In January 2025, the Taiwanese Parliament approved a significant reduction in the defense budget, an unexpected decision at a time when the island faces increasing military pressure from the People’s Republic of China. This budget cut jeopardizes crucial strategic programs essential for modernizing Taiwan’s armed forces, despite calls for substantial increases in defense spending to address growing regional threats.
The defense budget reduction prompts consideration of shifting Taiwan’s focus from costly high-tech equipment like F-35 jets to more affordable, mass-produced assets such as drones, anti-tank munitions, and mines for greater sustainability in prolonged conflicts (Picture source: Taiwan MoD)
In August 2024, the Taiwanese government announced an ambitious 7.7% increase in the defense budget, bringing it to 647 billion New Taiwan dollars (approximately 19 billion euros), representing 2.45% of GDP. This increase was intended to finance strategic programs, such as the development of “Hai Kun”-class submarines and the acquisition of advanced U.S. military equipment. However, the Legislative Yuan, dominated by an opposition coalition of the Kuomintang and the Taiwan People’s Party, froze significant portions of the funds. The cuts included a 50% reduction in submarine program funding, a 33% cut for drone projects, and a 30% decrease in operational budgets for the Ministry of National Defense.
These decisions raise critical questions about Taiwan’s defense strategy during a pivotal period in which China has intensified operations within the “gray zone,” employing diplomatic pressure, cyberattacks, and military maneuvers near the island. By limiting its defense spending, Taiwan risks undermining its deterrence capabilities, prompting a broader discussion on the efficiency and prioritization of its military investments.
Despite consistent increases in defense spending over the years, Taiwan’s military procurement processes remain plagued by structural issues and corruption scandals. The notorious La Fayette frigate scandal of the 1990s highlights the detrimental role of arms brokers, often retired officers with close political ties, who have fostered opaque practices that undermine transparency and efficiency in procurement.
A more recent example is the Indigenous Defense Submarine program, considered a cornerstone of Taiwan’s defense strategy. However, the contract awarded to Gavron Limited, a Gibraltar-based company described as a shell entity, exposed significant flaws in the bidding process and raised concerns about unreliable intermediaries. Such cases underscore the urgent need for institutional reforms to oversee procurement processes and minimize external influence and conflicts of interest.
The defense budget reduction also invites reflection on Taiwan’s current approach to military spending. For years, the focus has been on acquiring high-tech equipment, such as F-35 fighter jets and advanced defense systems. While strategically significant, these investments are costly and limit Taiwan’s ability to stockpile sufficient weaponry for a prolonged conflict.
An alternative strategy would involve prioritizing the acquisition of less expensive but mass-produced equipment, such as drones, anti-tank munitions, and mines. These asymmetric weapons, though less sophisticated, provide significant deterrence against large-scale invasions. The “Drone National Team” program demonstrates this approach by fostering collaboration between the military and local manufacturers to develop cost-effective solutions. However, reliance on foreign technology for certain critical components remains a major challenge.
Taiwan’s military also faces immediate challenges in providing basic equipment for its forces. Recent tests of locally produced bulletproof vests revealed their inability to withstand ammunition used by the Chinese military, raising concerns about the adequacy of such fundamental gear. Addressing these deficiencies requires a shift in priorities toward effective and affordable solutions while leveraging Taiwan’s industrial capabilities.
To strengthen its defense, Taiwan must strike a balance between acquiring advanced technology and investing in mass-produced armaments capable of sustaining prolonged resistance. A combined strategy that modernizes strategic equipment while increasing local production of asymmetric systems appears to be the most viable path forward. However, achieving this requires significant reforms in military procurement institutions to eliminate inefficiencies and ensure optimal use of resources.
Taiwan’s decision to reduce its defense budget amid growing pressure from China poses critical challenges to its security. While this decision may be influenced by domestic political considerations, it must be accompanied by a strategic reassessment of defense spending and the island’s ability to respond to current and future threats. Institutional reform, clear investment prioritization, and mobilization of domestic resources are essential to ensure Taiwan’s resilience and autonomy in the face of China’s increasing ambitions.
