Asia Defense | Security | East Asia

Taiwan’s Drone Industry Take Centerstage in Defense Spending Debate

Funding for drones became much more hotly discussed in the wake of KMT chair Cheng Li-wun’s trip to the United States last month.

Various drones, missiles and weapons on display at the Taipei International Aerospace and Defense Industry Exhibition at the Nangang Exhibition Center in Taipei, Taiwan, Sep. 20, 2025.

Defense spending has become a contentious issue in Taiwan. The Kuomintang (KMT) and Taiwan People’s Party (TPP), which together control the legislature, continue to be at odds with the ruling Democratic Progressive Party (DPP) over the issue. In particular, the pan-Blue and pan-Green camps are now in conflict over a NT$210 million (US$6.6 million) special budget for drones that President Lai Ching-te hopes to pass. 

The Lai administration had hoped to purchase 208,200 coastal attack drones, 1,446 coastal reconnaissance drones, and 1,320 uncrewed surface vessels using the special budget. This seems to indicate rising interest in maritime drones; there was relatively more discussion of unmanned aerial vehicles in the past. This proposal, however, was blocked by the KMT and TPP. Their legislators did not allow the bill to proceed to committee review. 

Instead, the KMT and TPP eventually produced their own version of bills that would provide spending on drones. The KMT’s version of the bill would divide NT$240 million in spending over six years, while requiring any procurement above NT$100 million to include a written report to the legislature with details on progress and implementation. The bill also specified local content for drones at 50 percent in two years and 80 percent in four years. The TPP’s version of the bill, on the other hand, puts drone funding under the annual budget but does not have any overall cap. Both versions of the bill have supply chain checks, as well as other oversight measures. 

The Lai administration has criticized both bills reducing funding for drones, in that the KMT and TPP’s bills are subject to the annual budget process and therefore also subject to the national debt ceiling. It has also suggested that funding drone procurement through the annual budget would result in less money for education, welfare, and other social services. Instead, the Lai administration has instead argued that special budgets would provide for more flexibility in developing Taiwan’s capacity in a rapidly changing field. 

More broadly, the Lai administration has criticized the KMT and TPP for again attempting to claim powers over budgeting from the Executive Yuan, Taiwan’s executive branch of government. Indeed, both the TPP’s and the KMT’s bills would subject further spending to approval by the legislature, as has also occurred with other defense spending passed by the legislature. 

For its part, the KMT has argued that funding the drone industry through the legislature indicates commitment to long-term development, while asserting that the Lai administration’s use of special budgets is only a temporary fix. 

The Taiwan Unmanned Vehicle Alliance has been among the industry groups to voice support for the Lai administration’s special budget. In an event in Taipei at the end of June, the organization suggested that funding drone development through the legislature would lead to competing funding streams from the government, constraints on funding, and less spending overall. 

Partisan fighting between the pan-Blue and pan-Green camps over drones is the latest version of Taiwan’s ongoing debate about defense. Funding for drones became much more hotly discussed in the wake of KMT chair Cheng Li-wun’s trip to the United States last month. 

Together, the KMT and its ally, the TPP, blocked defense spending for over six months – until May. That month, the two parties passed a budget greenlighting NT$780 billion out of the NT$1.25 trillion special defense budget originally sought by the Lai administration. It is probable that the KMT passed this spending with an eye to........

© The Diplomat