Arms Purchase: background info

This excellent essay on the arms purchase and Taiwan's defense was posted to the Taiwan Forum discussion group. Very informative...

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There are many, many reasons why I avoid casting blame for the special budget. If one did feel inclined, there's enough to go around. Here's a few things to consider:

-- The Bush Administration released around 14 systems to Taiwan in April 2001. Taiwan already had been cleared for others the year before, such as the Po-Sheng, the long range UHF early warning radar, AMRAAM, etc.

-- In 2001, Taiwan suffered its first negative GDP growth in history. It was related to the worldwide economy, but it had a signficant effect. In 2001 and 2002, Taiwan asked the USG for co-development of, or a major role in, a ballistic missile defense interceptor and diesel electric submarines. Idea was to adopt the same approach as almost every other country in the world. Taiwan and Saudi Arabia are the only two U.S. security assistance partners that rely on Foreign Military Sales (i.e., buying from the US government) to meet most of their weapon systems and spare parts requirements (in Taiwan, it's about 50%).

-- Almost every other country in the world has a significant defense industry, and will sometimes buy from the US government and sometimes go for licensed production or play a significant role in the design, R&D, and or production of that system. Of course, if a program isn't structured right, and Taiwan goes 100% indigenous, it's normally about 20% more expensive. But there are benefits that are indirect, such as creation of jobs and income, technology spin-offs to the commercial sector, etc. Ideally, the best approach is a workshare arrangement between a foreign industrial partner and US defense industry to provide the customer with quality, cost effective system.

-- In October 2002, the USG, after developing a perception that Taiwan was not moving fast enough on its force modernization program, began a policy review on how to encourage Taiwan to move faster. The Bush Administration, especially one senior individual at AIT who should have known better and went to DC to whip up anti-Taiwan sentiment, didn't quite grasp the seismic changes underway in Taiwan's defense establishment (political shock of the DPP win, economic downturn, defense transformation and reorg, etc).

-- In Feb 03, at the annual US-TW Business Council Defese Conference, the US began its pressure campaign at senior levels, including Doug Paal (the senior AIT official) and reps from DC meeting and writing letters to CSB, Chiou Yi-ren, and Tang Yiau-ming, etc. Public statements began to be made as well, with veiled threats made on a consistent basis, like "if you don't buy more weapons from us, then we may drop our support for you."

-- Between 2000 and all the way until now, the Taiwan military has been undergoing a major transformation. The two defense laws (National Defense Law and Defense Reorganization Act), sent to the LY and promulgated in 2002 and 2003, forced a huge structural change in Taiwan's defense establishment. Entire planning staffs (J-5, etc) had to move to a newly established Office of the Minister of Defense, with new departments responsible for strategic planning, operational analysis, manpower, etc. All this moved from under the Chief of General Staff to the Office of the Minister of Defense -- reorganizatons in large, conservative bureaucracies are very disruptive. These two laws, which also mandated that somewhere between 1/4th to 1/3rd of the Office of the Minister of Defense had to be civilian.

-- The combined effect of these two laws was on a par of the US 1947 Reorganization Act and Goldwater-Nichols Act of 1986 combined. It took DoD 15 years to settle into the new structure, and trying to enforce the 1947 Reorganization Act was so frustrating that it drove a US Secretary of Defense to suicide. Militaries all around the world are perhaps the most conservative establishments in government, and are resistant to change -- it's the nature of the profession. Militaries that are able
to transform with the times dominate. Those that don't lose.

-- Taiwan had just had a wave of force modernization. When it buys, it tends to buy in waves. The systems approved in the 92/93 timeframe, F-16s, PATRIOT, Mirage, Lafayette, PFG-2s, etc were deployed and began operations in 1997/1998. As these were coming on line, the US began emphasizing "software" over hardware forms of assistance -- training, logistics, C4ISR, strategy, etc).

-- The Bush approval in April 2001 was a shock -- no one expected this much to be approved. After coming in each year since 1982 with a dozen or so requests for new weapons, only a couple would be approved. Was like that under Reagan, Bush I, and Clinton. The approval of around 10 out of the 14 systems Taiwan asked for was a shock. Total value was around US $30 billion, if one includes AEGIS. People forget about AEGIS now, but there was what was called a "soft approval" in 2001. It wasn't denied, only "deferred" until the program could be defined in more detail (i.e., platform, combat system, etc).

-- Tang Yiau-ming was an Army guy. And very powerful since he ensured the military stayed in its barracks when the political party they were programmed to hate won in 2000. These were Army guys who ran the Taiwan Garrison Command and other instruments of oppression -- they had still been putting DPP guys in jail in 1991 (i.e., Lee Ying-yuan), only 10 years before. But Tang Yiau-ming deserves alot of credit for ensuring a stable environment during Taiwan's first transition of national power from one party to another in 50 years. But as an Army guy in a very parochial environment, Tang, and all the Army generals he took with him up to the Office of the Minister of Defense in 2000, likes Army things -- attack helicopters, tanks, arty, etc. He did not like PAC-3.

-- In May 2003, the DPP decided to go for a special budget for three systems. They already had lots of programs underway -- Posheng, the EWR, the KIDDs, the AnYu programs (radars and air defense command and control), AMRAAM, MAVERICK, etc. The staffs were pretty maxed out. Managing programs isn't so easy from a bureaucracy perspective. The US Navy was screwing Taiwan, and there wasn't, and still isn't, much support for PAC-3 in the military. They didn't ask for PAC-3 in 2001 -- only after US pressure in Spring 2003 did they cave and agree to submit a request. P-3s were fine.

-- The KMT and the military are very close. They talk on a regular basis, much more than the military talks with their own DPP leaders. The trust isn't there, and there's still lots of underlying tension. If the military as an interest group wants to use someone as a cut out, it's the KMT or PFP. This is at a different level than the guys in the Office of Minister of Defense, such as Lee Jye. He has to balance his political leaders with the interests of the military. Not an easy job. The real military are the warfighters.

The military wants their airplanes to fly by having a steady supply of spare parts, good training, trucks and tanks to run, ships to sail, etc. Who has been the strongest advocate of fixing the military's readiness problems (i.e., lack of spare parts, training, etc)? Lin Yu-fang from the People's First Party -- he has been over the last few years. And the KMT's Shuai Hua-min, a retired lieutenant general who was a leading military reformer and #1 war planner in the General Staff's Operations Directorate. He knows his stuff,although he did get a little political with the Bulletgate thing.

The military has been asking for a rise in the annual budget on a yearly basis, dating back at least until 2000. Every year, the DPP has said no. Last year, the military sent up a budget request for an additional NT $70 billion. After a DPP party meeting, before Lee Jye signed off on the budget proposal to be sent to the EY for integration with the other portions of the national budget, the DPP decided to go for only NT $7 billion instead.

-- Right now, because of the overemphasis on force modernization (i.e., new weapon systems), what the military has in its inventory now it is having a hard time using. That's why the Mirages are being mothballed. Spare parts problems. And ditto with two Knox destroyers that sat in Suao harbor for a year waiting on spare parts. The budget portion for operations and maintenance (including training and spare parts) is only 25% and going down.

In short, there is a significant segment of the military, the warfighters and military planners, and not the political guys, are not that enthusiastic about these systems. When field grade officers have to live three to a room in barracks (US officers always have their own rooms in base officer quarters), and they see the US cramming weapons down Taiwan's throat, such as PAC-3, and they've done the homework and analysis in terms of cost effectiveness (keep in mind that a PAC-3 fire unit (one radar and six launchers) can only handle about seven ballistic missiles at one time. This is both technical and the human limitations of one operator looking at a scope and calling th shots). Anything over seven, and that fire unit would lose its radar, command vehicle, etc, now that the PRC ballistic missiles are orders of magnitude more accurate and lethal than they were 10 years ago. Add the first generation of land attack missiles into the equation, and it gets even more complicated. But the US wants Taiwan to buy the PAC-3, over 350 some odd missiles, at more than US $2 million apiece, at least in part because it needed the Taiwan buy to drive down overall unit costs for the US Army. There was a viable option on the table for US defense industry to work with Taiwan on its Tiankung program to make it almost as good as the PAC-3, and at least have an equitable creation of jobs and income in the US and Taiwan. The US Army said no -- they needed Taiwan to buy the PAC-3.

And the Bush Administration was, and is, pressing on the US national missile defense program, despite significant opposition. Having a Taiwan that said no to PAC-3, despite the fact that it faces perhaps the most daunting ballistic missile threat in the world, then it would weaken the Bush Administration's arguments in favor or spending billions on missile defense (but what's missed is that the two situations are different -- the missile problem is becoming so great, it is almost becoming like conventional artillery. Would South Korea, for example, invest in a very pricy system to knock out artillery shells in the air? There would be too many targets in the air, and it's not cost effective to hit them one by one in the air.

-- For missile defense in the kind of environment that is unfolding, you harden, and develop a counterstrike capability. Of course, the US government freaks out over any hint of Taiwan having a real defense capability and being able to hit missile command centers, logistics depots, airfields, etc on the ground before they are launched or before a second salvo. This is the most cost effective means of missile defense -- this is not "offensive" as many like to characterize strikes against targets on the mainland. Taiwan's strategy is defensive in nature, and by
extension, any capability that aids in its defense is defensive in nature.

Submarines -- US Navy undermined this program from day one. Submarines being built in US shipyards scare the hell out of them. When the first diesel powered submarine comes off the assembly line and half the cost of a nuke submarine, the fear is that Congress would force the US Navy to also go with diesels. And Pacific Command doesn't want Taiwan to have submarines -- they assume they will have to intervene. The Taiwan military would just get in the way. It's better not to have any more subs in the water in this area since they would only complicate an already complcated ASW mission for the US.

-- So, with PACOM being Navy-dominated, and US Navy opposed to Bush's decision (but they can't say so of course and so have to be supportive on the surface, but were smart in undermining through a "death by bureaucracy" approach), they gave Taiwan sticker shock in Jan 02 with a price estimate that was more than double what Taiwan was expecting. They know how much subs are -- they've been wanting a 10 submarine force since the 1970s and have been searching all over the world to fill this requirement, as long as the cost is fair. It was a cruel trick to finally release submarines, and then make it as difficult as possible for the LY to approve.

-- I've been saying "Taiwan" as if its a unified entity with no bureaucratic infighting over resources. Not so -- even in the military. Tang Yiau-ming, former Army CINC, then Chief of General Staff, then Minister of Defense, was given the direction to come with his priorities to meet the DPP's direction to come up with a package valued at US $15 billion. What does Tang do? He picks the systems for the special budget that he likes least, and keeps the annual budget open for what he and the Army do want -- attack helicopters, M1A2 Abrams tanks, and M109A6 Paladin artillery. He knows this special budget, which is mostly Navy systems and the PAC-3 that few wanted anyway and the US was forcing down Taiwan's throat, is going to get hung up. The Army has been trying to get rid of the strategic air defense mission (PATRIOTs, TKs, etc) for years, and finally succeeded a few years back with the formation of a special Missile Defense Command directly under the Chief of General
Staff, which has now been shifted over to the Air Force.

-- The special budget was developed in large part to get the US off Taiwan's back. From the military's perspective, having the budget get hung up in the LY gave it time to heal itself after major surgery from major reorg and transformation. The systems selected for funding through the special budget are the ones the Army-dominated Ministry of National Defense didn't care about. So then when the budget goes to the LY, it started taking hits from the start. The military doesn't want PAC-3 -- DPP does, and that's for political reasons, and because the US is pushing it. So the KMT became the cut outs, the bad guys. And there are some in the KMT that truly are sell outs, but this is the exception and not the rule.

-- Back to submarines -- 130 membersof the LY were clear in their position. No local role, no appropriation of funds. This transcended party lines. And the price was grossly inflated. No responsible legislator in the world would appropriate more than US $10 billion for something that they had no idea what they were getting. There was no defined system -- only a general concept of what they needed.

-- In the US, there are milestones that have to be passed before the next stage in the budgeting process -- having a design is the first step. After that, you go back in to the legislative branch and ask for additional funding when you can show it's worth the taxpayers money. US Congress would have rejected a budget proposal for the entire amount for a program without any idea of what they were getting in return, just like the KMT/PFP did. P-3Cs should have been a no-brainer. But the DPP refused to split the systems apart for individual consideration. So it got stuck as well.

-- KMT said raise the annual defense budget to 3% of GDP and fund the systems that way, and this was from day one. This is the same view as the military -- they had been asking for a rise in the annual defense budget since 2000. The DPP refused to raise the annual budget up to the standard 3% of GDP, although they have recently agreed to do so. Its not that easy. There are caps on annual expenditures in the national budget.. Limits on borrowing, and the central government is maxed out on borrowing -- the budget deficit is at an all time high, a very different approach for an economy that has traditionally been fiscally conservative (ie., balanced budget). This began to change with Lee Teng-hui in 1992, started in large part by the last big special arms budget for F-16s, Mirage, Lafayette, etc.

-- A rise in the defense budget means a decrease in another area. There are opportunity costs for education, S&T, welfare/health insurance, infrastructure, etc. Or the DPP could raise taxes -- but if they did, the DPP would lose votes. Voters don't like more taxes. Expenditures in areas such as welfare, S&T, infrastructure, education, etc win votes. The benefit is clear to the voter who thinks locally. Weapons bought from the US don't provide a direct benefit to the taxpayer/voter. Unless it creates jobs or income. Then it's different. If Taiwan, working with US industry, were able to make expenditures on systems that have a more equitable creation of jobs and income in Taiwan, and in the US, then again, the story would be very different. A legislator can say no to a weapons purchase from the US because it doesn't create jobs and income for voters and taxpayers.

-- This seems pretty important at a time when grumblings over the state of the economy are rampant. Don't believe GDP figures -- when the average individual monthly income in Taiwan at the laobaixing level is around NT $25,000 a month, and hasn't gone up in 10 years, and inflation is going rising albeit at a modest pace (could be worse if gas prices weren't subsidized), then this metric at the individual level is more important than GDP.

Anyway, bottom line is that these three systems valued at US $15 billion would be useful in Taiwan's defense. But is Taiwan going to crumble if it doesn't get subs, PAC-3s, and P-3Cs? The answer to me is no. They would be nice to have, but Taiwan would be OK without them. The subs in particular would be useful.

-- But Taiwan, out of approximately US $8 billion spent of defense annually, about US $1 billion is spent every year on new equipment. People don't see this because everyone's eyes are on these three systems. Taiwan is upgrading its command, control, and communications system (the US $1.4 billion Posheng program, spread out in payments over about five years); a large EWR (US $800 million, same payment schedule); four KIDD-class destroyers (US $800 million, same payment schedule); air defense command center upgrades (about US $250 million); eleven new surveillance radars from Lockheed Martin; 100 AMRAAMs (not enough but a start); a new buy of HELLFIREs; and the list goes on and on. And this doesn't even include the indigenous programs (CM-32 LAV, KH-6 FABGs, HF-2E, Tianlei MLRS, etc).

This whole special budget thing turned into a political circus. It was used by both sides of the political spectrum to gain political mileage. But underneath, it wasn't all as big of a deal as everyone makes it out to be.

-- If someone wants to get into the blame game, then I would look to the US in large part. Especially on the submarines. And to some extent, PAC-3s, since the military, at least since Tang Fei left, hasn't, and still isn't, that keen on spending US $4.3 billion on upgrades and six new fire units when they know there are about 800 increasingly accurate and lethal ballistic missiles, including some medium range systems (DF-21C and extended range DF-15) that would have reentry speeds that the PAC-3 missile would never even make it off the rail before the fire unit lost its command center and radar.

So blame the KMT as traitors? I'm not so sure. Some -- absolutely yes. Usually unscrupulous types who have personal business ties on the mainland mostly. But the other guys, especially the most powerful KMT faction -- Huangfu Hsing -- that consists mostly of retired military officers and their relatives (KMT legislator and Taipei mayoral candidate Ting Yu-chou's father in law is very, very close with Hau Po-tsun; and the other KMT candidate for Taipei mayor, Hau Lung-pin's father is Hau Pei-tsun. And the key KMT guy on the LY Defense Committee, Shuai Hua-min, a retired Army lieutenant general who is the father of Taiwan's reform effort that started in 1998 that culminated in the defense laws. He, like so many others, want a strong military. He, different from many of his Army collegues, wants submarines -- after the US government changes its attitude and plays fair. Shuai, like ADM Ku Chung-lien (PFP) understand very well the problems in the military now, such as coping with this massive transformation that still hasn't quite worked itself out yet; the getting jerked around by DPP guys who, with some exceptions (i.e., Lee Wen-chung on the Defense Committee, Michael Tsai, and Ko Chen-heng are all decent), who don't care or know much about defense. I like the DPP -- most at least. Some are more than willing to shed every drop of American blood for their own independent state. Not all are like this though. But most DPP types just don't put alot of emphasis on defense. They flap their lips alot, and have the matra down, counting each and every time the Procedures Committee doesn't let the budget move to the Defense Committee. But this is all political BS -- if they cared enough about defense, they would do this the right way and raise the defense budget. But they haven't. Welfare and agricultural subsidies have gone up, which is fine. The DPP is a classic liberal party that tends to place social justice (i.e., welfare) and environmental protection over defense, not too different in many ways from Democrats in the US or the SPD or Greens in Germany. There is an underlying anti-military sentiment in the DPP -- can't blame them after many spent years jailed by the Army, tens of thousands slaughtered in 1947, daughters and mothers killed as recently as 1979, and even CSB's wife run over by a van in an act that most believe was KMT directed. Actually, the DPP since coming to power has kept their cool pretty well, and didn't go for retribution. Of course, just to hedge, the NSB burned any file that could implicate anyone in a wrong doing after the DPP assumed power. The DPP is very adept politically, which is why I think they'll recover just fine after all this stuff with CSB's son-in-law blows over (and the Kaohsiung scandal, Tainan Science Park, insider trading, etc). They'll transform themselves and come back stronger than ever. They are survivors.

Enough rambling. When it comes to defense issues, the guys I listen to are the field grade officers and soldiers. Not the politicians, either DPP or KMT. Ask the field grade officers and enlisted what they need -- it's being able to do their job. The Taiwan military has lots to be proud of, especially at the unit level, and would love to have the types of logistics support and training needed to protect homes and families. Many really don't care whether or not they get PAC-3s, subs, or P-3Cs. They want what they have now to work right, decent living conditions, good training for reservists that would fill out units in a crisis, etc.

[Taiwan]