Taiwan’s defence expenditure is expected to grow from the current $9.9bn to $10.9bn by 2021, witnessing a compound annual growth rate (CAGR) of 2.38%, according to a report by Strategic Defence Intelligence (SDI).

Titled ‘Future of the Taiwanese Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2021’, the report states that the rapid modernisation of armed forces and China’s assertive territorial claims will push Taiwan to allocate a higher budget for its military sector.

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The report further forecasts that the defence budget as a percentage of the nation’s GDP will average 1.8%, while the average capital expenditure allocation will grow from the historic 16.9% to 18.8% over the forecast period.

"The report further forecasts that the defence budget as a percentage of the nation’s GDP will average 1.8%."

Procurement contracts related to multi-role aircraft and their maintenance, repair and overhaul (MRO), missile defence systems, corvettes and diesel-electric submarines will drive the capital expenditure allocation.

Lower revenue expenditure of 81.2% is anticipated during the forecast period compared to the historic average of 83.1%, however.

SDI anticipates the country’s homeland security expenditure to grow marginally from $2.7bn in 2016 to $2.8bn in 2021, driven primarily by spending to enhance defence capabilities for countering human trafficking and illicit drug trade.