Taiwan Defence and Security Report Q2 2008

Politics is a key focus in 2008 as the parliamentary (January 12) and presidential (March 22) elections constitute an important moment in Taiwanese relations with mainland China. The past eight years have been characterised by the independence-leaning policies of outgoing President Chen Shui-bian and the ructions this has caused in Beijing. The widespread notion that Chen and the Democratic Progressive Party (DPP) have neglected the economy, and the greater popularity of Ma Ying-jeou, should favour the opposition KMT in the upcoming elections. Ma has pledged to neither seek reunification with mainland China nor formal independence, but instead maintain the present status quo while negotiating with Beijing about a peace treaty and the normalisation of economic ties. An increased economic integration - the mainland is already the largest recipient of Taiwanese exports and foreign direct investment - would not only boost growth in Taiwan, but also serve to increase the costs, and possibly reduce the likelihood, of further cross-Strait tension.

Tensions have, however, recently been aggravated by the proposal to hold a national referendum, by the ruling Democratic Progressive Party and opposition Kuomintang respectively, on a bid for UN membership under the name of Taiwan. The national referendum is scheduled to be held on March 22 in conjunction with the presidential election. Taiwan's bid for UN membership under the name of Taiwan has been criticized by China as a 'first step toward independence from China', and was also opposed by the US Secretary of State Condoleezza Rice, who denounced the bid as a provocative move that would heighten tensions in the Taiwan Strait. President Chen's leanings towards independence have also caused increasing friction with Japan, whilst relations with Tokyo were already strained by a dispute over the Diaoyutai/Senkaku islands, a group of uninhabited islets between Taiwan and Okinawa, currently administered by Tokyo, but being claimed by both Beijing and Taipei. Overall, the number of countries which recognise Taipei as the single representative of China is rapidly waning as Beijing is wheedling over the remainder of Taiwan's 24 diplomatic allies - mainly smaller states in the Caribbean, Central America and the Pacific. Costa Rica switched allegiance earlier this year and South Pacific island nation Palau appears likely to be the next ally to defect to Beijing, with legislators stating that ties with Beijing would offer more business opportunities.

According to US Secretary of Defence Robert Gates, it is unlikely there will be any military reaction from China to Taiwan's referendum and the US is monitoring the situation closely. Taiwanese Minister of National Defence Minister Lee Tien-yu also announced in November that according to his ministry's intelligence, there had been no unusual deployment of the Chinese military along China's coastline in reaction to the referendum. Tensions between China and the US rose in November 2007 when the US government announced that it would support a US$1bn upgrade to Taiwan's missile defences. The Chinese government subsequently denied the US Navy the use of the port of Hong Kong. The US Government and military have since taken a very 'low-key' attitude in handling the matter, however, and the US is hopeful of maintaining good military relations with China. The US has also announced that it will continue arms sales to Taiwan in accordance with the Taiwan Relations Act to help Taiwan defend itself against China's military threat.

Whilst spending on and preparation for defence has, traditionally, been constrained by the assumption that the US will prevent China from initiating an invasion of Taiwan, presidential candidate Frank Hsieh has insisted that Taipei needs to boost its defence budget to more than 3% of its GDP because of the threat of attack by China. Taiwan's cabinet has already announced plans to raise defence spending in 2008 to strengthen the island's military in response to what it sees as a rising threat from China. The island's defence spending is estimated at 2.85% of GDP this year, up from 2.45% in 2006. Though Taiwan continues to be one of the most significant importers of military equipment in the world, its spending, is still only a quarter of China's official planned spend this year of US$45bn. A Pentagon report in May said Beijing's total military-related spending could be more than double the official figure.

Taiwan's Minister of National Defence Lee Tien-yu also announced at the end of January that construction of a runway on Taiping Island, the most southerly inhabited territory of the Republic of China, has been completed. Taiping Island is one of the largest land masses in the South China Sea's Spratly islands. The construction of the runway has been contentious for neighbouring countries and incurred protests from the Vietnamese government in 2005. President Chen Shui-bian visited the new island at the start of February 2008, immediately triggering a fresh protest from Vietnam, whilst the visit could additionally trigger protests from neighbouring countries that also claim sovereignty over the Spratly Islands in the South China Sea, including the Philippines, Malaysia, Brunei and China.