Defense Procurement

I was poking around the net today and found two important articles from 2006 on defense procurement issues in Taiwan. The first comes from the hand of Mark Stokes, who was in charge of Taiwan for the Pentagon, and is now working for Raytheon here on Taiwan. Mark lays out much of the background to the budget, including the force modernization program and military restructuring that have caused major stresses to the local military. The article is too long and detailed to due justice to it with mere excerpts, so read the whole thing. Mark believes that mainstream actors on both the Green and Blue sides are dedicated to defending the island against China. That is probably true, but the mainstream is not running the Blues.

The second is an excellent article from Wendell Minnick from Defense News from September of last year. It provides a thorough overview of the corruption issues:

Critics say corruption is fostered by the Taiwanese practice of requiring foreign defense contractors to use local agents. A local Taiwan defense source said he knew legislators who assigned an assistant — or even a team of them — to secure handouts from agents.

A former official for the American Institute in Taiwan, the de facto U.S. Embassy in Taipei, said that “private Taiwan agents working for U.S. companies on contract, who, on their own, pay members of the legislature or military procurement officials or anyone else,” are out of the direct control of U.S. defense contractors.

“However, as everyone knows, this is common practice for European companies and their governments — i.e., France — to pay direct payments to anyone who can help get a contract through,” said the former official.

U.S. defense contractors are governed by the 1977 Foreign Corrupt Practices Act and the 1998 International Anti-Bribery Act, which severely punishes U.S. companies that pay bribes or offer other types of financial incentives. However, local Taiwanese contract agents work without such restraints.

“The problem lies in the fact that many Taiwan agents do not work on a retainer, but instead get a percentage of the sale — sometimes as much as 5 percent. Imagine getting 5 percent for a billion-dollar sale. Where does that 5 percent go? Into whose pockets? There is no transparency,” said another U.S. defense source.

Agents also bribe military officials to craft operational requirements documents to favor their clients, said one source.

“The officers who are clean and want to focus on their work distance themselves from anything remotely connected to that — consequently ignorant of the situation and not seeking to improve it — while the dirty ones who take advantage of it usually can get away with it,” said a Taiwan military officer.

Legislators and agents can further complicate military procurement by killing the program that wins the selection process. Sources say that agents and legislators believe killing a program will give them a second chance to win it in the next round. Unfortunately, it takes up to three years to start over, and the military suffers for lack of essential equipment.

“The Legislative Yuan is a huge part of the problem, and because the system is not transparent enough and the media can easily be spun without any verification, there’s little one can do to fix it,” said the Taiwan defense source.

In addition to the widespread corruption, there is also the issue of cooperation with China.

To make matters worse, some agents are now being accused of selling sensitive information on Taiwan’s defense programs to Beijing.

“One agent is working for three competing defense contractors and makes frequent trips to Beijing for unknown reasons,” said a source.

Another U.S. defense contractor said, “There are shadowy types from Shanghai now in Taiwan working in this area [defense procurement]. They are very quiet and they don’t want to be known.”

Sources say there are fears that an Israeli company has sold sensitive information to Beijing about Taiwan’s new early warning radar (EWR) program.

“An Israeli company is doing all of the software for the EWR program, and it has close business relations with China,” said a source.

There are fears that China could shut down Taiwan’s air defense network without firing a shot, local sources warned.

A couple of years ago I wrote a fantasy about an attack on Taiwan by China, and several people objected, noting that I hadn't described how China was going to shut down the island's air defense missile network. That's how, folks.

[Taiwan] [China]