In response to the increasing military tensions from mainland China, Taiwan plans to raise its defense spending to US$12.4bn to modernize the capabilities of its armed forces by 2025, according to GlobalData, a leading data and analytics company.

GlobalData’s latest report, ‘The Taiwanese Defense Market – Attractiveness, Competitive Landscape and Forecasts to 2025’, reveals that the Taiwanese defense budget accounted for 2.1% of country’s GDP in 2020, an increase of 0.2% from 2019.

China’s ‘One China Policy’ has challenged the sovereignty of Taiwan. The Taiwanese response has been to procure advanced defense equipment; for instance, in 2019, the government signed a contract for 66 F-16V aircraft worth US$8.1bn and 108 M1A2 Abrams tank along with 250 I -92F MANPAD Stinger missiles worth US$2.2bn.

According to GlobalData’s analysis, during 2015–2019, Taiwan imported foreign military equipment worth US$1.38bn. Traditionally, the US has been the sole supplier of military equipment and platforms to Taiwan. Aircraft accounted for 43.3% of Taiwan’s arms imports, naval vessels 28.7% and air defense systems 12%.

Hemant Bhandari, Aerospace Defense and Security Analyst at GlobalData, says: “Taiwan continues to face difficulties with COVID-19, after a successful start in containment, including an investigation in military practices after 28 sailors tested positive on the Taiwanese naval supply ship ‘Panshih’. In addition, the outbreak has caused the economy to grow at 1.54% in the first quarter of 2020 from 3.31% in the previous quarter. The situation doesn’t seem to get better with the IMF reducing the GDP growth rate projection by 6 percentage points to -4% from 2%. The slowdown in the economy can hinder the defense budget growth over the forecast period, however, out of budget purchases and changes to priority programs will be pushed should the security situation change from the tensions presently experienced.”