Recently, the Chinese Nationalist Party (KMT) and the Taiwan People’s Party (TPP) hastily pushed amendments to the Act Governing the Allocation of Government Revenues and Expenditures (財政收支劃分法) through the Legislative Yuan, sparking widespread public concern. The legislative process was marked by opaque decisionmaking and expedited proceedings, raising alarms about its potential impact on the economy, national defense, and international standing. Those amendments prioritize short-term political gains at the expense of long-term national security and development.
The amendments mandate that the central government transfer about NT$375.3 billion (US$11.47 billion) annually to local governments. While ostensibly aimed at enhancing local development, the lack of strategic planning for resource allocation could lead to inefficiencies and fragmentation. That short-sighted approach undermines the central government’s capacity to allocate resources toward critical national priorities, particularly defense and international cooperation.
The rushed legislative process also undermines transparency and public trust. Procedural irregularities and the lack of consultation with key stakeholders reflect a troubling disregard for democratic principles. That has not only sparked domestic backlash, but also raised questions among allies about Taiwan’s commitment to sound governance and strategic foresight.
The most pressing concern it the amendments’ impact on the defense budget. Over the past decade, Taiwan has made significant strides in bolstering its defense capabilities, with a particular focus on asymmetric strategies. Investments in cutting-edge technologies such as drones, missiles and air defense systems have been critical to countering growing threats from China.
However, the amendments risk derailing that progress by diverting resources away from national defense. The Executive Yuan said the central government could face a 28 percent reduction to its defense budget, amounting to more than NT$80 billion. Such cuts would have severe consequences for key projects, including the development of the Chungshan Institute of Science and Technology’s Aerospace and UAV Industrial Park in Minxiong Township (民雄) — a cornerstone of the nation’s defense autonomy.
The defense budget stands at 2.47 percent of GDP, with this year’s allocation at NT$674 billion. That marks an impressive 80 percent increase over the past eight years. However, compared with other nations facing similar security challenges, Taiwan’s defense spending is still relatively low. South Korea allocates approximately 2.8 percent of its GDP to defense, while Israel, often cited as a model for small nations navigating complex security environments, spends more than 5 percent.
Elbridge Colby, the nominee for US undersecretary of defense for policy, has repeatedly called for Taiwan to raise its defense spending to at least 5 percent of GDP. That increase is essential for enhancing Taiwan’s deterrence capabilities and ensuring alignment with US expectations, he said. Failure to do so risks not only weakening Taiwan’s defense posture, but also undermining the confidence of international allies in Taiwan’s ability to defend itself.
In addition to its impact on national defense, the amendments pose significant economic risks. The Ministry of Economic Affairs has warned that the changes could erode investor confidence in Taiwan. Major international companies such as Micron, Nvidia and AMD, which have played a pivotal role in economic growth, could reconsider their investment plans due to policy instability.
Such developments could have far-reaching consequences for Taiwan’s economy and its position in global artificial intelligence supply chains. The nation’s economic resilience and technological leadership have long been key pillars of its international credibility. Undermining those strengths could weaken Taiwan’s standing in the global community at a time when it is seeking to deepen ties with like-minded partners.
While the goal of supporting local government is commendable, it should not come at the expense of national priorities. Local development initiatives must be carefully integrated into a broader strategic framework that aligns with Taiwan’s long-term goals. The absence of such a framework in the current amendments has raised serious concerns about their effectiveness and potential unintended consequences.
The rushed nature of the legislative process has deprived Taiwan of an opportunity to engage in meaningful discussions about balancing local and national interests. A more transparent and inclusive approach could have ensured that the amendments addressed the needs of local governments without compromising national security and economic stability.
National defense and economic stability are the twin pillars of Taiwan’s survival in an increasingly volatile global landscape. Any changes to fiscal policies must prioritize the nation’s overall interests and be guided by transparent and inclusive decisionmaking processes.
The Democratic Progressive Party has said that it does not oppose revising the Act Governing the Allocation of Government Revenues and Expenditures in principle. However, it has strongly criticized the KMT and TPP for their lack of procedural transparency and foresight. By prioritizing short-term political gains over long-term national security and economic stability, the amendments risk sending the wrong signals to domestic and international audiences.
The amendments represent a significant policy misstep. Without a clear strategic plan, the KMT and TPP have jeopardized Taiwan’s defense capabilities, economic resilience and international credibility. As Taiwan navigates an increasingly complex and challenging global environment, it is imperative to ensure that fiscal policies are aligned with its strategic priorities. Transparent, thoughtful and inclusive policymaking is essential for safeguarding Taiwan’s future and maintaining its role as a beacon of stability and resilience in the Indo-Pacific region.
Gahon Chiang is a staff member in the office of Legislator Kuan-Ting Chen (陳冠廷), focusing on foreign policy. He holds a master’s degree in international relations from National Taiwan University and serves as the youth representative to the Taichung City Government.
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