The Executive Yuan on Thursday last week put forward a NT$3.035 trillion (US$99.2 billion) proposal for central government expenditure next year, under which the national defense budget would account for NT$949.5 billion, a year-on-year increase of 22.9 percent and reaching a two-decade high of 3.32 percent of GDP.
With next year’s government tax revenues expected to total NT$2.86 trillion, a year-on-year drop of 9.6 percent, and expenditures forecast to increase 3.8 percent to NT$3.035 trillion, the central government would be in a fiscal deficit.
Defense spending would cover payments for defense articles and the procurement of ammunition, with about NT$244.2 billion earmarked for specific arms and facilities, such as drones and domestically developed uncrewed surface vessels. Expenses for veterans and coast guards are also included.
Furthermore, the government has pledged to seek supplementary budgets to support military salary raises.
Following Russia’s annexation of Crimea in 2014 and China’s rapidly increasing military budgets, defense expenditures have risen around the world. The military spending of most NATO member countries surpassed 2 percent of GDP last year, led by Poland at 4.1 percent, Estonia and the US at 3.4 percent each, and Latvia at 3.2 percent. The 32 members of the bloc have agreed to increase their defense budgets to 5 percent of GDP by 2035.
President William Lai (賴清德) said that the proposed military budget increase aims to show the world Taiwan’s commitment to enhancing its self-defense capabilities, while also vowing to lift defense spending to 5 percent of GDP by 2030, in line with NATO standards.
Facing China’s escalating military threats, increases to the defense budget are an indispensable and critical necessity. However, Taiwan’s 3.32 percent target for next year is still slower and lower than the US’ 3.4 percent, Russia’s 6.3 percent and Singapore’s 3.2 percent this year, and far lower than Japan’s NT$1.58 trillion, South Korea’s NT$1.31 trillion and China’s NT$7 trillion annual military expenditure.
Next year’s defense budget for the first time emulates the “NATO model” to incorporate civil defense and social resilience spending for Taiwan’s all-out-defense. Therefore, the increase in core military spending would be relatively limited. How to properly allocate the budget to improve Taiwan’s critical asymmetric combat capabilities for “smart defense” would be an uphill battle.
Another bigger challenge is that the budget would have to be passed by a legislature dominated by the Chinese Nationalist Party (KMT) and the Taiwan People’s Party.
The defense budget during former KMT president Ma Ying-jeou’s (馬英九) term was reduced to below 2.1 percent of GDP. In addition to blocking several arms procurement and domestic development budgets, opposition lawmakers have pushed amendments that would crowd out defense budgets, such as reallocating tax revenues to local governments, which could receive up to NT$416.5 billion next year, and resuming controversial civil service, military and teacher pension payouts, which aim to benefit their political constituents, but would worsen the government financial shortfall.
A growing number of foreign defense officials and experts have warned that the political division in Taiwan would jeopardize the country’s security and international support. Former US security official Alexander Gray said that “the reluctance in Taiwan — particularly by the KMT — to prioritize adequate defense spending risks fundamentally undermining US support to Taiwan.”
Proposing a significant increase to the defense budget signals the Lai administration’s determination, but accomplishing its goals would need more political communication and national solidarity.
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