent of the country’s gross domestic product (GDP).
According to Taiwan's Ministry of Defence release in the end of August 2011 with a five-year rebuilding troops address policy, in addition to the Executive Yuan in 2012, the year can be restated NT $ 317.5 billion defense budget, the years from 2013 to 2016 can not be prepared enough 300,000,000,000 new NT, but the military personnel costs in the year 2012 the total defense budget accounted for 48.89%, from the beginning of the year 2013 defense budget exceeded for 50% of all volunteer force to fully implement the 2016 defense budget will reach 54.56%.
In such a large environment, the scale of Taiwan's military cuts, trends local negative exclusively defensive, in the sea and in the air gradually shrink, seems to be an inevitable strategic trends, one can ease cross-strait confrontation, creating mutual political and economic exchanges in the background. More important is to reduce military spending, soothing an increasingly downhill Taiwan financial predicament.
By 2013 Taiwan’s military spending had dropped to approximately 2 percent of GDP — well below President Ma Ying-jeou pledge of 3 percent. In response to U.S. concerns over Taiwan’s military spending, which stood at less than 3 percent of the nation’s gross domestic product, in May 2013 the MND noted that in the past funds for large arms purchases included in the defense budget prior to their approval by the U.S. had to be returned to central government coffers at year-end. Thus since 2009 the ministry based the defense budget on the principles of practicality and rationality. The MND stated it will “increase the budget or apply for special funds from the ROC Cabinet if the U.S. agrees on more arms sales to Taiwan."
The government-proposed defense budget for 2015 saw a NT$8 billion growth in comparison to the 2014 budget, with the increased spending mainly allocated for military investment and the maintenance of facilities. Citing a proposed defense budget sent to the Legislative Yuan pending review in August 2014, Kuomintang (KMT) Legislator Lin Yu-fang said that Taiwan's defense budget for 2015 stood at NT$319.3 billion. The number saw an NT$8.2 billion increase in comparison last year's amount, he said in a released statement.
Expenditure on military personnel remains the largest category, accounting for NT$143.1 billion, or a 44.8-percent share of total spending, he said. However, the number is still significantly lower than a year ago, an NT$9.2 billion drop from 2014. With the huge decrease in spending on personnel maintenance, the military has largely increased the budget on military investment and the maintenance of facilities, Lin said.
Money to be allocated for military investment that could be used to purchase new weapons systems has seen a NT$11.8 billion surge compared to the previous. The increase in the category means that R.O.C. armed forces now have more money to be spent on buying weapons to boost its defense capability. The money is expected to be used in buying an additional 36 AAV-7A1 amphibious assault vehicles as well as UAVs with attack capabilities.
The “National Defense Policy Blue Paper" was released by the opposition Democratic Progressive Party on 03 October 2014. It stated "The DPP reaffirms to increase the defense budget to GDP 3% level. Additionally , the Defense Committee recommends that to meet the needs for revitalizing defense industry, 70% percent of the new budget increase must be devoted toward military i industry, 70% percent of the new budget increase must be devoted toward military i industry, 70% percent of the new budget increase must be devoted toward military investment items, to stimulate the industry development by creating development by creating development by creating development by creating development by creating stable demand. The goal is that by the year 2020, expenditures going toward domestic production should reach no less than 60% of total military investment."