Amidst persistent military threats from China regarding the “One China Policy,” Taiwan is striving to modernize its air and naval combat capabilities. Against this backdrop, the defense expenditure by the country is expected to witness a compound annual growth rate (CAGR) of 4.6% to reach $20.8 billion in 2028, forecasts GlobalData, a leading data and analytics company.

GlobalData’s latest report “Taiwan Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2023-28” reveals that Taiwanese defense expenditure, inclusive of the additional special budget, increased from $15.3 billion in 2022 to $19.9 billion in 2023, reflecting an annual growth rate of 30.3%. The continuous annual increase in the defense budget is attributed to the necessity to fund significant acquisition programs for the Taiwanese defense industry.

In October 2019, Taiwan approved the procurement of F-16V fighter jets and has planned to spend TWD247.2 billion on this acquisition from 2020 to 2026. The delivery of these aircraft is scheduled to take place between 2023 and 2028, with TWD45.1 billion budgeted for the program in 2023.

Rouble Sharma, Aerospace & Defense Analyst at GlobalData, comments: “Taiwan is working with its closest ally, the US, to enhance its military capabilities. The procurement of F-16s and missile defense systems such as the Patriot Advanced Capability-3 (PAC-3) will provide strategic benefits for Taiwan’s national defense while potentially boosting the defense industry through increased production and technology transfer.”

Additionally, Taiwan is focusing on upgrading its naval capabilities. In recent years, it has purchased several warships, including Perry-class frigates, Oliver Hazard Perry-class guided-missile frigates, and most recently, M1A2T Abrams tanks, from the US. Taiwan has also launched its own indigenous submarine program to strengthen its undersea warfare capabilities.

Sharma concludes: “Taiwan is increasing its naval training and cooperation with other countries, particularly the US, Japan, and Australia, to enhance its operational readiness and to better respond to potential threats. The country is also improving its coastal surveillance and early warning capabilities to detect and respond to any potential hostile activity in its waters. Overall, these investments aim to enhance Taiwan’s military capabilities to protect its sovereignty and territorial integrity in the face of potential threats.”