Tuesday, 21 March 2017

Taiwan to increase Defense expenditures to 3 percent of GDP by next year

Taiwan Plans Military Spending Surge to Counter Rising China

by Adela Lin and Ting Shi

March 16, 2017, 12:44 PM GMT+7 March 16, 2017, 5:40 PM GMT+7

  • Defense expenditures to rise to 3 percent of GDP by next year
  • Tensions have grown as island’s president shifts from Beijing
Taiwan plans to raise military spending by about 50 percent next year as President Tsai Ing-wen attempts to offset China’s growing might and support the local defense industry.

Military expenditures are targeted to rise to 3 percent of gross domestic product next year, up from about 2 percent this year, Minister of National Defense Feng Shih-kuan said Thursday while presenting a report outlining Tsai’s first major security review since becoming president. Taiwan plans to develop indigenous ships, airplanes, weapons and unmanned aerial vehicles, he told lawmakers in Taipei.

The report cited China’s capacity to blockade Taiwan or invade its outer islands as a main reason to increase this year’s NT$356 billion ($11.6 billion) budget. Tensions between the long-time rivals have been simmering since Taiwanese voters swept Tsai’s pro-independence Democratic Progressive Party into power last year, raising concern locally about China’s recent military-modernization drive. 

While China saw improved relations under Tsai’s predecessor, it still considers Taiwan a province to be united with the mainland, by force if necessary, and points some 1,200 missiles at the island. Authorities in Beijing have expressed increasing frustration with Tsai’s refusal to endorse their “One China” negotiating framework, under which both sides agree they belong to the same country even if they differ on what that means.

Trump Factor
“It may make sense from Taipei’s perspective to invest more in defense at this juncture,” said Ja Ian Chong, an assistant professor with the National University of Singapore, who specializes in Asia-Pacific relations. “Beijing is currently already dissatisfied with Taiwan. Unless Beijing wishes to escalate matters, relations between the two sides are unlikely to get worse, just as they are unlikely to get better.”

President Donald Trump’s election in the U.S., which sells weapons to Taiwan and is obligated to defend the island under a 1979 law, has also increased uncertainty. Tensions escalated after Trump publicized a protocol-breaking phone conversation with Tsai in December. He later reaffirmed U.S. support for the One-China policy in a call with Chinese counterpart Xi Jinping.

Premier Li Keqiang on Wednesday reiterated China’s opposition for Taiwanese independence and support for peaceful reunification. “We are one family,” Li said.

Economic Stimulus
Taiwan’s defense-spending boost may also help Tsai support hi-tech industries and stimulate an economy expected to grow 1.9 percent this year, according to data compiled by Bloomberg. Local companies such as Aerospace Industrial Development Corp., which is planning to develop jets for the air force, and CSBC Corp., Taiwan, which is designing submarines, are among those that could benefit.

Local defense expenditures have declined since the 1980s, when Taiwan spent more than 5 percent of GDP on its military, according to data compiled by the Stockholm International Peace Research Institute. Taiwan hasn’t spent 3 percent of GDP on the military since 1999, according to Sipri. 

The increase would help fulfill a campaign pledge by Tsai. Defense Ministry spokesman Chen Chung-chi said defense expenditures last exceeded 3 percent in 2008. “We hope for an increase to 3 percent next year, but the government also needs to consider revenue and balance it among other ministries,” Chen said.

China earlier this month announced plans to increase defense spending by 7 percent to 1.044 trillion yuan ($151 billion) this year, although independent estimates put actual expenditures much higher. Either way, China now spends more than any other country apart from the U.S.

Liu Fu-kuo, executive director of National Chengchi University’s Taiwan Center for Security Studies, said the security review shows Tsai’s administration realizes its disadvantage and is focused on asymmetrical defense strategies.

“It would be difficult for Taiwan to compete with China’s world-class military power,” Liu said. “The wisest choice for Taiwan would be refraining from provocative measures and refraining from giving any excuses for China to take military actions.”

Original post: bloomberg.com

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