Taiwan should think big with defense manufacturing plans

Domestic defense manufacturing offers both security and economic potential for Taiwan

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(Wikimedia Commons photo)

KAOHSIUNG (Taiwan News) — The global defense market was worth an estimated US$1.8 trillion in 2018. That’s an increase of 2.6 percent on the previous year. While it is an industry that is not without controversy, there is no denying it is a lucrative business.

Earlier this year, President Tsai Ing-wen (蔡英文) announced an 8.3 percent increase in Taiwan’s own military spending, raising the annual defense budget up to US$13.1 billion (NT$411.3bn). That’s around 3 percent of Taiwan’s GDP and a substantial amount of taxpayer’s money.

The problem Taiwan has is a dearth of countries that are willing to let it spend this money. Pressure from the Chinese Communist Party (CCP) means a lot of countries and businesses are reluctant to engage with Taiwan on defense matters and risk repercussions from China, which spends around US$250 billion a year and is therefore a far bigger market.

As a result, Taiwan has become overly reliant on the United States, which is legally obliged to provide Taiwan with the means to defend itself under the Taiwan Relations Act of 1979. However, even that can be dependent on the U.S. administration of the time.

Under the presidency of Barack Obama, there were no significant military sales to Taiwan between 2011 and 2017, as he sought to woo communist China. Under President Tsai, there has been a clear shift away from excessive dependence on overseas military sales and toward establishing Taiwan’s own domestic defense manufacturing industry.

Plans for Taiwan to manufacture its own submarines are already underway and have been well-publicized. Meanwhile, Taiwan’s shipbuilding sector has the capacity to build naval vessels, and the National Chung-Shan Institute of Science and Technology (NCSIST), in Taitung County, has been manufacturing surface-to-air missiles.

This is a positive step forward for a number of reasons.

It is never healthy for a country’s national security to be overly dependent on the whims of another country. In the current geopolitical climate, with the U.S. and China at odds, things are fine, but when the next Democrat administration takes over, which could be as soon as next year, things could rapidly deteriorate.

Far from softening its position on Taiwan, the CCP has been stepping up pressure on companies and countries around the world who dare to do business with, or even recognize the country in any way. The likelihood of other countries selling arms to Taiwan in the short-term is therefore minimal.

By investing in and developing a domestic defense manufacturing market, Taiwan is taking a big step toward securing its national security for the future. It is something that should have been done decades ago, but for a variety of reasons wasn’t. Better late than never, as they say.

Then there are the economic benefits. At the top of this article, I noted the colossal scale of the global defense sector. If Taiwan can claim even a small slither of that market, it could do wonders for the country’s economy.

If Taiwan is able to manufacture some of its own defense requirements, that is less money that needs to be spent with overseas companies. This money can be put back into the domestic economy, instead.

With a vibrant defense industry comes high-skilled jobs and the potential to spur development in parts of the country that need it. Kaohsiung is an obvious hub for naval development, while missiles are already being developed in Taitung.

Such developments are also likely to attract attention from overseas businesses. They may choose to invest or even bring some of their own business to Taiwan in time too.

Then there is the potential to develop an export market too. Taiwan’s Sky Bow III missile is already attracting attention from international buyers.

If Taiwan can develop a reputation for manufacturing high-quality, cost-effective hardware, there is no reason why smaller countries might not choose to buy from Taiwan companies. This would be far preferable to opting for Chinese hardware and all the compromises and security risks that come with it.

Developing such a market would also be a great soft-power coup for Taiwan as it would show Taiwan can compete with communist China on such matters. It could also potentially lessen the growing dependency some countries have on China for their defense needs.

It is early days and no-one is under any illusion that Taiwan is capable of manufacturing the equipment it needs to protect itself from the threat of communist China yet, never mind start exporting on any scale. If it is ever possible, it will likely take decades to achieve.

But as the famous Chinese proverb says, “A journey of a thousand miles begins with a single step.”

Taiwan’s journey toward keeping itself secure and developing a vibrant and diverse defense manufacturing sector is further down the road than that. There is still a lot that can be done but it is refreshing to see the government recognizing the potential and showing the type of ambition that Taiwan has long lacked.