During the past quarter, Taiwan President Chen Shui-bian’s ability to take the initiative in the legislative and policy arenas has been undermined by growing political turmoil. While Taiwan’s defense establishment has tried to retain a policy-oriented focus, the national security community has also been visibly impacted by fallout from a number of alleged political scandals.

Meanwhile, continued gridlock in the Legislative Yuan has exacerbated U.S. misgivings about Taiwan’s willingness to tangibly contribute to its own national security. These developments have the potential to derail progress in U.S.-Taiwan security cooperation, a relationship that has taken decades to cultivate.

This quarter’s defense and national security analysis examines the political dynamics that seem to define the limits of current prospects for several of Taiwan’s key defense efforts. This report will also discuss defense policy issues and defense budget and procurement developments, and will offer a review of current U.S.-Taiwan defense relations.

Executive Summary: Taiwan Defense & Security Report – Q3, 2006

Marked by a series of corruption scandals, waning domestic confidence in its ability to sustain its economic growth, and a growing military challenge stemming from the People’s Republic of China (PRC), Taiwan’s security environment is complex and dynamic.

With an eye on national elections scheduled for December 2007 and March 2008, Taiwan’s political landscape is becoming increasingly polarized as opposite ends of the spectrum seek to dominate the island’s political agenda. Fierce political debates are taking place on topics as diverse as the rising national debt, competing requirements for central government expenditures, challenges in shoring up its revenue base, and the growing migration of Taiwan’s industrial sector toward mainland China.

In this political and economic environment, Taiwan’s defense establishment is coping with how best to ensure an adequate self-defense capability with limited resources. This quarterly report reviews events over the last quarter, including the ongoing political paralysis, economic security issues, and trends in defense policy.

Executive Summary: Taiwan Defense & Security Report – Q2, 2006

Taiwan continues to face a number of challenges in meeting its defense and national security needs. The island’s political environment is growing increasingly challenging, while changes in Taiwan’s domestic milieu have become more rapid and dramatic than at any time in its history. In many respects, Taiwan is going through a form of transitional crisis from which it is unlikely to emerge until after the next presidential election in 2008.

The overriding interest on both sides of the political spectrum is maintaining or gaining political power. The political environment is charged by fundamental disagreements on issues associated with national identity. On one side of the continuum is the pan-Green coalition, consisting of the Democratic People’s Party (DPP) and the Taiwan Solidarity Union (TSU), which stresses a Taiwanese identity separate and unique from that of mainland China. The opposition pan-Blue coalition of the Kuomintang (KMT) and People’s First Party (PFP) continue to feel strongly about Taiwan identification with the mainland. The dominant parties within these coalitions – the DPP and the KMT – are currently focused on positioning themselves to win intermediate elections over the next two years, setting the stage for the presidential elections in March 2008. Their junior partners, the PFP and the TSU, are striving to remain politically relevant.

In this struggle, each side has adopted tactical measures to enlist support from external allies in the United States, the PRC, and elsewhere to further their domestic political agendas. The pan-Blue and pan-Green coalitions tend to cast each other in the darkest hue possible, with the Blues highlighting the Greens as working towards destroying Taiwan through the pursuit of de jure independence, and driving the nation’s economy into the ground. In turn, the pan-Green coalition has accused its opponents of “selling out” Taiwan to communist China.

A more accurate and less sensationalist perspective reveals that the mainstream elements within all four parties are not at all seeking a radical, strategic shift in external relations. Substantive debates tend to be focused on how to best manage cross-Strait relations, avoid PRC entrapment and the use of force, maintain good relations with Taiwan’s primary benefactor the United States, and how to best stem Taiwan’s economic and political marginalization in the international community.

With less than two years remaining in his term, President Chen and the DPP are looking to recover from their devastating loss in the December 2005 local elections. The DPP has become internally divided as it seeks to develop a consensus on how to best regain its public credibility, while at the same time fissures have emerged within the opposition camp. This transitional crisis is taking place during a period in which many on the island view their competitive advantage as diminishing and, in the absence of other alternatives, views themselves as increasingly reliant on mainland China for their continued economic development.

It is in this dynamic political and economic environment that Taiwan’s national defense establishment finds itself, while also in the midst of a major transformation that has been underway since at least 2000. The defense establishment has attempted to do its best to satisfy its political leadership, while at the same time maintaining operational effectiveness. The Chen Shui-bian Administration’s request for the acquisition of three key systems (diesel electric submarines, PATRIOT PAC-3 missiles, and P-3C maritime patrol aircraft) through a US$18 billion (NT$575.85 billion) special budget request has been held hostage to the political debates between the two camps.

The special budget request for these three systems was withdrawn in February 2006, and the MND has reconstituted its request in the form of a supplemental request to the annual 2006 defense budget. However, when the budget is forwarded to the Legislative Yuan, the passage of all portions of the new supplemental budget request is not assured. This quarter’s defense and national security analysis examines Taiwan’s dynamic political and economic environment with a particular focus on the factional politics within the KMT and DPP, and their effects on the continued impasse over the three items that were originally contained in the defense special budget request.

Executive Summary: Taiwan Defense & Security Report – Q1, 2006

In 2005, Taiwan’s political landscape was marked with continued divisions in the island’s domestic polity. Issues at hand included the island’s political future, how to best manage Taiwan’s limited fiscal resources in a dynamic economic environment, and the continued political deadlock surrounding the legitimate requirements for an adequate self-defense capability within the context of Taiwan’s broader national interests.

This report first reviews Taiwan’s domestic political and economic environment in 2005, including the brief détente between the ruling Democratic Progressive Party (DPP) and the People’s First Party (PFP), the cross-Strait initiatives of the opposition parties, and the downturn in the DPP’s public image that in December resulted in the party’s worst electoral performance since it assumed power in 2000. Also examined are the economic challenges Taiwan is facing, including the growing national budget deficit that has been a source of debate for the past five years.

The report also reviews the key defense policy issues of 2005, including the continued impasse over the defense special budget request for diesel electric submarines, PATRIOT PAC-3 missile defense system, and P-3C maritime patrol aircraft. Finally, the report provides an outlook for 2006 and issues a number of recommendations for U.S. policymakers to consider over the coming year.

Executive Summary: Taiwan Defense & Security Report – Annual Review, 2005