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Taiwan Defence and Security Report Q1 2013
Business Monitor International, December 2012, Pages: 69
BMI's Taiwan Defence and Security Report for Q1 2013 examines the country's strategic position in the Asia Pacific region. It provides an overview of the contemporary geopolitical challenges facing the country, and the challenges it may face in the future.
The report examines the trends occurring in Taiwan's current and future defence procurement, and the order of battle across its armed forces. The intention is to provide a clear and concise discussion of these issues. The report's general conclusion is that the re-election of Kuomintang President Ma Ying-jeou in early 2012 has paved the way for the continuation of relatively warm cross-Strait relations, giving the island confidence about its security outlook for the next few years at least. It is also unlikely that the new leadership in Mainland China, headed by Xi Jinping, will alter the country's longstanding Taiwan policy,
especially given the many pressing domestic issues that demand Beijing's attention.
Ma's promotion of good relations with China has led to accusations that he has been neglectful of national defence. Perhaps to counter this criticism, Taipei has increased its defence budget for 2012. However, the Ministry of National Defense (MND) continues to complain about a lack of funds. The decision to go ahead with a costly F-16 fighter aircraft upgrade programme is likely to monopolise procurement funds in the short to medium term, the MND has warned, with the result that other requirements will have to wait.
Despite this, there have been some important procurement developments besides the F-16 refit plan.
Taiwan is procuring two second-hand frigates from the US Navy, and it has started production of a new class of corvettes to bolster its fleet of small fast patrol boats that recently entered service. Indigenous missile programmes are also producing weapons that should serve as a deterrent both to Chinese naval forces and also to land-based targets immediately across the Strait, while Taiwan's own missile defence shield is steadily expanding.
Over the last quarter BMI has revised the following forecasts/views:
- Taiwan-Mainland relations are discussed in light of recent political developments on both sides of the Strait. While relations are expected to remain cordial, the recent discovery of three alleged Chinese spies and the Chinese military's continued focus on attacking Taiwan mean that the island will remain wary of Beijing's intentions.
- The US has assured Taiwan that it is an important part of its 'pivot' to Asia, despite the public focus having been on other countries in the region. The decision to sell second-hand frigates to Taiwan, and not to other US allies in the region, came as a sign that Washington remains committed to supporting the island.
- It has been confirmed that Lockheed Martin will conduct upgrade work on Taiwan's F-16 fleet.
The supplier on a new radar system for the aircraft has yet to be announced.
- However, the cost of the F-16 refit work is threatening other procurement programmes. Defence Secretary Kao Hua-chu said that Taiwan would like to procure used M1 Abrams tanks from the US, but that the funds are not currently available as the F-16 work is given priority.
- The Taiwanese military continues to downsize as it aims to become an all-volunteer force by 2014. The number of personnel is expected to drop to 190,000 by 2015, down from 275,000 just a few years earlier.
Executive Summary 5
SWOT Analysis 7
Taiwan Security SWOT 7
Taiwan Defence Industry SWOT 9
Taiwan Political SWOT 10
Taiwan Economic SWOT 11
Taiwan Business Environment SWOT 12
Global Political Outlook 13
North East Asia Security Overview 16
North East Asia: The Strategic Outlook For The 2010s 16
The Geopolitical Importance Of North East Asia 16
Flashpoints And Faultlines In North East Asia 17
The China-North Korea Border 20
The Taiwan Strait 21
Disputed Islands 22
The Russia-China Border 24
China's Western Periphery 24
The Evolution Of North East Asia 25
Security Risk Analysis 29
Table: Asia Pacific Regional Security Ratings 29
Table: Asia Pacific State Vulnerability To Terrorism Index 30
Taiwan's Security Risk 30
Political Overview 32
Long-Term Political Outlook 32
Legal Status Quo To Prevail In 2010s 32
Foreign Policy 35
Political Divide To Curb Cross-Strait Investment Impact 35
Taiwan Security Overview 37
Internal Security Situation 37
External Security Situation 37
Armed Forces And Government Spending 43
Armed Forces 43
Weapons Of Mass Destruction 48
Market Overview 50
Recent Changes 51
Arms Trade Overview 51
Industry Trends And Developments 52
Procurement Trends And Developments 53
Competitive Landscape 55
Industry Forecast Scenario 56
Armed Forces 56
Taiwan's Armed Forces, 2000-2008 ('000 personnel, unless otherwise stated), 2000-2008 56
Defence Expenditure 56
Table: Taiwan's Defence Expenditure, 2010-2017 57
Table: Taiwan's Defence Expenditure Scenario - Changing % Of GDP (US$mn), 2010-2017 57
Defence Trade 58
Key Risks To BMI's Forecast Scenario 58
Macroeconomic Forecast 59
Structural Growth At Risk 59
Table: Taiwan - Economic Activity, 2009-2016 61
Company Profiles 62
Aerospace Industrial Development Corporation (AIDC) 62
CSBC Corporation, Taiwan 64
Chung Shan Institute of Science and Technology 65
Combined Service Forces 66
BMI Methodology 67
How We Generate Our Industry Forecasts 67
Defence Industry 67
Aerospace Industrial Development Corporation (AIDC)
CSBC Corporation, Taiwan
Chung Shan Institute of Science and Technology
Combined Service Forces