Rewritten -- October 2001

Map of Taiwan

The Republic of China Navy (ROCN) bases its force level requirements on its assessment of the threat posed by the People’s Liberation Army - Navy (PLAN) and Air Force (PLAAF) of the People’s Republic of China (PRC). Ironically, the ability of the ROCN to procure the systems it needs to counter those threats are hindered by the reluctance of Western governments to sanction arms sales that might disrupt their efforts to improve relations with the PRC. Most notably, in the past decade the ROCN has seen all of its efforts to acquire diesel-electric submarines from Western suppliers stymied by these supplier’s governments refusal to approve the sales. Similarly, ROCN efforts to achieve an Aegis or Aegis-like capability to respond to the PRC’s anti-ship missile capabilities have been frustrated by US reluctance to release the technology to Taiwan.

Even considering the hindrances, the ROCN has recently completed significant acquisition programs involving Cheng Kung (Perry), Kang Ding (La Fayette) and Knox class frigates that have substantially modernized its surface combatant force. Additionally, Taiwan has become more self-reliant in the construction of fast attack craft (FAC), patrol vessels, and amphibious units, as well as surface-to-surface missiles (SSMs).

For the foreseeable future, the ROCN will continue with programs to build its own corvettes, FAC, and patrol vessels while attempting to persuade Western powers to release high-technology systems to Taiwan. Of significance is the new US administrations stance on the Taiwan issue. President George Bush Jr. announced on 23 April 2001 that the US would defend Taiwan against any Chinese attempt to forcefully reunite it with the mainland. Additionally, the President authorized the sale and transfer of a large weapons package, including the four Kidd class destroyers and up to eight diesel-electric submarines, as well as Boeing Harpoon surface-to-surface missiles (SSMs), Raytheon Mk 48 torpedoes, and the Lockheed P-3 anti-submarine warfare (ASW)/patrol aircraft.

The Kidd class, although not as capable as AEGIS destroyers, is considered a significant upgrade to the ROCN’s anti-air (AAW) and anti-surface (ASuW) warfare capabilities, and are immediately available. The submarines proposed by the US Government will be an entirely different matter. More than likely, European governments will refuse to allow their technology to be transferred to Taiwan, and the US has not designed or built a diesel submarine in over thirty years. It will take at least several more years before the submarine issue is finally decided.

General

Geographical Information:

Coastline: 1,448 km (897.76 miles)

Maritime Claims:

Exclusive Economic Zone (EEZ): 200nm

Territorial Sea: 12nm

National Capital and Defense Headquarters: Taipei (population: 2,100,000)

Language: Mandarin Chinese (official), Taiwanese, Hakka dialects

 

Political

Country’s legal name: Republic of China (ROC)

Type of Government: Republic – multiparty democratic regime headed by a popularly elected president.

Branches of Government:

Executive Branch: Chief of State: President CHEN Shui-bian (since 20 May 2000). Head of Government: Premier (President of the Executive Yuan) CHANG Chun-hsuing (since 20 May 2000) and Vice Premier (Vice President of the Executive Yuan) LAI IN-jaw (since 20 May 2000). Cabinet: Executive Yuan appointed by the President.

Legislative Branch: A unicameral Legislative Yuan (consisting of 225 seats – 168 elected by popular vote, 41 elected on the basis of the proportion of nationwide votes received by participating political parties, eight elected from overseas Chinese constituencies on the basis of the proportion of nationwide votes received by participating political parties, eight elected by popular vote among aboriginal populations; members serve three year terms), and a unicameral National Assembly (consisting of 334 seats ; members elected by popular vote to serve four year terms).

Judicial Branch: A Judicial Yuan with justices appointed by the President with the consent of the National Assembly.

Currency: Taiwan Dollar (TWD).

Economic Overview: Taiwan has a dynamic capitalist economy with gradually decreasing guidance of investment and foreign trade by government authorities. In keeping with this trend, some large government-owned banks and industrial firms are being privatized. Real growth in the Gross Domestic Product (GDP) has averaged 8% annually for the past three decades, slowing slightly in the late 1990s and into the new decade. Exports have grown even faster and have provided impetus for industrialization.

Inflation and unemployment are low; the trade surplus is substantial; and foreign reserves are the world’s third largest. Agriculture contributes 3% to the GDP, down from 35% in 1952. Traditional labor-intensive industries are steadily being moved offshore and replaced with more capital and technology sensitive industries. Taiwan has become a major investor in China, Thailand, Indonesia, the Philippines, Malaysia, and Vietnam. The tightening of the labor markets has led to an influx of foreign workers, both legal and illegal.

Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from the Asian financial crisis in 1998 – 1999. Growth in 2000 and 2001 was expected to be moderate, backed by the expansion in domestic consumption, exports, and private investment. However in 2002 and beyond, growth may be extremely limited or actually decline in large part due to the slow down of the world economy over the past eighteen months.

This economic slow-down is significant enough that Taiwan is pushing to open formal investment ties with the People’s Republic of China (PRC). As can be expected, the PRC is open to these formal ties on the agreement that Taiwan hastens its acceptance of reunification.

The key to Taiwan’s economic future rests with the nations status as a large exporter of information technology (IT) equipment (one third of all exports in 2000). This sector has experienced a major decline since the end of 1999, and future economic growth will be dependent on how long the world economic slow down lasts, and the status of any formal economic ties with the PRC.

Alliances and Foreign Relations: The People’s Republic of China (PRC) replaced Taiwan at the United Nations (UN) in 1971, and its diplomatic position eroded as many countries changed their official recognition from Taipei to Beijing. By mid-2000, Taiwan had formal diplomatic relations with only 29 countries.

During the same time period of diplomatic decline, Taiwan cultivated informal ties with most countries to offset its diplomatic isolation and to expand its economic relations. As a result, a number of nations have set up unofficial organizations to carry out commercial and other relations with Taiwan. Between its official overseas missions, and its unofficial representative and/or trade offices, Taiwan is represented in 149 countries. Recently, Taiwan has lobbied strongly for admission into international organizations such as the UN. The PRC opposes Taiwan’s membership in such organizations, most of which require statehood for membership, because Beijing considers Taiwan to be a province of China, not a separate sovereign state.

Relations with the US Government have remained relatively stable since January 1979, when the US changed its diplomatic recognition from Tapei to Beijing. In the US-PRC Joint Communique that

announced the change, the US recognized the PRC Government as the sole legal government of China, and acknowledged the Chinese position that there is only one China, and Taiwan is a part of China. The Joint Communique also stated that the US would maintain cultural, commercial, and other unofficial relations with the people on Taiwan.

In June 1979, then President Carter signed into law the Taiwan Relations Act (TRA), which created the domestic legal authority for the conduct of unofficial relations with Taiwan. Following de-recognition, the US terminated its Mutual Defense Treaty with Taiwan. However, for the past two decades, the US has continued to sell defense military equipment to Taiwan in accordance with the TRA. In 1999, the US House International Relations Committee approved the Taiwan Security Enhancement Act, which aims to bolster US-Taiwanese military ties. This act, although not very substantive, does indicate the US willingness to maintain close ties to Taiwan and continue to support its defense. In May 2001, US President George Bush Jr. announced publicly that the US would defend Taiwan in the event that the PRC attempts to forcefully reunite with Taiwan. This was the first public acknowledgement of US intentions in the event of PRC-Taiwanese hostilities since the Mutual Defense Treaty was suspended in 1979.

International Organization Participation: APEC, AsDB, BCIE, ICC, IOC, WCL, WTrO (applicant).

The Republic of China Armed Force’s (ROC) foremost mission is the defense of Taiwan. Most of Taiwan’s defense efforts are directed against mainland China, which is seen as the predominant threat and which has not renounced the use of force against Taiwan.

Taiwan’s emphasis on a defensive strategy is relatively new. For decades, the ruling Kuomintang (KMT) Nationalistic Party held that Taiwan was the sole legitimate government of all China, including the mainland. In 1991, Taiwan publicly gave up this dream, acknowledging for the first time that the PRC controls mainland China. Taiwan’s current military doctrine focuses on three specific objectives:

· Maintaining air superiority over the Taiwan Strait and the waters contiguous to Taiwan.

· Conducting effective counter-blockade operations.

· Defeating an amphibious and aerial assault on Taiwan.

Taiwan’s military strategy will continue to remain defensive. The country’s future survival depends upon its ability to deter potential Chinese aggression. To do so, Taiwan must maintain a qualitative edge over its potential adversary through the continued acquisition of modern weapons, technologies, and military systems.

Taiwan’s primary security goal for the foreseeable future will be to maintain the status quo, while retaining its long-term objective of eventual peaceful reunification with China on terms favorable to the Taipei regime. Taiwan will try to advance its international status, maintain a strong economy, modernize its military, and further democratize the island’s political system. At the same time, Taiwan will endeavor to expand political, cultural, and economic ties with Beijing, thereby reducing tensions with China and lessening the prospects of military conflict.

Although Taiwan’s main focus is on the mainland, it is involved in several other territorial disputes in the region:

· Taiwan is involved in the complex dispute over the Spratly Islands with China, Malaysia, the Philippines, Vietnam and possibly Brunei.

· The Paracel Islands are currently occupied by China, but claimed by Vietnam and Taiwan.

· Taiwan and China both claim the Japanese-administered Senakaku-shoto islands.

The President is the Commander in Chief of the Republic of China (ROC) Armed Forces, and is responsible for all defense matters of the state. The National Security Council assists him, which is the main advisory body on national security issues.

The Minister of National Defense (MND) is responsible for the day-to-day administration of Taiwan’s defense establishment. He is responsible for formulating military strategy, setting military personnel policies, managing the military procurement process, arranging for the research and development of military technology, and compiling data for the national defense budget. As of early 2000, the new National Defense Law 2000 established a guideline for the MND to be a civilian, rather than a retired military officer, in order to strengthen civilian control over the armed forces.

Mr. Wu Shih-wen

Minister of National Defense

Ministry of National Defense

2^nd Floor

164 Po-Ai Road 100

Taipei

Taiwan

Tel: + 886 2 23 14 32 74

Fax: + 886 2 23 14 42 21

General Tang Yao-ming (Republic of China Army) (as of January 1999)

Chief of the General Staff

Ministry of National Defense

2^nd Floor

164 Po-Ai Road 100

Taipei

Taiwan

Tel: + 886 2 23 14 32 74

Fax: + 886 2 23 14 42 21

Admiral Li Jye

Commander in Chief of the Navy

General Headquarters Navy

3015 Pei-An Road

Tachih, Taipei

Taiwan

Tel: + 886 2 25 05 38 11

Fax: + 886 2 25 02 46 98

Additional information on the Taiwanese Ministry of National Defense is available on the Internet at http://www.mnd.gov.tw (Mandarin).

The ROC Armed Forces consists of approximately 382,000 active duty personnel, including:

· 240,000 in the Army (reduced to 200,000 by 2003).

· 70,000 in the Navy (including 1,000 in the Naval Air component and 35,000 Marines).

· 72,000 in the Air Force.

Approximately 1,160,000 reserve personnel support the active duty force, including:

· 1,000,000 in the Army.

· 70,000 in the Navy (including 35,000 Marines).

· 90,000 in the Air Force.

Taiwan also has over 26,650 paramilitary personnel, including 2,100 in the Coast Guard and 650 in the Customs Service.

The Navy General Headquarters is responsible for developing and maintaining the Navy’s combat readiness, as well as commanding and supervising its subordinate fleets and ground units. Under its command are the following commands:

· Naval Fleet Command

· Marine Corps Headquarters

· Navy Logistics Command

· Headquarters of the Naval Area Command

· Area Service Office

· Naval Base Command

Subordinate Navy units (four hundred forty seven ships and craft) are under the direct supervision of the Naval Fleet Command and include the following commands:

· Antisubmarine Warfare (ASW) Command

· Destroyer Group

· Submarine Group

· Patrol Group

· Logistics Groups

· Amphibious Forces

· Naval Aviation Command

The Republic of China Navy (ROCN) is administratively organized into three naval districts:

· The 1^st District, at Tsoying, is the fleet headquarters, the base for southern patrol and logistic squadrons, officer training schools, the Naval Academy, and a naval shipyard.

· The 2^nd District, at Makung, supports several attack squadrons, a naval shipyard, and training facilities.

· The 3^rd District, at Keelung, is the base for the northern patrol and logistic squadrons.

The Republic of China Coast Guard (ROCCG) is responsible for eight local Coast Guard Commands and 25 Coast Guard Battalions. The Coast Guard currently consists of twenty ships and craft, and is responsible for the security of the coastline from intrusion and smuggling by providing coastal patrol and defense through such activities such as air patrols, inshore patrols, harbor inspections, and inland inspections.

Admiral Li Jye

Commander in Chief of the Navy

General Headquarters Navy

3015 Pei-An Road

Tachih, Taipei

Taiwan

Tel: + 886 2 25 05 38 11

Fax: + 886 2 25 02 46 98

Vice Admiral Chi Hua CHAN

Vice Admiral Sho Lu FAN

Deputy Commanders in Chief of the Navy

Vice Admiral Hong Bo FEI

Fleet Commander

Vice Admiral Chi Chiang WANG

Commander of the Eat Command

Mr. WANG Chun

Director General of the Coast Guard

The ROCN currently consists of four hundred forty seven ships and craft:

· Four diesel submarines:

1. Two Hai Lung class.

2. Two Guppy II class.

· Seven Gearing (Wu Chin III Conversions) class destroyers.

· Twenty-one frigates:

1. Seven Cheng Kung (Perry) (Kwang Hua 1 Project) class, plus one under construction.

2. Six Kang Ding (La Fayette) (Kwang Hua 2 Project) class.

3. Eight Knox class.

· Forty-eight missile-equipped Fast Attack Craft (FAC):

1. Two Lung Chiang class.

2. Forty-six Hai Ou class.

· Eight Ning Hai class gun-equipped FAC.

· Twelve Jin Chiang (Kwang Hua 3) class patrol boats.

· Twelve mine countermeasures vessels (MCMVs):

1. Four Aggressive class ocean minesweepers (MSOs).

2. Four Yung Feng (MWV 50) class coastal minehunters (MHCs).

3. Four Adjutant and MSC 269 class coastal minesweepers (MSCs).

· Three hundred amphibious ships and craft:

1. One Anchorage class landing ship, dock (LSD).

2. Two Newport class landing ships, tank (LSTs).

3. Eleven LST 1-510 and 511-1152 class LSTs.

4. Four LSM 1 class landing ships, medium (LSMs).

5. Two hundred eighty-two landing craft.

· Thirty-five auxiliary ships and miscellaneous craft..

The ROCCG currently consists of twenty ships and craft:

· Two Ho Hsing class offshore patrol vessels (OPVs).

· Eighteen patrol bats:

1. Two Pao Hsing class.

2. Two Mou Hsing class.

3. One Yun Hsing class.

4. One Hsun Hsing class.

5. Twelve PP-1001 class.

The Republic of China Customs Service currently consists of sixty-six craft in addition to hundreds of harbor launches.

* Currency conversions based on exchange rates for 07 August 2001 (US$1=34.670TWD)

** 2000 budget is for an 18-month period (01 July 99 – 31 December 2000) as the government transitioned from a fiscal year to a calendar year.

The Ministry of National Defense’s stated goal for the defense budget is 3.5% of the GDP. However, this percentage is no longer considered realistic, and the ROCAF will more than likely only average around 3% of GDP for the forseeable future.

As an example, when the 2001 budget was being drafted, the Minister of National Defense believed that the idealized target for the year was around US$12.6B. However, being realistic, only a US$10.8B budget was submitted by the Ministry, of which US$8.5B was approved by the Executive Yuan, US$2.3B less than requested. Operations, maintenance, and personnel (O&M) expenses for the year will total around US$6.5B, with the remaining US$2B for procurement purposes. The Navy will only receive US$670M for procurement in 2001.

The defense budget also continues to decline in its share of overall government outlays, declining from 17.2% in 1998 to 16.2% in 2001. Significant fiscal shortfalls, including a budget deficit of US$4.9B in 2001, and a national debt of US$66B, the government is beginning to enforce fiscal conservatism. Additionally, the new government under Chen Shui-bian (since 2000) is coming under increasing criticism to deliver on campaign promises to greatly expand social welfare programs at the expense of more traditional spending goals.

In addition to the standard defense budget, the government occasionally funds some acquisitions on an adhoc basis, with funding from additional sources. Part of the reason is to reduce public criticism on overall defense spending. For example, in 1994 the F-16A/B and Mirage 2000-5 jet fighter acquisitions were funded outside of the defense budget. Other programs in which the Ministry of Defense may request funding outside its normal channels are the Theater Ballistic Missile Defense (TBMD) program. Estimated at US$9B over 8-10 years, the Defense Ministry would never be able to fund this program without a separate budget line. Programs proposed by the US in 2001 may also require additional funding over the long-term.

The MND Military Procurement Bureau (MPB), which was established on 1 July 1995, purchases most of the military equipment and supplies required by Taiwan’s defense organizations. Following the exposure of (and public outrage at) several major procurement scandals that began in 1998, the MND came under increasing pressure to reform the defense procurement process. A new advisory commission was set up by the summer of 1998, however defense procurement scandals continued. As of early 2001, the government laid the groundwork for the new Armament and Acquisition Agency, which will become operational in February 2002.

The new Armament and Acquisition Agency will combine the old MPB, the procurement offices in the military-run Chung-Shan Institute of Science and Technology (CSIST), and the General Headquarters procurement offices into one organization. The new organization will operate under the direct supervision of the MND in order to consolidate and oversee a more transparent acquisition system.

Currently, several military procurement bodies, such as the military services’ logistics commands and the Chung-Shan Institute, play a role in military purchasing process. Military organizations may purchase imported items without involving the MPB bids, but all equipment and supplies with a purchase amount exceeding the designated audit ceiling of US$1.55M must be purchased through MPB tenders. Additionally, all procurements sourced from foreign suppliers having a value in excess of US$1M must be conducted through the MPB and its field offices in foreign countries. The Chung-Shan Institute is a major player in the definition of new requirements as well as the development, testing and fielding of new systems.

There are two categories of military procurements in Taiwan: Domestic purchase and overseas purchase. Both must be done in accordance with pertinent provisions of the Law of Audit. Under the Law of Audit, procurements can be made by open tender, restricted tender (selective tenders), or negotiations. Taiwanese military purchasing agencies usually solicit foreign bids through open tenders. Restricted tenders may be used for smaller purchases when the government specifies that the project should be awarded to entities in select geographical regions, or there is another policy reason for not holding an open tender. Restricted tenders, usually awarded on a price-comparison basis, require at least two bidders. Negotiated purchases require special authorization from the Ministry of Audit. Such authorization is granted only when the purchasing entity can demonstrate that there is only one qualified supplier, or that the need is too urgent to conduct a competitive tender.

When less than three qualified bidders compete for an open tender, the bids will not be opened and the agency in charge will announce the cancellation of the tender. However, if there are only one or two bids and the agency has confirmed that only those bidders have the capability to take on the project, the procurement may be changed to a restricted tender or a negotiated purchase. This normally happens only on the third round of a tender (i.e. after the tender has twice failed to attract the mandatory three qualified bidders).

Procurements can be classified into "single review" and "divided review" tenders, based on differences in the procedures used to review the bids. Tender documents usually ask the bidders to provide three main items: Qualifications of the supplier, specifications of the commodity, and price. If these three items are reviewed at the same time, the tender is defined as a "single review" tender. If the item to be procured is expensive and technically complex, the qualifications of the bidders and the specifications of the product(s) they propose to supply are usually reviewed before proposals are opened. These tenders are defined as "divided review" tenders.

To begin the procurement procedure, the military purchasing agencies must publicly announce the invitation-to-bid in both Chinese and local English newspapers, namely the Youth Daily News and the Central Daily News (Chinese), and the China Post and the China News (English). In case of restricted tenders or negotiated purchases, invitation letters are sent to specific firms. An invitation to bid is attached to the letter.

The bidder must have its own copy of the invitation to bid, available at modest cost from the MPB, to tender a bid. A bid bond of three percent of the total bid value in the form of cash, bank draft, certified check, bank guarantee, or letter of credit is required at the time of submission and will be refunded if the bid is unsuccessful. Unless otherwise stipulated in the contract, within 18 days after receiving the minutes of award, the seller must deposit a performance bond of five percent of the contract value.

New-to-market vendors interested in presenting their product line to Taiwan’s military branches should first contact the MPB to schedule a presentation. A primary function of the MPB is the compilation of data and supplier lists, which are made available to Taiwan’s military branches. Defense contractors are strongly encouraged to submit product literature and promotional material to the bureau’s second division, which is charged with making this information available to the various military service headquarters.

Taiwanese contracting entities tend to wield excessive power over the contractor. Exorbitant potential liabilities, cumbersome change order procedures, and expensive bonding requirements are common. Contracting entities tend to view contractors as adversaries, which can make normal business dealings strained. Taiwanese bureaucrats tend to believe that the penalty for making no decision is always less than the penalty for making the wrong decisions, and this attitude can result in frustrating delays or unreasonable demands on the contractor as bureaucrats seek to take the safest course of action. Firms employing relatives of existing officials and/or retired officials have an inside track on Taiwanese contracts. However, as Taiwan bids to join the World Trade Organization (WTO) and sign on to the WTO Government Procurement Agreement (GPA), Taiwan's procurement practices will need to be more transparent and fall in line with international standards. Towards that end, Taiwan’s new Government Procurement Law (GPL) went into effect on 27 May 1999 with provisions meant to conform to the requirements of the GPA, and significantly improve the transparency and fairness of the government procurement process. Additionally, the new Armament and Acquisition Agency once operational in 2002, should also help streamline and add transparency to the procurement process.

The majority of Taiwan’s military procurements involve some type of offset agreements that tend to be associated with the nations industrial development program. The government has imposed offsets and technology transfer requirements on successful bidders for large military procurements, often after tenders have been awarded and contracts signed. Generally, Taiwanese offsets or industrial cooperation programs range from 30%-60% of the contract price. Although no regulations stipulate that large projects must have local participation, government authorities prefer to have domestic industry participation in major procurements to help local firms acquire foreign technology and high technology manufacturing experience. In addition, these industrial benefits make procurements more politically palatable.

A prime example of post-contract offsets demanded is the US F-16 sale to Taiwan in 1993. Taiwan’s Legislative Yuan retroactively demanded Taiwan's first ever offset from an American firm in connection with the F-16 sale. The Yuan blocked payments on the package until Lockheed Martin provided Taiwan with technology and production contracts related to the aircraft. In July 1993, Lockheed Martin signed a 10-year Industrial Cooperation Agreement (ICA) worth US$1.1B, which ensures production of some of the aircraft parts and creation of maintenance depots in Taiwan.

· Ministry of National Defense

Major General Chen Lan-Juen (as of 1 January 1999)

Director of Procurement

Military Procurement Bureau (MPB)

Ministry of National Defense

172-1 Po-Ai Road

Taipei, Taiwan

Tel: + 886 2 382 6078, 886 2 382 6079

Fax: + 886 2 383 6444

Taiwan has a strong private-sector industrial base, but domestic production of defense equipment has traditionally been dominated by organizations run directly by the Taiwanese military. Domestic production has been concentrated in two organizations: The CSIST and the Aero Industry Development Center (AIDC). Academic institutions and other state-owned firms, most notably the China Shipbuilding Corporation (CSC), also play a key role in the production of defense equipment.

The star of Taiwan’s defense industry is the CSIST. Established in 1968, the CSIST employs over 6,000 scientists and more than 8,000 technicians. The Institute has four major research divisions:

• Aeronautic research and development

• Missile and rocket development

• Electronics

• Chemistry

To date, the CSIST has designed, tested, and produced on a large scale a number of weapon systems, including the Hsiung Feng I and II surface-to-surface missiles (SSMs), the Tien Kung 1 and 2 surface-to-air missile (SAM) systems, sonar systems, and naval electronic warfare systems. CSIST can be reached as follows:

· Chung-Shan Institute of Science and Technology (CSIST)

Lieutenant General LIU Chin-Ling

President

Chungshan Institute of Science and Technology (CSIST)

Lung Tan

Post Office Box 9008-1

Lungtan

Taiwan

Tel: + 886 3 471 2201

Fax: + 886 3 471 1057

Website: http://www.csist.org.tw

Control of the Aero Industry Development Center/AIDC (previously a part of the CSIST) was transferred to the Taiwanese Ministry of Economic Affairs as a state-run enterprise on 1 July 1996. This conversion from military to public enterprise status is intended to facilitate the transfer of Taiwan’s military aeronautic technology to the private sector while enabling the center to form joint ventures with high-tech foreign manufacturers. The AIDC has also been renamed as the Aerospace Industrial Development Corporation to reflect its new private sector emphasis. AIDC can be reached as follows:

· Aerospace Industrial Development Corporation (AIDC)

General Tsai Chuen-Huai

Director General

Aerospace Industrial Development Corporation (AIDC)

111-6, Lane 68

Fu-Hsing North Road

407 Taichung

Taiwan

Tel: + 886 080 082020, 886 4 256 2226

Fax: + 886 4 256 2370

E-Mail: aidc@ms.aidc.com.tw

Website: http://www.aidc.com.tw

The state-run China Shipbuilding Corporation (CSC), with 6,400 employees, is building the Navy’s new surface combatants. CSC can be reached as follows:

· China Shipbuilding Corporation

Mr. C. C. Chen

Sales Manager

China Shipbuilding Corporation

3 Chung Kang Road

Hsiao-Kang

Kaohsiung 81234

Taiwan

Tel: 886 7 801 0111

Fax: 886 7 802 0805

E-Mail: 1588@kao.csbcnet.com.tw

Website: http://www.csbcnet.com.tw/csbc/english2.htm

Traditionally, Taiwan has relied heavily on US suppliers for its defense equipment needs. From the US entry into World War II until the break in diplomatic relations in 1979, the US was a close military ally of Taiwan. Until 1994, Taiwan purchased advanced military equipment almost exclusively from the United States, often directly from the US Government through the Foreign Military Sales (FMS) program. All of the major US defense contractors have sold equipment and/or technology to Taiwan, and most have well-established, long-term relationships with individuals and institutions in the Taiwanese military. U.S. defense sales to Taiwan are supported and restricted through two primary policy documents:

• The Taiwan Relations Act 1979: This Act, passed by the US Congress in 1979, states that the US will provide defense supplies to Taiwan in order to maintain a sufficient self-defense capability.

• The Second Shanghai Communiqué: China and the US signed this document on 17 August 1982 in order to further the relationship between the two nations. Part of the agreement included the provision that defense supplies provided to Taiwan would not exceed the 1979 level of supplies in either qualitative or quantitative terms. This agreement also led to further negotiations that established an annual reduction in the level of US support to Taiwan by US$20M per year after the US$800M level was reached in 1983. Non-defense technology transfers were not restricted by the Shanghai Pact.

The Second Shanghai Communiqué effectively placed an annually declining ceiling on US arms sales to Taiwan. From the FY1983 high of US$800M, the ceiling declines US$20M annually, which places the ceiling at US$480M for 1999 and US$460M for 2000. Taiwan is required to submit its preferred purchase lists to the US State Department for approval two years in advance. In 1994, Congress passed an amendment that would make it easier for US companies to sell equipment to Taiwan, but after protests by China and the Clinton administration, the amendment became a non-binding resolution.

China’s purchase of Russian fighter aircraft (Su-27 Flankers) in 1992 prompted the US to re-examine the ability of Taiwan to defend itself and the implications of America’s agreements with China on Taiwan’s long-term security. This review led President Bush to approve the sale of 150 F-16s to Taiwan in September of 1992 (ten years after the US initially refused to sell F-16s to Taiwan). Interestingly, the F-16 sale to Taiwan, conducted as a Foreign Military Sales (FMS) Agreement, totaled over US$5.8B, and therefore represented a significant departure for the sales ceilings agreed upon in the Second Shanghai Communiqué. Since 1992, China has continued to acquire advanced Russian weapon systems (Su-30 fighters, Sovremenny class destroyers, Kilo class submarines, and advanced surface-to-surface and surface-to-air missile systems). These acquisitions, plus Chinese ballistic missile test firings, which led up to the Taiwan Strait Crisis of 1996, have soured US-China relations and have led to a greater willingness on the part of the US to provide Taiwan with modern weaponry. The US Senate passed a provision strengthening the 1979 Act while diluting the 1982 Communiqué.

In 1999, Republicans in the US Congress moved to strengthen US military ties with Taiwan and support those ties with increased military equipment sales. At one point, language in the Taiwan Security Enhancement Act proposed supplying Taiwan with a number of advanced air and sea-based weapons systems (including AEGIS equipped surface ships, diesel submarines, theater missile defense equipment, and AIM-120 air-to-air missiles), but references to specific weaponry was deleted from later versions of the bill. In April 2001, following a series of incidents that further strained US/PRC relations, US President George Bush Jr made two major announcements concerning US policy on Taiwan. First, the President publicly announced that the US would defend Taiwan in the event that the PRC attempts to forcefully reunite with the island. This was the first time that this unwritten/assumed policy concerning Taiwan’s defense was acknowledged since the Mutual Defense Treaty was suspended in 1979. Secondly, the President went public with a new arms sales package offer to Taiwan, which for the first time in several decades, offered up to eight submarines, the four Kidd class destroyers, as well as surface-to-surface missiles (SSMs), torpedoes, and anti-submarine warfare (ASW)/patrol aircraft. Oddly enough, it will be difficult at best for the US to deliver on the proposed package as it stands. Additionally, the Taiwanese Government has not made any official response to the proposal, and the US Congress must also approve it.

Since 1990, Taiwan has attempted to diversify its sources of defense equipment to lessen its dependence on US suppliers. In early 1992, Taiwan's former Defense Minister, Sun Chen, implemented a procurement policy directed at overcoming Taiwan's dependence on U.S. weapons systems purchases. With the implementation of this new policy, France made some significant offers of technology and support to Taiwan. These offers resulted in the sale of six La Fayette class frigates to Taiwan in a contract valued at US$1.7B (plus US$1.6B for the combat systems). France also sold sixty Dassault Mirage 2000-5 fighters to Taiwan in late 1992. However, in January 1994, in response to intense Chinese pressure, France agreed to ban further arms sales to Taiwan, although the frigate and fighter sales continued in accordance with their contracts. France may have established a formal policy of no arms sales to Taiwan, but French suppliers have continued to actively market a wide range of defense equipment and technology to all three of Taiwan's armed services, with at least the tacit approval of the French Government. In November 1995, France agreed to sell shoulder-fired Mistral air defense missiles to Taiwan, but pressure from the China forced France to withdraw their offer (Taiwan bought US Stinger missiles instead). In one of their more recent deviations from their policy, French suppliers delivered a substantial quantity of anti-tank rocket launchers to Taiwan in 1998. In mid-1998, during the annual Franco-ROC military procurement conference held in Taipei, France reportedly offered to sell Taiwan the Sadral sextuple point-defense surface-to-air missile (SAM) system (the shipboard version of the Mistral) and the F-17 torpedo.

Besides the two principal foreign suppliers noted above (France and the US), Taiwan has managed to obtain (or receive assurances of willingness to approve sales of) defense equipment and technology, from several other countries, though most of these have been on a much smaller scale. These countries include Belgium, Canada, Denmark, Germany, Indonesia, Israel, Italy, Singapore, South Africa, Spain, and UK. Russia has also been willing to export certain equipment with arguably dual-use potential (such as utility helicopters and STOL transport aircraft).

The biggest factor deterring foreign suppliers from doing business with the Taiwanese MND is the political and economic power of the PRC. Virtually any nation that has concluded arms sales agreements with Taiwan has had to contend with intense diplomatic protests from China. The French experience, detailed above, is typical; and continued US arms sales to Taiwan are one of the major sticking points in the continued tense nature of US-Chinese relations. The Netherlands, for its part, was the recipient of intense pressure when it sold two Zwaardvis (Hai Lung) class submarines to Taiwan in 1981. As a result of that experience, it is doubtful that any builder of diesel-electric submarines will be willing to brave Chinese disapproval by selling submarines to Taiwan with the exception of the US and Russia.

Taiwan’s primary threat is mainland China, which considers Taiwan to be a renegade province that will eventually reunified with the mainland, by use of military force if necessary. Beijing has repeatedly emphasized its determination to take military action against Taiwan, if the island should declare formal independence. Should China decide to use military force against Taiwan, there are several options available to Beijing, including, but not limited to:

• An interdiction of Taiwan’s sea lines of communication (SLOCs) coupled with a blockade of Taiwan’s ports. Taiwan believes that any Chinese aggression would begin with a naval blockade to cripple Taiwan’s economy and isolate it internationally. MND officials estimate that Taiwan would only be able to endure a blockade for 120 days before needing a re-supply of essentials, so Taiwan is naturally concerned with China’s plans to develop a blue water navy. Beijing would probably initiate a blockade in steadily increasing steps, beginning with declaring maritime exercise closure areas and stopping Taiwanese-flagged merchant and fishing vessels operating in the Taiwan Strait. Operations would include mine laying and deploying submarines and surface ships to enforce the blockade. Barring third party intervention, the Chinese People’s Liberation Army - Navy (PLAN)’s quantitative advantage over the ROCN would probably prove overwhelming over the course of time. Taiwan’s military forces would probably not be able to keep the island’s key ports and SLOCs open in the face of concerted Chinese military action. Taiwan’s small surface fleet and four submarines are numerically insufficient to counter China’s major surface combatant force, and its anti-submarine warfare (ASW) assets likely would have difficulty defeating a blockade supported by China’s large submarine force. The PLAN Air Force’s bombers, armed with anti-ship missiles would place Taiwan’s merchant, fishing, and naval ships at serious risk.

• A large-scale missile attack on Taiwan. Over the next several years, the size of China’s Short Range Ballistic Missile (SRBM) force is expected to grow substantially. Taiwan recognizes this force as a significant threat, and is developing a lower-tier system ballistic missile defense system to counter the threat. Currently it appears that this system will be based on the Patriot Advanced Capability-3 (PAC-3) system, but if the Navy acquires Aegis-equipped surface combatants they will have a role to play in ballistic missile defense.

• An all-out invasion of Taiwan. An amphibious invasion of Taiwan by China would be highly risky and most unlikely option for the PLA, chosen only as a last resort to force the total surrender of the island. It would most likely be preceded by a variety of preparatory operations to include a blockade, conventional missile strikes, and special operations against Taiwan. China’s amphibious lift capability is extremely limited at present (the PLAN has sufficient shipping to transport approximately one division), and there are no indications that China is devoting resources to significantly improve its amphibious assault capability. As a result, success would only come with a massive commitment of military and civilian assets over an extended period of time (China could move as many as seventeen divisions if it mobilized all of its fishing and merchant shipping for that one purpose) and without third party intervention. An invasion of Taiwan would also require a significant airborne or airmobile component to seize a port or cut off Taiwan’s coastal defenders from supply and reinforcement. China could reportedly drop two airborne brigades and airlift two to four regular infantry divisions into Taiwan as part of an all-out invasion effort. An invasion of Taiwan would certainly damage China’s economy and its diplomatic interests, especially in the Asia-Pacific region.

To counter these threats, Taiwan is in the process of a major shift from maintaining formidable ground forces to developing a strong air and maritime defense capability. It is fundamental to Taiwan’s strategy that it maintains the military capacity to ensure that no landing can occur on Taiwanese soil.

To support the national strategy, the ROCN has two primary missions:

· Defend Taiwan against a Chinese blockade and protect the island’s sea lines of communication (SLOCs).

· Assist the Air Force and Army in repelling a Chinese invasion.

In order to accomplish these missions, the ROCN’s main priorities are to develop capabilities in the following areas:

• Anti-submarine Warfare (ASW).

• Merchant ship escort and protection.

• Sea-based air defense (particularly in light of China’s acquisition of Su-27 and Su-30 fighters and the PLAN’s probable acquisition of a PLAN aircraft carrier in the future).

• Electronic warfare (EW).

• Anti-blockade operations.

The ROCN and ROCCG continue to modernization their respective services to replace its aging fleet of World War II-vintage surface combatants with newer ships. The modernization program, referred to as the "Kwang Hua" (KH) or "Glorious China" Program included the licensed-production of eight Cheng Kung/Kwang Hua 1 (Perry) class frigates, the purchase of six Kang Ding/Kwang Hua 2 (LaFayette) class frigates from France, and the lease (later purchased) of eight surplus Knox class frigates from the US. The Kwang Hua Program also includes the acquisition of several types of smaller surface combatants: twelve Jin Chiang class patrol boats, ten Kwang Hua 5 class corvettes, and thirty Kwang Hua 6 class fast attack craft (FAC). However, the Kwang Hua 5 and 6 programs, plus the ROCN’s oft deferred mine countermeasure vessel (MCMV) program, have been delayed, pending decisions on higher priorities including diesel-electric submarines and Aegis-equipped (or substitute) surface combatants.

The following ROCN and ROCCG programs have just completed, are in progress, or are in advanced stages of planning:

· Kang Ding (Kwang Hua 2) (La Fayette) Class Frigate: This program included the procurement of up to six frigates from Direction Constructions des Navales International (DCNI). Built at the China Shipbuilding Corporation (CSC) in Taiwan under license, all six units were commissioned into the ROCN as of January 1998.

· Cheng Kung (Kwang Hua 1) (Perry) Class Frigate: The first seven units of the class were delivered as of December 1998. In late 2000, the ROCN ordered the eighth unit from the CSC, and construction commenced in early 2001. Commissioning is expected by 2004. Unit number eight will probably be the final unit of the class.

· Jin Chiang (Kwang Hua 3) Class Patrol Boat: Started in 1993, the twelfth and final unit of the class was delivered in December 2000. 

· Coast Guard Hsiung Hsing Class Patrol Boat: Started in 1998, the ROCCG planned for up to ten units of a new class of patrol boat. Due to funding shortfalls, this program was terminated after four units. The final unit was delivered in June 2001.

· Kwang Hua 5 Class Corvette (also called the New Generation Secondary Combatant): the ROCN has a requirement for up to sixteen 2,000-ton corvettes. This program continues to be delayed due to funding constraints. It will probably start by the end of the decade, and may only consist of ten units, vice the sixteen planned.

· Kwang Hua 6 FAC: Construction of the prototype for the program was authorized in late 1999. The prototype was stared in October 2000. Funding for the additional 29 units may not be approved until around 2005, upon completion of prototype testing. Full-scale construction may start around 2006.

· Future Mine Countermeasures Vessel (MCMV): The ROCN has a requirement for a new class of MCMVs to replace its aging MCM force. However, it has not budgeted the funds for procurement. This program is also a low priority and may not start until around 2010.

· Future Destroyer: The ROCN has a requirement for four modern destroyers to replace its aging Wu Chin III class. Authorities are continuing to lobby for the US Arleigh Burke class Aegis destroyers, however continue to meet resistance from the US Government and US Navy. In April 2001, US President George Bush Jr made an offer of the Kidd class destroyers as an alternative. The Taiwanese Government has not given an official response to the offer. AMI estimates that by 2002, Taiwan will make a decision regarding this procurement. More than likely, the ROCN will procure the Kidd class as an interim until a new class can be procured.

· Future Submarine: For the past decade, the ROCN has continued to look for a supplier to satisfy its requirement for diesel-electric submarines. In April 2001, US President George Bush Jr. made the public announcement that the US would sell up to eight submarines to Taiwan. There a many stipulations that will need to be worked out prior to a construction contract. Construction, if it occurs, will not commence until 2005 – 06 at the earliest.

· Future Coast Guard Offshore Patrol Vessel (OPV): The ROCCG has a requirement for two 2,000-ton OPVs. Originally planned in the late 1990s, the program will probably not commence until the middle of the decade.

· Coast Guard Patrol Craft: The Coast Guard has a continuing requirement for small patrol craft to replace its aging fleet as well as expand its capabilities. Up to 34 patrol craft will be constructed by 2008.

· Coast Guard Modified Jin Chiang Class Patrol Boat: The first two units of the class were delivered as of 2000. Ten additional units will probably be delivered by the end of 2005.

· Coast Guard 47-Foot Motor Life Boat (MLB): The Coast Guard is expected to order up to 16 Textron Marine & Land Systems Motor Life Boats for search and rescue (SAR) operations. A construction contract can be expected as early as 2002.

The Navy’s modernization program also includes the acquisition of modern weapon and sensor systems. The ROCN is acquiring advanced anti-submarine warfare (ASW) technology to improve its ability to counter Chinese submarines operating off the coast of Taiwan. The Cheng Kung and the Kang Ding class frigates are armed with the indigenously produced Hsiung Feng II surface-to-surface missiles (SSMs), while the Knox class frigates came with Harpoon SSMs. From an anti-air warfare (AAW) perspective, the Cheng Kung class is armed with the Standard I surface-to-air missile (SAM) system, and the Kang Ding has the Sea Chaparral system.

* FOC RfP is the First of Class Request for Proposal